Above industry-average growth phase seems to be over for Infosys

The phase of above industry-average growth seems to be over for Infosys. The country’s second largest IT exporter today guided for 8-10% growth in dollar denominated revenue for FY 13. Its revenue estimate lagged for the first time behind the industry wide revenue forecast by the industry body Nasscom. A few weeks ago, Nasscom had predicted 11-14% growth for the Indian IT sales for the current fiscal.

Infosys has cited sudden ramp downs in some of its large projects, uncertainty over demand from the Western economies, and currency volatility as major headwinds during the current fiscal.

The company has been facing issues in accelerating its revenue and in retaining its operating margin for quite some time. It failed to increase its dollar denominated revenue in the March 2012 quarter following slowdown in a few projects. Revenue in dollar terms fell by 1.9% to $1,771 million from the previous quarter’s level. This was also lower than Infy’s revised forecast of $1819-1,823 million for the quarter.

In the rupee terms, revenue fell sequentially by 4.8% to Rs 8,852 crore, while operating profit dropped by 8.7% to Rs 2,647 crore. A sharper fall in profit reflects shrinking margin, which fell by 128 basis points to 29.9%. Net profit dropped sequentially by 2.4% to Rs 2,316 crore.

Infosys expects a tough year ahead in terms of global outsourcing demand. It has also guided for 50-100 basis points drop in its operating profitability for FY13.

The company’s lackluster revenue growth in the March 2012 quarter contrasts an upbeat guidance given by its closest smaller peer Cognizant two months ago. It estimated that revenue would grow by 23% to $1.7 billion for the quarter. Investors would closely track the performance of other top IT vendors to ascertain the extent of demand concerns.

At 11.40 on Friday, Infy’s stock was trading 9.1% lower at Rs 2,498.8 from the previous day’s close.