Infosys Q2 seen to be slowest Sept quarter since 2009, BFSI key

Its FY17 constant currency guidance is expected to be lower to 8.5-10 percent from 10.5-12 percent. Infosys had already lowered guidance to 10.5 percent-12 percent in constant currency from 11.5-13.5 percent in last quarter. It had also warned about risks to guidance after RBS cancellation and softness in banking, manufacturing and retail. Dollar revenue growth may be lowered to 8-9.5 percent from 10-11.5 percent due to euro and GBP depreciation against dollar.

According to analysts polled by CNBC-TV18, constant currency revenue growth is seen at 2.8 percent on forex headwinds of 50 basis points. Margins may see a slight pickup given Q1 had headwinds of wage hikes and visa costs. Q1 margins are likely to be at the lower end of 24-26 percent. RBS contract loss will be in effect till second half of FY17. Revenues from GST could be a partial offset but margins on this contract are likely rather low.

BFSI will remain to be a key area to watch out as it is one of the key verticals in sector, accounting for 25-40 percent of revenues for leading companies. Cognizant was one of the earliest companies to highlight softness in the vertical.

Infosys has also indicated early signs of caution mostly in Europe due to Brexit. BFSI revenue growth led the sector through FY14 and the early part of FY15. Since then, growth has slowed down as financial institutions have been driving down costs – vendor consolidation and insourcing also hurt, at the margin.