Infosys retains margin guidance, sees challenging times

Excerpts from Bazaar on CNBC-TV18 Watch the full show »

Moneycontrol Bureau

Infosys  shares trimmed early losses caused by the cut in FY13 guidance, after the management clarified that the dollar guidance of 5% did not include numbers from the recently acquired Lodestone.

Infosys trimmed its dollar guidance for FY13 to USD 2.97 from USD 3.03, and analysts initially concluded that the revised number included earnings of the recently-acquired Lodestone. The company said the Lodestone acquisition would be completed in a week's time and that its numbers would be factored in the current quarter.

And while the stock may have inched up from the day's lows, players tracking the stock say that it could be a while before the company's strategy of focussing on high margin businesses started paying off.

In the interaction with CNBC-TV18, Infosys CEO and Managing Director SD Shibulal said the company was winning "transformation" deals in India, and that it will reflect in the company's earnings over the "next few quarters." He added that the company had put up a decent performer in the September quarter, despite a tough business environment.

Here is the transcript of the boardroom interview.

For now, there is little clarity on when that will happen.

So far in 2012, Infosys shares have underperformed frontline peers like TCS and HCL Tech, and the benchmark CNX IT index on concerns over slowing revenue growth, margin pressure, law suits, ineffective use of cash and market perception of a leadership crisis. And while some of the issues appear close to being resolved, analysts are not betting on a big upswing in the stock.

Ravjiv Bansal, who will take over from V Balakrishnan as CFO of the company from November 1, said the issues being faced by Infosys were not specific to the company.

"Industry is going through a challenging period, and these are challenging times for Infosys and the industry," he told CNBC-TV18.

The company admitted to pricing pressure, but Basab Pradhan, head of sales said despite the challenges in the company's key BFSI (banking, financial services, insurance) segment, the worst may be over.

The BFSI segment accounts for little over a third of the company's total revenues.

Of the 39 clients added during the quarter, 14 were from financial services, the company said. Shibulal said the company added six large clients during the quarter and signed two large deals in the infrastructure sector.

V Balakrishnan, outgoing CFO of the company, said the company is sticking to its margin guidance of 200 basis point-decline for this financial year. Analysts were expecting margin guidance to be lowered because of additional pressures in the form of wage hike, lower prices and rupee appreciation.

Shibulal said offshore wages were hiked 6% and onsite wages by 2-3%, and that billing rates were down 0.2% quarter-on-quarter.

 At 11:50 am, the Infosys stock was down around 5% at Rs 2407 after touching Rs 2350 earlier in the day.