Infosys Q4 results: Stock falls over 4% on weak guidance

The stock was down 2.5% lower at Rs 944, falling nearly 5% from intra-day high of Rs 991 on BSE

Infosys shed as much as 4.3%% to Rs 927 on BSE at intra-day Sensex, falling nearly 7% from early morning high of Rs 991 after the company reported a 2.8% fall in its Q4 net profit to Rs 3,603 crore versus Rs 3,708 crore in the sequential quarter ended December 31, 2016. Consolidated revenue of the company also declined 0.89% (QoQ) and 3.44% (YoY) to Rs 17,120 crore for the quarter under review. 

The IT major downgrading its guidance for the fourth time added to the fall. It said that the revenue is expected to grow 6.5%-8.5% in constant currency terms and 6.1%-8.1% in dollar terms for the year ending March 31, 2018 (FY18).

For the recently concluded financial year 2016-17 (FY17), Infosys had reported revenues growth of 8.3% in constant currency terms and 7.4% in dollar terms on year on year basis.

“Unanticipated execution challenges and distractions in a seasonally soft quarter affected our overall performance,” said Vishal Sikka, CEO.

Meanwhile, the board of directors of the company recommended a final dividend of Rs 14.75 per equity share for the financial year ended March 31, 2017.

Effective from FY18, the company expects to payout up to 70% of the free cash flow of the corresponding financial year in such manner (including by way of dividend and/or share buyback) as may be decided by the board from time to time, Infosys said in a press release.

In addition to the above, the board has identified an amount of upto Rs 13,000 crore ($2 billion) to be paid out to shareholders during FY18, in such manner (including by way of dividend and/ or share buyback), to be decided by the board, subject to applicable laws and requisite approvals, if any, it added.

“The Q4 earnings for the IT major Infosys has disappointed the street with the guidance getting downgraded and the EBIT margin declining from 25% to 23%, the only positive in the announcement was the capital deployment. Looking at the earnings, the stock doesn’t look good for an investment at current levels. HCL Tech, Mindtree, Tata Elxsi are better positioned that Infosys right now," said AK Prabhakar, head of research at IDBI Capital.
 
He also added that, "the appointment of a new chairman signals a lack in good governance. With the company already in not in sync with NRN Murthy over managerial issues, changes in the higher level will concern the investors more."

The stock hit an intra-day high of Rs 991 after opening at Rs 974 on BSE. The trading volumes on the counter more than doubled with a combined 4.5 million shares changed hands on BSE and NSE so far.

The stock ended 3.7% lower at Rs 932.9 in an otherwise flat market. The stock has fallen over 7% this month. 

Prabhakar also added that he didn't expect the stock to correct a lot today as it has already been in correction mode this month.