Infosys may not outperform in near-term: Prabhudas Liladhar

Apurva Shah, VP and HOR of Prabhudas Lilladher, in an interview with CNBC-TV18's Mitali and Udayan Mukherjee, gave his perspective of Infosys' fourth quarter performance and divulged his expectation from the company going forward.

Below is the verbatim transcript of the interview. Also watch the accompanying video. Q: What did you make of what the Infosys management is saying? Are you disappointed with what they have held out for FY12?
A: In dollar and topline terms, the guidance is not bad. Everyone was expecting pretty much 18-20%. On that count, I am not disappointed. It is clearly disappointing on bottomline terms, though the management is saying that it is mainly because of currency.
We need to see little more detail. I suspect that there are bit of margin compression, not only because of currency, but also because of higher cost estimates. On the whole, it is a bit on the disappointing side. Q: Would most analysts have to go back and scale down estimates, especially on EPS for Infosys?
A: Everybody will have to relook at their estimates. First of all, the estimates were on the higher side. If we look at the average for the next two years, everyone was building in more than 20% growth CAGR. This was definitely on the aggressive side.
The bottomline guidance has come much lower than what people expected. There is no doubt that the estimate will be cut by most analysts for the next two years. Q: On their Rs 128 EPS guidance, what would you think would be a reasonable kind of EPS target for next year? Now Rs 150 and all look very aggressive. Where do you think the line should be drawn?
A: I am not sure. We will have to look at the numbers a little more closely. Even if we build in some little bit of outperformance, we might be looking at Rs 135, which is still much lower that what everybody had build in.
On the whole, there are management and macro uncertainties and the big currency issue. It looks unlikely that we will see any significant outperformance for Infosys, at least in the near-term now. Q: How much margin erosion do you think will you have to work with for the next year?
A: Based on the management, it could have to build in around 100-150 basis points decline in margins at least or may be a little more than that, purely on account of cost and the currency impact. The total margin impact could be upwards of 200 basis points. Q: Purely on the back of underperformance, the expectation was that FY12 would be more about Infosys and less about TCS. What kind of takeaway would you have from FY12 to that regard?
A: We have been expecting Infosys