Infosys FY13 Q1 results: Is the company compromising billing rates to win clients?

MUMBAI: Infosys did not fail to disappoint the market yet again on its quarterly results day. The company cut its FY13 growth guidance and said pricing declined sharply in the June quarter.

Compared to the Street's expectation of Rs 9,660 crore revenue and Rs 2,418 crore net profit, Infosys announced muted performance for the June quarter. Its sales grew by 8.6% sequentially to Rs 9,616 crore and net profit fell by 1.2% to Rs2,289 crore.

The company said it may no longer be able to grow revenue at 8-10% as it had predicted three months ago. Instead, it now expects 5% dollar denominated revenue growth for the current fiscal.

Full coverage of Infosys FY13 results

Apart from the lacklustre guidance, what might spook investors is the fact that the company reported 3.7% drop in the average billing rates during the quarter on a sequential basis. Though the company has mentioned about stable pricing environment, this does not reflect in its revenue guidance. On the contrary, the guidance assumes a continued decline in the remaining quarters of the fiscal as well.

Infy's stock has lost 8.7% in the morning trade. It currently trades at Rs 2,252.6 reflecting a FY13 P/E of 13.5 based on its guidance of Rs 166.5 in earnings per share for the year. This is historically lower valuation the stock would have ever got. Investors would eagerly await the results of TCS, the country's largest IT exporter who will declare results later in the day, to understand more about the demand scenario.