Infosys may slash its revenue guidance for the second time this fiscal, stung by “risks” like challenges in the banking and financial services sector and cancellation of projects. The reasons for these risks include Britain's decision to exit the EU.
However, in the short term, the Bengaluru-based company remains confident of a “better” second quarter compared to the April-June, 2016 period.
“We see that our Q2 growth is going to be higher than Q1 growth. But we do see risks that would get us toward territory of downward revision of guidance because the atmosphere during the course of Q2 has worsened compared to what we saw in the beginning of Q2, you see the example of RBS,” Infosys CEO Vishal Sikka said at the JP Morgan India Investor Summit.
Infosys had earlier said it will ramp-down about 3,000 jobs following Royal Bank of Scotland’s decision to cancel its project to set up a separate bank in the UK.
While announcing its first quarter earnings, Infosys had slashed its annual sales growth guidance to 10.8-12.3 percent in US dollar terms for 2016-17, down from the previous forecast of 11.8-13.8 percent.
Sikka admitted there were “some internal execution issues” that had impacted its performance in the first quarter of this fiscal but added that those issues have been resolved.
”...this was purely because of internal reasons, because of execution reasons... we have made changes to the management and over the course of Q2, we have arrested the de-growth that we saw in consulting,” he said.
Infosys, which is expected to announce its earnings for the July-September 2016 period in October, said some elements of its business tend to flow in towards the end of the quarter.
“So we will only know more than this when we do the earnings in the second week of October. We would have factored in, at that time, the impact of RBS and many other projects that we are ramping up,” he added.
Top IT firms like TCS and Infosys have highlighted certain issues like softness in the BFSI sector and the cautious approach of clients in the wake of Britain voting to leave the European Union could impact their performance.
“We do see some challenges in BFSI but not nearly to the degree to what some other folks have talked about. RBS we have talked about, there are few clients in Europe which are seeing downward pressure but at the same time there are many that are growing significantly for us,” Sikka said.
He added that the US is witnessing a similar trend. “A couple of clients have declined but at the same time there are some that are growing very nicely for us. So I don’t see it in the negative sense,” he said.
On the pact of Brexit, he still feels over time it will open up more opportunities for service providers like Infosys.
“The immediate impact of this is negative. It has created a sense of anxiety. Overtime, this will become an opportunity for companies like us to provide services in a more compartmentalised world…when walls come up, there is more need for transparency...,” he has been quoted as saying in a report in The Hindu.