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Infosys Q1 margins seen falling; sales may rise 6%

Infosys' sales for the June quarter is likely to jump 5.9 per cent sequentially on account of sharp fall in the rupee, brokers polled by NDTV estimated.

Infosys is expected to post Rs 11,075 crore in sales for the April to June quarter of 2013-14 fiscal against Rs 10,454 crore in the March quarter of 2012-13 fiscal, brokers said. However, dollar revenues are likely to rise just 1 per cent to $1956 million from $1938 million in the last quarter, mainly on account of cross currency fluctuations.

Net profit is seen falling 2.9 per cent to Rs 2,324 crore from Rs 2,394 crore in the fourth quarter, brokers said.

Most analysts expect Infosys to maintain its full year dollar sales outlook at 6-10 per cent though global investment bank Morgan Stanley earlier this month said that Infosys may revise its full year revenue guidance to 4-6 per cent.

Hitesh Shah of IDFC Securities said Infosys' dollar sales may grow at 6.5 per cent, but if they revise the revenue down by more than 2 per cent, it will be read as negative by markets.

And that might be the key to stock reaction tomorrow as well. (Watch: What experts say about Infosys Q1)

Infosys no longer gives quarterly revenue guidance. It has also stopped giving earnings per share (EPS) guidance citing rising uncertainties in global macroeconomic environment.

Ebitda (or earnings before interest, tax, depreciation and amortization) margin, a key indicator of profitability is seen falling marginally to 26.4 per cent from 26.55 per cent on account of wage hikes. Operating margin for the quarter is seen falling to 23.7 per cent against 23.6 per cent.

"From a margins perspective, we expect a 40 basis points hit on margins, which is a combination of some wage hikes that they have taken effective February 1, which will have a full quarter impact and May 1, which will have a partial quarter impact," Mr Shah said.

Overall, for the full fiscal margins are seen falling by 100-150 basis points, analysts said.

Analysts will also be closely tracking the management commentary, especially if founder Narayana Murthy sheds more light on the company's strategy going forward. (Read: Why Narayana Murthy's words matter more than numbers)

"...he (Narayana Murthy) could make a difference if he comments on what will the company do with its huge cash pile... We desperately need some clarity from this company as to what will be done...will there be special dividend, will there be a buyback," Saurabh Mukherjea, head of equities, Ambit Capital told NDTV.

Infosys shares closed 1 per cent higher at Rs 2,526.75 on the Bombay Stock Exchange on Thursday, underperforming the broader BSE IT benchmark, which rose 1.4 per cent. (Track stock)