Infosys is in slow lane, again; growth may be muted in FY18
ET Intelligence Group: For investors of Infosys, third-quarter results may seem like a deja vu. The country’s second-largest software exporter had reported better growth in dollar-denominated revenue than the biggest peer Tata Consultancy Services (TCS) for the past two consecutive fiscals after lagging in the six before that. The situation may, however, reverse going by the performance of these companies in the first nine months of the current fiscal.
For Infosys, revenue grew by 6.5 per cent in the nine months to December 2017 to $8,134 million, a deceleration when compared with the growth of 8.3 per cent in the corresponding period of the previous fiscal. TCS, on the other hand, reported an improvement in growth rate to 7.6 per cent from 6.3 per cent by similar comparison. It clocked revenue of $14,117 million in the first nine months of FY18.
Moreover, Infosys has also started showing deceleration in comparison with TCS based on the trailing 12 months (TTM) data at the end of a quarter. After leading TCS in the six quarters to June 2017, Infosys has started to fall behind since then. Considering TTM data for the December 2017 quarter, Infosys grew the dollar revenue by 6.1 per cent, while TCS reported 7.1 per cent growth.
The slack in growth suggests Infosys is likely to report slower growth for FY18 than the 7.4 per cent growth in the previous fiscal. Going by its forecast, the company expects 5.5-6.5 per cent growth in the dollar revenue for FY18.
In addition, though its net profit shot up by 37.6 per cent in the quarter to Rs 5,129 crore, the jump was largely due to reversal of income tax provision of Rs 1,432 crore made in the prior period in the US. In the absence of such an adjustment, the net profit would have fallen by 0.8 per cent to Rs 3,697 crore sequentially.
Amid the slower growth trajectory, investors may find solace in the fact that Infosys has retained the momentum in adding clients. It added 79 clients in the December 2017 quarter compared with 72 in the previous quarter and 77 in the year-ago quarter. It added one client in the above $100-million billing bracket and three in the above $75-million bracket.
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Via:: Economic Times – Stocks