Infy Q2 disappoints, stock to settle at Rs 2200-2300: IIFL

Aniruddha Mehta, Research Analyst at IIFL is disappointed with the result and told CNBC-TV18 that although, Infosys' volumes have been good, its pricing has not been good over the last few quarters. At the moment, he sees the stock settling at levels of Rs 2200-2300.

Here is the edited transcript of the interview on CNBC-TV18.

Q: What did you take away from the number, was it disappointing for you?

A: Yes the numbers have been disappointing and it has rightly reflected in the stock price, especially the pricing that has been falling consistently over the last three quarters. The volumes though have been good, the pricing has not been good.

The client metrics has also moved in a negative manner, greater than USD 100 million and USD 300 million and clients have shown correction. Overall, we did not like the results

Q: Where do you see the stock settling now because it is already down 7-8% today?

A: We feel that the stock would probably settle down at levels of Rs 2200-2300 going forward at valuations around 13.5x to 14x one year forward.

Q: Just elaborate on that big client issue that you spoke about USD 100 million and USD 300 million, what kind of details did you see there which seem to have disappointed you?

A: The number of clients greater than USD 300 million have fallen as well as greater than USD 100 million have fallen. There seems to be a client churn that we are seeing in the top client at Infosys.

Q: Could you understand why the EBIT margins have shrunk so sharply between quarters?

A: There have been some increase in employee costs as well as some increase in SG&A expenses but, we need some clarity from the management as well on what kind of salary hikes have been giving. Whether it is generally a promotion or bonus or is there some amount of partial hikes given to the employees has to be clarified.