Infosys Crashes Most Since First Covid-19 Lockdown, Here Is What Led To Massive Carnage In The Stock

Shares of the country's second largest information technology company, Infosys, crashed as much as 12.21 per cent, the biggest single-day fall since first lockdown was implemented to curb the spread of Covid-19 on March 23, 2020, to hit three-year low of Rs 1,219. The stock came under intense selling pressure on Monday morning after the Bangalore-based IT giant lowered its revenue growth guidance for current financial year and its management sounded of uncertain future going ahead due to fears of recession in its biggest market US.

Analysts said that this was the first time since 2019 that the management of Infosys guided for revenue growth in low single digits.

Infosys on Friday guided for lower revenue growth guidance and gave weak 4-7 per cent revenue growth guidance for the current financial year amid tightening of IT budgets by clients following turmoil in the US banking sector.

Infosys' latest report card was a disappointment on several fronts - the company missed revenue guidance for financial year 2022-23. 

"unplanned project ramp downs and decision-making delays by some clients". With global macroeconomic uncertainties looming, it has given a subdued 4-7 per cent revenue growth forecast for FY24, with top management cautioning that "the environment remains uncertain". 
 

The company reported 7.8 per cent year-on-year growth in consolidated net profit at Rs 6,128 crore in the January-March quarter. But the profit fell 7 per cent when compared to the preceding October-December quarter.

The revenue growth in constant currency for FY23 came in at 15.4 per cent, lower than the guidance. Notably, during the Q3 earnings announcement in January this year, Infosys -- which competes in the market with Tata Consultancy Services (TCS), Wipro and other IT firms -- had raised FY23 revenue guidance to 16-16.5 per cent (against the previously projected band of 15-16 per cent).

Infosys' Q4 year year-on-year-growth was 8.8 per cent and the sequential decline was 3.2 per cent in constant currency terms.

“Infosys reported weak 4QFY23 revenue of $4.55 billion, down 3.2 per cent quarter-on-quarter (QoQ) in constant currency (CC) terms, significantly below our estimate of 0.6 per cent QoQ CC growth. This was primarily due to broad-based reduction in business volumes, led by unplanned project ramp downs and delays in new businesses during the early part of Q4. Additionally, the company saw one-off project cancellations and issues with a few clients, primarily on discretionary spending, which it expects to recover in 1QFY24. Further, TCV for large deals in 4Q stood at $2.1 billion, down 37 per cent QoQ,” brokerage firm Motilal Oswal said.

“As a result of weak 4Q performance, Infosys missed its FY23 dollar revenue growth guidance of 16.0-16.5 per cent (YoY) in CC terms, delivering only 15.4 per cent year-on-year (YoY). For FY24, the company has given dollar CC revenue growth guidance of 4-7 per cent, citing increased uncertainty for the wider guidance band. This implies a Compound Quarterly Growth Rate (CQGR) of 1.5-2.5 per cent between lower and upper end of guidance band, which we consider to be ambitious,” Motilal Oswal noted.

“We expect the big revenue miss and elevated uncertainty to adversely impact the stock’s short-term performance, resulting in a negative reaction from high single to low double digit, on account of the disappointment,” the Mumbai-based brokerage added.

As of 2:06 pm, Infosys was the top loser in the Sensex, down 10 per cent at Rs 1,248. Drop ins Infosys shares contributed nearly 450 points towards fall in the Sensex as it has one of the highest weightage in the 30-share Sensex.

The BSE IT index tumbled a whopping 5 per cent.