Infy pricing fall hints at pressure on IT sector: Edelweiss

Furthermore, Maheshwari feels that the market had anticipated a lot more in terms of the buyback of shares, which Infosys failed to deliver.

Below is the edited transcript of Maheshwari's interview with CNBC-TV18.

Q: What did you make of all the qualitative statements from the management? How cautious would you be going forward?

A: For the current quarter, there is some amount of disappointment. But I think the volume increase which they have shown especially on the US front and the domestic front is pretty encouraging. Again on the European front, if you take out the 15 million cut which they have taken, you would see quarter on quarter volume increase.

Overall, around 2.8% volume increase is pretty good. A bit of surprise has been on pricing decline. We have not been able to get an answer to that because that clearly shows that there is some amount of pressure. Otherwise, there was much more expectation as far as buyback was concerned in the market. I think that has disappointed the market quite a bit. And we have seen stock down by around 9-10%.

Q: The IIP number revised lower for April, then came in okay for May. Does it change your growth or revenue numbers, your EPS expectations for the current quarter or is it just one of those numbers that you can at the moment ignore?

A: Yes, it is just one of the numbers basically at the moment which you are just looking at it. It doesn’t change anything for the current quarter obviously. Even if there are some policy changes which gets announced post the presidential election, the transmission will take at least 2-3 quarters to manifest itself with the numbers. Definitely, we are not seeing any changes as far as the outlook on the numbers is concerned.

What is interesting is that in the last two recessions in the last 10 years, the corporates start realizing that the economy is not growing at the same pace what they had anticipated. In this case, may be most of the corporates are looking at around 8-9% kind of GDP growth, and here, we are between 6-7%, they start cutting down their expenses. So they are just readjusting to your OPEX now.

So they will cut down their employee costs, cut down the benches, expenses as we have seen for the last 2-3 quarters, advertisement expenses have been down. This year, surprisingly, the depreciation has been pretty down. If you look at BSE 100 and what you see in this kind of scenario though your top line will be falling, bottom-line starts to plateau out or start improving in couple of quarters time. So this actually creates a bottom for the market as far as the earnings are concerned.

Q: What are you working with in terms of an earnings growth? Do you have a quarterly number? What is your yearly number in terms of earnings growth and which quarter do you see things bottoming out as far as earnings is concerned?

A: If you really look at in the last 2-3 quarters, the top line has shown degrowth on a year on year basis from 27% to last quarter of 18%, this quarter I believe it will go down to anywhere between 15-16%. The PBT, at around 14.8-14.9%, has been flat for the last three quarters. So that has already started getting manifested where people have started cutting down their expenses.