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Tune in on 17th July for the Small Business Virtual Summit with Cisco. Register now!
Last Updated : Oct 12, 2015 05:32 PM IST | Source: Moneycontrol.com

Infosys falls 5% after hitting new high: What went wrong?

The stock fell off the cliff within minutes and touched intraday low of Rs 1108.90 per share, touching as low as 5 percent. News of revising dollar revenue and CFO Rajiv Bansal's resignation led the stock into a tizzy soon after.

 
 
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Shares of Infosys went into a tailspin in the first few minutes of trading. The stock opened at Rs 1199.95 per share, up 3 percent from previous close just as it declared its September quarter results. Its Q2 dollar revenue growth climbed to highest level in 16 quarters, at USD 2392 million, up 6 percent while it was up 6.9 percent to USD 2392 million in constant currency terms. Dollar revenue is aided by one time benefit of USD 23 million from one client, excluding which, it is up 5 percent.


Rupee revenue in July-September quarter rose 8.9 percent quarter-on-quarter to Rs 15,635 crore. Net profit increased 12.1 percent sequentially to Rs 3,398 crore during the quarter.

Close

However, the stock fell off the cliff within minutes and fell 5 percent to an intra-day low of Rs 1108.90. News of the company revising its dollar revenue and CFO Rajiv Bansal's resignation led the stock into a tizzy soon after. The country's second largest IT company has revised its FY16 dollar revenue guidance to 6.4-8.4 percent from 7.2-9.2 percent to factor in a stronger rupee, though it has maintained constant currency revenue guidance at 10-12 percent. There was a expectation among investors that constant currency guidance would be upped.


Though the stock hit all-time high at Rs 1219 per share, investors continued to sell it throughout the day. It was biggest loser in the Sensex after the initial euphoria died down.

Volume growth at 3.7 percent in the quarter is tepid, supported by  pricing improvement. Investors continue to be concerned on its sustainability.

Meanwhile, attrition is rising at a worrisome rate. It jumped to 19.9 percent in the quarter ended September compared to 19.2 percent in June quarter. It has added 8,453 employees (net addition), taking total to 1,87,976 employees at the end of second quarter.


Should you buy now?


Dipan Mehta, member BSE and NSE says Infosys remains a positive bet. According to him, the current correction is an opportunity for investors.


Moshe Katri, IT industry analyst is also bullish on the results and suggests looking at the long-term strategy of the management.Katri is confident of the company meeting the FY16 constant currency guidance of 10-12 percent and match industry growth.


Even Nilesh Shah of Envision Capital is upbeat on the results and says that downward revision of the dollar guidance could purely be because of currency reasons.

"If it is only to do with the currency and the strength on the dollar versus rest of the currencies globally I don’t think that could be a source of worry or a source of apprehension because all the other parameters in terms of deal wins and getting some of the larger customers and scaling them up I think all those are positives. So, the underlying business momentum continues to be very good," Shah says in an interview to CNBC-TV18.


Angel Broking has maintained a accumulate rating on the stock with a target price of Rs 1306. It says that the revision in the dollar revenue guidance is mainly on company outlook on currency. The company has also mentioned that it expects H2FY2016 is weaker than H1FY2016, and is witnessing headwinds in some client accounts.


JP Morgan feels that FY16 dollar revenue guidance seems very conservative. It remains overweight on the stock with a target price of Rs 1250 per share.


Barclays maintains overweight rating with a target price of Rs 1320 per share with a view that the confusion presents an opportunity to buy.


Maintaining positive view on the stock, Kotak retains add rating. However, it is concerned about senior management attrition ans is surprised with implied weak H2FY16 against the backdrop of strong deal signings.

The stock ended at Rs 1,122.50, down Rs 45.35, or 3.88 percent on the BSE.

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First Published on Oct 12, 2015 11:09 am
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