India’s outsourcing sector is bracing itself for a sharper than expected slowdown after the industry’s second-largest operator, Infosys Technologies, slashed its full-year forecast for revenue growth by nearly 30 per cent.
In a further bearish signal, Infosys also backed away from its bid for the UK’s Axon, saying it would not match a rival offer for the company from Indian competitor HCL.
EDITOR’S CHOICE
Path cleared for HCL to buy Axon - Oct-10Infosys nervous after Tata factory dispute - Sep-09Infosys ‘cautious’ despite profits jump - Jul-11Infosys develops new pricing models - Jan-11India’s IT outsourcers face increasing costs - Dec-27Indian IT gears up for US backlash - Dec-18“When we looked at the future and given what other things are happening, we felt it would be prudent to reduce our guidance,” S Gopalakrishnan, Infosys chief executive, told the FT.
The outsourcing sector has become one of the pillars of India’s economy by providing third-party services such as software and hardware management to overseas clients.
But the crisis afflicting one of the industry’s main sources of business, the US financial sector, is increasing uncertainty over the outlook for the sector.
Infosys reported strong results for its second quarter, the three months to September 30, but sounded a cautious note on the remainder of the fiscal year to March 2009.
Infosys said revenue grew 19 per cent against a year earlier in the September quarter to $1.22bn, while net profit was up 17.3 per cent to $318m.
But it forecast that full-year revenue would grow between 13.1 per cent and 15.2 per cent against a year earlier to up to $4.81bn compared with an earlier forecast of growth of between 19 and 20 per cent.
It also predicted that revenue in the third quarter ending December would be flat compared with the second quarter, at $1.22bn.
Sandeep Muthangi, analyst with India Infoline in Mumbai, said the change in guidance was a surprise to the market.
At least 3 percentage points was due to the sharp depreciation of the rupee against the US dollar, with the currency losing nearly 20 per cent this year to approach levels close to Rs50.
“What they have done is put in a significant amount of buffer for either meeting or outperforming expectations for the next quarter,” Mr Muthangi said.
Mr Gopalakrishnan also said the group believed its 600p per share bid for Axon, a specialist in applying SAP business software, was fully valued and it was not prepared to match HCL’s 650p price.
