Morgan Stanley warns Infosys may cut FY14 revenue guidance

Moneycontrol Bureau

Infosys shares fell more than one percent on Monday, after Morgan Stanley issued a warning statement that the country's second largest software services exporter may cut its FY14 expected revenue guidance.

The foreign brokerage house feels Infosys may cut FY14 revenue guidance to 4-6 percent year-on-year.

Earlier the IT bellwether had given revenue guidance of 6-10 percent that was lower than market expectations of 12 percent. "Global economic uncertainties remain challenging for the industry," the company had reasoned while forecasting revenue guidance for FY14 in April.

The company has been struggling to meet its given guidance from last many quarters, which is the reason that Narayan Murthy joined Infosys again as executive chairman last month. Must Read - What Narayana Murthy's second innings entails

Narayana Murthy at the 32nd annual general meeting on June 15, said that it will take him at least three years to rebuild the ‘desirable’ Infosys.

He also recognised the need to boost employee morale which must have been affected due to continuous under performance of the company over past two years. On June 14, the India’ second largest software exporter had announced an average eight percent hike in salaries of Indian employees and 3 percent hike for global employees.

The company will announce its results for the April-June quarter of FY13 on July 12.

Credit Suisse is neutral on the stock with a target price of Rs 2700. The foreign brokerage house expects margins of IT company to dip by 60 bps sequentially due wage hikes, promotions, impact of H-1B visa costs and additional expenses relating to the Lodestone acquisition. These will partly be offset by the impact of a cheaper rupee, the broker adds.

At 11:13 hours IST, the stock declined 1.5 percent to Rs 2,456.70 on the Bombay Stock Exchange. It plunged 15 percent in last three months.