Near-term performance to be choppy for Infosys, says Shibulal

India’s second-largest software services exporter Infosys expects to touch the lower end of its revenue guidance for FY14, below the 12-14 per cent growth projected for the industry by Nasscom.

Speaking at an investor call organised by Barclays on Wednesday, Infosys CEO and MD, S D Shibulal pointed out that the near-term performance of the software-services firm would be “choppy.”

During the December-quarter earnings, the Bangalore-based IT major had raised its revenue outlook for the current fiscal to 11.5-12% from 9-10% range.

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The company had again underperformed its closest rival TCS in the third quarter. Infosys’ net profits grew 6.7 per cent year-on-year to $463 million and topline grew 9.9 per cent year-on-year to $2.1 billion. On the other hand, TCS net profits went up by 31.7 per cent to $ 858 million and the topline was up 17 per cent to $3.44 billion.

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Earlier considered as an indicator of IT industry’s overall performance, Infosys’ has failed to meet the upper end of its revenue forecast over the last few fiscals.

Despite an initial “optimism” among business leaders at the World Economic Forum in Davos earlier this year, clients are maintaining a cautious approach towards spending. There are still concerns in areas like high-tech, consumer packaged goods (CPG) and retail, which is more seasonal, Shibulal noted.

“Client confidence is still not back yet. In the next one month, the budget will be closed for the next fiscal year. We expect to be near the lower end of our FY14 guidance,” he said, adding that the fourth-quarter performance will set the base for FY15 outlook.

During the investor call, commenting on the company’s action plan to drive its growth rate and margin ahead of the industry, chairman NR Narayana Murthy pointed out that it plans to hire 250-350 graduates from B-Schools and under-graduate schools across US, Europe and Australia, adding that 18 people have accepted offers from top Indian B-Schools this year.

“We have created a special group to start recruiting and training our sales people in local markets. We are in the process of building several systems that will measure individual performance of our sales team. We have also reorganised our sales structure and created small units that can lead to better growth,” Murthy noted.

“Most of the initiatives are work in progress and will start showing results mostly during Q1 and Q2 of FY16,” he said.

Since Murthy’s returned to Infosys last June as chairman, the IT-services firm has been on a restructuring drive of its sales team in the country and abroad, including the US, its largest outsourcing market. The IT firm is looking at optimising costs and streamlining its workforce across locations. These changes are part of the new measures started by Murthy to reenergise the company and he is being helped by his son Rohan Murty, executive assistant.

“We have reintroduced the role of account managers so that we can mine deeper. We need to identify large outsourcing projects. We have created better structure to evaluate top performers,” said Murthy while addressing the investors.

Infosys’ shares fell 0.05% to close at Rs 3670.90 on the Bombay Stock Exchange on Wednesday. The sensitive index, Sensex, ended the day flat, up 0.14 per cent.