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Infosys Expected to Post Strong Growth in Q1, Margins May Fall

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Infosys Expected to Post Strong Growth in Q1, Margins May Fall
Infosys is back to reporting earnings before stock markets open in India, a development that is being viewed positively by analysts. Shares in India's second biggest outsourcer had fallen nearly 7 per cent when Infosys announced its quarterly numbers in April, but Tuesday's numbers are likely to be stronger, analysts say.

The June quarter could be better because clients tend to close budgets by March, after which spending picks up, driving growth for outsourcers, analysts say.

According to brokers polled by NDTV, Infosys is likely to post revenues of $2,216 million in the June quarter, a 2.9 per cent sequential rise in constant currency terms.

TCS, India's biggest outsourcer, had earlier this month reported a 3.5 per cent sequential rise in constant currency revenue.

EBIT or operating margins are likely to decline by 165 basis points sequentially to 24.05 per cent, analysts expect. Higher visa costs and wage hikes announced during the quarter likely impacted Infosys margins.

Infosys had announced an average of 2 per cent salary hike for its onsite employees and an average of 6.5 per cent salary hike for its offshore employees in March.

In rupee terms, Infosys is expected to post a net profit of Rs 3,019 crore on sales of Rs 14,066 crore. That compares with a net profit of Rs 3,097 crore on sales of Rs 13,411 crore in the previous quarter.

Growth is likely to be led by banking and retail verticals, while telecom, energy and utilities are expected to be a drag. Infosys is expected to retain its annual sales guidance at 10-12 per cent in constant currency, announced in April.

Infosys shares closed flat at Rs 1,001.90 in a market that closed 0.15 per cent lower.

Analyst call

Shashi Bhushan of Prabhudas Lilladher told NDTV that Infosys shares have not moved since the last result announcement. A big miss in revenue growth could lead to some correction, he added.

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