Infosys shares plunged 8.5% to Rs 3,357.5 on Thursday after executive chairman NR Narayana Murthy led a management briefing that signalled the company would barely meet its growth forecast with no early sign of its recovery in an industry where it is now a leader-turned-laggard.
The management of India’s second-largest IT services exporter said that its current fourth quarter would end with revenue growth at the lower end of its target revenue growth range of 11.5%-12% in 2013-14. Only in January, Infosys had revised its growth forecast for the current financial year to 11.5-12% from 9-10%.
The candid statement coming about four weeks ahead of its annual results, also indicated that the first part of the new financial year could be a rough one as well. But there were some who pointed to Infosys’s traditional penchant for under-promising and over-delivering as an indicator of misplaced pessimism in the market. Most analysts turned "Neutral" in their rating of the stock.
Addressing an investor call initiated by Barclays on Wednesday, Murthy said: "We will follow the adage that let the bad news take the elevator while the good news takes the stairs."
The management said weak sales during a severe winter and holiday discounts in the US and a tepid outlook in emerging markets impacted its retail and consumer goods clients. Both these sectors together account for 25% of Infosys’ revenues. A weak outlook on high-tech spending also dampened the sentiment.
CEO SD Shibulal said clients cut back on spending on the demand side, while skill mismatches hurt delivery.
Infosys dragged down the BSE IT index which lost 4% on Thursday as all 10 stocks including TCS, Wipro and HCL fell.
Ganesh Natarajan, CEO of Zensar Technologies said what Infosys faced was "an industry-wide problem."
"A sense of Deja-Vu after third quarter of 2012-13. Infosys had similarly guided for a weak quarter in Q3, 2012-13, but it ended up significantly outperforming the weak outlook," brokerage Motilal Oswal said in a note.
Prabhudas Liladhar, in fact, put a "Buy" rating on the stock, expressing confidence in the company.