Shares of Infosys nose-dived by 21% on Friday and took down the broad stock market with it after the software major announced a disappointing earnings forecast with its quarterly results.
Infosys, famous for outperforming its peers, forecast a revenue growth in the range of 6 to 10% that was well below the industry average of 12 to 14%. That spooked investors. The benchmark Sensex fell 300 points or 1.6% tracking Infosys, which has a 7.19% weightage in the the 30-share index.
“The ongoing global economic volatility intends to continue forward so we have to look where we are and make a reflection in our guidance that is a statement of facts,” said SD Shibulal, chief executive officer and MD of Infosys.
As its share fell to Rs. 2,295.5 from Rs. 2,918 overnight, Infosys lost as much as Rs. 35,740 crore in its market capitalisation on a single day.
The company’s famed promoters — NR Narayana Murthy, Nandan Nilekani, S Gopalakrishnan and SD Shibulal — along with their family members saw their combined share wealth erode by Rs. 4,796 crore in the process.
During the January-March quarter of fiscal 2012-13, the net profit for Infosys grew by 3.4% to Rs. 2,394 crore, when compared with a year ago. Its revenue, from a year ago, rose by 18.1% to Rs. 10,454 crore. The numbers were in line with analyst expectations but the outlook was a shocker.
Over the past several quarters Infosys has been lagging behind its peers such as TCS, Cognizant and HCL Technologies in its quarterly numbers.
The company says this is because it has been focusing on high-value services that have been hit by uncertainties in Western economies.
The 1,56,688-employee-strong Infosys, which has been going through an overhaul in strategy, said its profit margins will be under pressure in the near term.