Infosys cuts revenue guidance; IT industry wears a bleak outlook

BANGALORE: Outlook for 2012, for the Indian IT industry remains bleak as the second largest IT exporter Infosys on Thursday cuts its guidance for the year, citing delayed decisions by clients on new IT contracts.

Infosys counts JP Morgan, Bank of America and UBS as its largest clients. Infosys revenues are now expected to grow about 5% to about $7.34 billion, for the year versus Nasscom’s forecast of 11%-14% for IT industry’s growth.


Full coverage of Infosys FY13 results

Infosys said that the clients are sticking on with it, but just delaying their decisions. In April, Infosys expected FY12 sales to be in the range of $7.5 billion and $7.6 billion, a year on year growth of 8.0% to 10.0%.

Infosys said that clients are not cancelling projects but just deferring them, due to the current economic environment. The less visibility into quarterly movements has led Infosys to not disclose quarterly sales guidance this quarter, for the first time ever.

“Overall the results were gloomy with guidance numbers indicating that management is seeing challenges in terms of IT spends from big accounts,” Ankita Somani, of Angel Broking said on Infosys Results.

Infosys stock opened down about 10% on BSE in early trade.

Also for the first time pricing of contracts declined for Infosys, by about 3.7%. Infosys said it expects the pricing to decline about 3%-4% for the year.

The company's growth rate expected for the year, is now more than half of what the $100 billion Indian IT industry is predicted to grow at, this year.

Nasscom in February predicted a 11%-14% growth for the industry, which might be now cut down furthur since the bellwether Infosys, which accounts for almost 10% of industry's exports, has cut its guidance.

Morgan Stanley Research expects divergent performance and commentary of TCS and Infosys in Q1.

Thursday’s results from the two largest tech services companies in India Infosys and TCS, will provide some visibility for IT investors for the year.

TCS earned about $10 billion, and Infosys earned about $7 billion, last year, contributing almost 24% to India’s $70 billion worth of IT exports.