Infosys could fall further by 40% in next 12 months: CLSA

Posted By: Religare
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Infosys Ltd — the country's second largest software exporter — came under pressure after the global equity research firm CLSA said its stock could nosedive by another 40 per cent from the current levels in next 12 months.

Though CLSA downgraded the stock outlook in a note to its clients, a Mumbai based stock broker said that some clients might have leaked the note to media after taking position in the counter.

Reacting to the development, shares of Infosys fell 1.17 per cent today to close at Rs 2,578 on the Bombay Stock Exchange (BSE). CLSA has fixed the price target of Rs 1,566 in the note sent to its customers.

CLSA pointed that IT companies have been all going aggressively to sell services in foreign markets. It said some companies are going after big contracts with offshore billing rates in the $14/hour area.

"This 'freebie' issue is interesting -- in that it is what we believed should be the first choice vs. lowering pricing because we believe that once a rate is lowered, it is much harder to raise it in the future," said CLSA's sales team.

CLSA also said that the recent appreciation of Rupee against the US dollar may also turn the things into worse for company. It said that a 4 per cent strengthening of the rupee will hurt Infosys earnings by about 5 per cent. And a 13 per cent move in the rupee would reduce earnings by 17 per cent.

The statement of CLSA came at a time when the company is all set to roll out Q2 earning numbers this month and the company has already shown that it earned most from the 8 per cent weakening of rupee during six months ended June 2012.

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