Rao said margins may stay pressured in the near term and don‘t expect significant relief on margin in near-term. He also reiterated that client spend on IT is not really increasing.
Shares of Infosys fell 4 percent intraday on Thursday as the company is cautious of its costs hurting margins. The stock has fallen below 1200 per share last seen in May 25. UB Pravin Rao, COO of Infosys, in an interview to CNBC-TV18, said that an increase in visa and compensation costs is likely to impact margins by 200 basis points in the first quarter of FY17 as compared to rest of the year.
"So, that impact will absorb a big part of it in this quarter and phase out rest of the quarters. For this industry and for us in particular quarter one has always been about 200 basis points lower and we expect that to continue this quarter as well," Rao said.
He said margins may stay pressured in the near term and don’t expect significant relief on margin in near-term. He also reiterated that client spend on IT is not really increasing.
Infosys expects FY17 revenue growth at 11.5-13.5 percent in constant currency and 11.8-13.8 percent in dollar terms, which is far better than industry guidance. Nasscom, that represents Indian software industry, expects the IT industry to grow 10-12 percent in FY17.
Its profit grew by 3.8 percent to Rs 3,597 crore in January-March quarter compared to Rs 3,465 crore in preceding quarter despite fall in other income. Rupee revenue increased 4.1 percent sequentially to 16,550 crore from Rs 13,411 crore in same period. Dollar revenue in Q4 rose 1.6 percent to USD 2,446 million and 1.9 percent in constant currency compared to preceding quarter.
Post its March quarter results, Infosys had hit record high of Rs 1267.90 per share while most analysts were betting on the IT major.
Meanwhile, Tamil Nadu has allowed workers to form labour unions which may be a cause of concern for IT firms. The issue arose after TCS dismissed employees in January 2015. Most large IT companies have campuses in Tamil Nadu. Labour troubles utilise management bandwidth and can result in cost increases.
At 09:52 hrs Infosys was quoting at Rs 1,195.95, down Rs 42.35, or 3.42 percent on the BSE.
Posted by Nasrin Sultana
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First Published on Jun 9, 2016 09:34 am