Home >Companies >News >Infosys may cut FY14 revenue guidance to 4-6%: Morgan Stanley
The report noted that any cut in revenue guidance and lower QoQ margins could limit FY14 EPS upgrades despite rupee depreciation. Photo: Hemant Mishra/Mint (Hemant Mishra/Mint)
The report noted that any cut in revenue guidance and lower QoQ margins could limit FY14 EPS upgrades despite rupee depreciation. Photo: Hemant Mishra/Mint
(Hemant Mishra/Mint)

Infosys may cut FY14 revenue guidance to 4-6%: Morgan Stanley

Report says higher costs and wage hikes dragging on margins in the first half of FY14

New Delhi:Infosys Ltd. is expected to cut 2013-14 revenue guidance to 4-6% as wage hikes and higher costs are hitting its margins, offsetting the benefits of rupee depreciation, says a Morgan Stanley report.

“A quarter-on-quarter (QoQ) revenue decline for Infosys cannot be ruled out in Q1 FY14, with higher costs and wage hikes dragging on margins in 1H FY14, despite the strong inherent operating leverage of its bench," Morgan Stanley said in a research note.

The report further noted that any cut in revenue guidance and lower QoQ margins could limit FY14 EPS upgrades despite rupee depreciation.

It said Infosys may cut its FY14 revenue guidance to 4-6% year-on-year (YoY), adding that “we expect first quarter (April-June) revenues to be flattish with wage hikes and productivity hitting QoQ margins and offsetting rupee depreciation".

The global brokerage firm said historically, the QoQ revenue growth in US dollar terms has “disappointed" large companies in times of steep rupee depreciation.

“We expect large-cap stocks to absorb the tailwind due to rupee depreciation, whereas it is likely to flow through to margins and earnings for small and mid-cap companies," the report said.

The rupee last week sank to all-time low of 60.72 against the dollar on heavy capital outflows and month-end dollar demand from importers.

Infosys, considered bellwether for the Indian IT sector, had in April given lower-than-expected revenue guidance of 6-10% growth for FY14.

This was less than industry body Nasscom’s estimate of 12-14% growth for the Indian software services industry in the 2013-14 fiscal.

The over $100 billion Indian IT-BPO sector gets about 80% of its revenues from the US and Europe.

Infosys scrip opened on a weak note and plunged further 1.93% to touch intra-day low of Rs2,445 on the BSE.

Infosys is scheduled to announce the April-June quarter results on 12 July.

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