Infosys FY14 revenue guidance may be raised: Poll

Infosys, India's second largest software services exporter, will kick-off the July-September quarter earnings season on Friday. Analysts on an average expect profit after tax of the company to rise by 10.2 percent quarter-on-quarter to Rs 2,614 crore during the September quarter, according to CNBC-TV18 poll.

Revenues are seen going up by 13.4 percent to Rs 12,781 crore in second quarter of FY14 from Rs 11,267 crore in previous quarter while dollar revenues may grow 2.6 percent Q-o-Q to USD 2042 million.

Earnings before interest and tax (EBIT) is likely to increase 14.7 percent sequentially to Rs 3,056 crore and EBIT margin may improve marginally to 23.91 percent in Q2 from 23.64 percent in Q1.

In fact, the quarter gone by should be very strong for all technology companies led by combination of improving demand, seasonal strength and significant rupee weakness, feel experts.

Watch out for margins

Margins of the software services provider could improve sequentially around 30 bps. Adverse impact of wage hike can more than balanced by benefits from currency depreciation and higher utilisation during the quarter. Also the company has been very focused on cost cutting especially onsite costs.

Infosys has given a 2-3 percent wage hike to onshore and 6-8 percent increase to offshore employees effective July 1, 2013.

Current FY14 guidance

Analysts feel the company may revise its full year guidance. "The market will watch out for and change in the FY14 revenue guidance by Infosys. The return of Narayan Murthy to Infosys has raised hopes on the medium-to-long term prospects of the company. Based on our expected revenues in Q2, we expect the company to increase the guidance range," Kotak Securities report said.

At the end of first quarter, the company guided the FY14 dollar revenues growth of 6-10 percent (as against NASSCOM forecast of 12-14 percent for IT industry) to USD 7842-USD 8138 million.

The rupee revenue guidance for full year has been set at Rs 45,598-Rs 47,212 crore, a growth of 13-17 percent over previous year. Rupee rate assumed is Rs 59.39/dollar.

The FY14 guidance for revenues may be raised at lower end of the guidance to 8 percent, feel experts. Meanwhile, the street is divided on whether upper end of guidance will remain at 10 percent or get increased.

Few analysts like CIMB expects guidance to be increased to 7-11 percent and Kotak Securities at 9.5-11 percent.

How the currency depreciated during the quarter

The rupee depreciated 11.2 percent on an average during July-September quarter from 55.76 to 62.03 per dollar.

Australian dollar fell by 7.7 percent quarter-on-quarter against the US dollar that will also boost dollar revenues of IT companies.

Investors need to watch out for - 1) Management stability, 2) progress on revival plan 3) deal wins 4) pricing for Infosys has been under pressure 5) how will Infosys re-invest currency benefits 6) view on margins 7) management commentary and 8) cash on books.

Basab Pradhan (Infosys's global head of sales), Ashok Vemuri (Head of the US and manufacturing vertical) and four senior managers left the company during September quarter.