Brexit, new H-1B norms to weigh on Infy
BENGALURU: The impact of Britain’s recent decision to exit the European Union (Brexit) and pressure from the US lawmakers to tighten visa regulations are expected to cast a long shadow on the performance of India’s second largest IT services exporter Infosys, though these are not challenges specific to the Bengaluru headquartered company.
On Friday, when Infosys’ chief executive Vishal Sikka and his team discuss the company’s performance for the first quarter of the current fiscal, investors and analyst will be eyeing more clarity on the company’s revenue growth forecast provided at the start of the year.
In April, the Infosys had forecast a revenue growth of 11.5-13.5% for 2016-17, a notch higher than Nasscom’s growth forecast of 10-12% for the Indian IT sector this fiscal.
A recent research report by Kotak Institutional Equities suggests that Infosys is unlikely to revise its revenue guidance and achieving the upper end of the guidance (13.5%) may be a tall task due to Brexit.
Mumbai-based Tata Consultancy Services will be announcing its first quarter results on Thursday. The company’s views on the impact of Brexit on its financial performance will also provide some sense of what to expect from Infosys the following day.
Though no official number is available, industry experts believe that revenue from UK as part of this could be anywhere between 30-50% for companies like Infosys and TCS.
Rajiv Mehta with Indiainfoline believes it will be too risky to quantify it at such an early stage. “What happens in the next 6-9 months will be difficult to guess,” he said. Mehta pegged the first quarter sequential revenue growth for Infosys in the range of 3.5-4%.
Dipen Shah of Kotak Securities, sequential revenue growth to be around 3.6% and net profits for the quarter on an year-onyear basis to be lower by around 4% due to increase in US visa costs and salary hikes.
Investors and analysts will also be keen to hear on the progress Infosys is making towards its 2020 vision. By March 2021, Sikka hopes to more than double the company revenue to $20 billion from $9.5 billion in 2015-16, improve margins to 30% from around 26% now and improve revenues billed by every Infosys employee to $80,000 from around $51,000 now.