FIIs, promoters pare stake in Infosys during Q3

Foreign Portfolio Investor Corporate raised their stake to 1.38% against nil holding in previous quarter.

Foreign institutional investors (FIIs) and promoters reduced their holding in tech major Infosys during the December quarter.

The promoter holding declined by 300 basis points (bps) to 13.08 after four promoters sold stake worth $1.1 billion in December. FII holding also reduced by 109 bps to 41.58 per cent.

The reduction in holdings comes at a time when technology firms are facing cross currency headwinds due to volatility in the global financial markets.

On December 8, 2014, Infosys co-founders N R Narayana Murthy, Nandan Nilekani, Dinesh K and S D Shibulal’s wife, Kumari Shibulal, along with their families, had sold 32.6 million shares in the country’s second-largest information technology services company, for an overall amount of Rs 6,484 crore.

The decline in promoter holding was the highest in more than a decade. During the June 2004 quarter, promoters had reduced their holding by 4.5 percentage points to 22.02 per cent.

Among FIIs, Aberdeen and Europacific Growth Fund’s holdings in Infosys have declined below one per cent.

Meanwhile, mutual funds and individual shareholders have raised their stake in the company by around one percentage point each. Mutual fund and UTI holding increased to 5.42 per cent in December quarter from 4.75 per cent at the end of September quarter, while individual shareholders hiked their stake to 9.78 per cent from 9.06 per cent. Foreign portfolio investors raised their stake to 1.38 per cent against nil holding in the previous quarter.

Infosys is schedule to announced its October-December quarter earnings on Friday.

Analysts at Credit Suisse expect Infosys EBIT margins to contract by 50 bp QoQ to 25.6% in Q3 FY15.

Infosys' EBIT margins expanded by 100 bp in 2Q FY15 and utilisation (including trainees) are now at the highest levels since June 2003. Given the company's focus on growth, we think there is little scope in the near term for utilisation expansion. Furthermore, investments in training and sales should weigh on margins, analysts said in a results preview.

With cross currency headwinds for two consecutive quarters, we believe that USD revenue growth in FY15 may settle at the lower end of the 7-9% guidance range, analysts add.