Infosys Revenue Growth To Hit 6-year Low As Clients Become Cautious On Spend

Infosys Ltd on Thursday forecast revenue growth would hit a six-year low this fiscal as India's No.2 IT services exporter grapples with clients clamping down or deferring spending due to growing fears of a recession in many countries.

Infosys said it expects revenue to increase 4 per cent-7 per cent, on a constant currency basis, in the year ending March 2024, well below analysts' expectations of 10.7 per cent. The previous slowest growth was a 5.8 per cent increase in fiscal 2018.

The company's US-listed shares sank as much as 9 per cent on Thursday, to USD 15.53, their lowest since December 2020. Its India-listed shares closed down 2.7 per cent ahead of the results, weighed down by a similarly disappointing quarterly report from larger rival Tata Consultancy Services on Wednesday.

Infosys does not have a "clear view" of the year and there was a "slowing cycle" in closing deals, Chief Executive Salil Parekh said at a media briefing. The uncertainty was highlighted by Infosys refraining from its usual start-of-the-year practice of setting a target for hiring freshers.

The warnings from India's top two IT exporters highlight the travails for the sector, which earns more than 25 per cent of its revenue from just the US and European banking, financial, services and insurance (BFSI) sector.

For Infosys in particular, the forecast of a slowdown comes just three months after it raised its revenue forecast for fiscal 2023, citing a strong deal pipeline.

However, its revenue growth of 15.4 per cent ultimately fell short of that forecast of 16 per cent-16.5 per cent.

Parekh said there were "unplanned rampdowns" in client projects in the January-March quarter, across a number of sectors, including financial services.

There were also "one-timers" such as project cancellations and "specific client issues," finance chief, Nilanjan Roy, said.

Infosys said it won large deals worth USD 2.1 billion in the quarter, less than the USD 2.3 billion it won a year ago.

As a result, Infosys's revenue increased a smaller-than-expected 16 per cent to 374.41 billion rupees (USD 4.58 billion) in the quarter, while its profit of 61.28 billion rupees also missed analysts' expectations, according to Refinitiv IBES.

The Bengaluru-based company's operating margin fell to 21.1 per cent in the quarter, and is expected to stay between 20 per cent and 22 per cent this fiscal year, it said.  

(Reuters)