Cognizant hints at 16% growth in '13

Shocks Indian IT services industry

In a move being seen as lowering its 2013 growth expectation, Nasdaq-listed IT services company Cognizant has said its senior executives will get 100 per cent of their performance-linked stock units only if the company meets a sales target of $8.52 billion. This means the company might expect a growth of at least 16 per cent in 2013, provided it meets its full-year revenue guidance of $7.34 billion for 2012.

Though it was part of Cognizant’s routine regulatory filing with the US Securities and Exchange Commission, it is being seen as an initial reading of the company’s growth expectations for 2013.

“Generally, revenue growth target for 100 per cent performance award provides a reasonable indication of a firm’s revenue growth guidance for a year,” JPMorgan analysts Viju K George and Amit Sharma wrote in their note on Wednesday.

Though this was not the formal growth forecast Cognizant gave every year while announcing its full-year earnings, “we find the initial revenue growth guidance in last three years have typically been equal to or higher than the threshold for 100 per cent stock unit award. So, it would be reasonable to assume Cognizant is likely to guide for at least 16 per cent revenue growth in 2013, provided there is no macro shock due to events like fiscal cliff”, the note added.

For 2012, Cognizant had revised its official revenue guidance from its initial projection of 23 per cent to 20 per cent, which it has maintained so far.