Infosys Share Drops 4% On FY24 Guidance Cut; Lost Rs 26,000 Crore M-Cap In Few Minutes, ADR Dips 6.5%

Tech giant, Infosys grappled into a free fall as investors dumped its shares on exchanges during the early trade of Friday. Infosys shares have dropped by more than 4%, dragging the broader market as well. Not just that, Infosys has lost over Rs 26,000 crore m-cap in a few minutes and erased its critical Rs 6 lakh crore valuation mark, while ADRs have also plunged over 6.5%. Despite impressive Q2 numbers, it would be weak volumes that pushed Infosys to trim its FY24 guidance and that has left investors worried.

In the opening bell, Infosys share price touched an intraday low of Rs 1,402.10 apiece on BSE, nosediving by 4.3% at least. This led to an erosion of over Rs 26,137.31 crore market value, taking its total to 5,81,707.19 crore.

But Infosys has recovered some of the losses, nevertheless, continues to take a heavy beating.

At the time of writing, Infosys shares traded at Rs 1422.15 apiece, down by 2.90% with a market cap of 5,90,246.88 crore --- lower by Rs 17,598 crore from the previous print.

On the previous day, Infosys shares stood at Rs 1464.55 apiece with a market cap of Rs 6,07,844.51 crore.

Meanwhile, the tech giant's American Depositary Receipts (ADRs) listed on NYSE shed 6.53% to end at $16.46 on Thursday after the Q2 results were announced. However, after market hours, ADRs were up 0.73% to $16.58.

In Q2FY24, Infosys had a consolidated net profit of Rs 6,212 crore which is attributable to the owners of the company, registering a growth of 4.5% QoQ and 3.2% YoY. While operating profit stood at Rs 8,274 crore, rising by 4.8% QoQ and 5.1% YoY. Operating margins also expanded sequentially by 0.4% to 21.2% compared to 20.8% in Q1FY24. Also, consolidated revenue stood at Rs 38,994 crore in the quarter under review, posting a growth of 2.8% QoQ and 6.7% YoY.

These were all in line with estimates. But the real spoilsport would be the FY24 guidance cut.

For the full-year FY24, Infosys trimmed its upper-end of constant currency revenue growth to 3.5% from the previous 2.5%. Overall, the company expects CC revenue growth to be in the range of 1-2.5% from earlier 1-3.5%. However, it maintained its EBIT margin guidance in the range of 20-22% growth.

Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Infosys Q2 earnings are in line with market expectation but the company trimming its revenue guidance would be negative for the stock. Overall results are not so bad but discounted in prices. FY24 Guidance - revised downwards would put pressure on prices to sustain while it has maintained margins."

Also, Sumit Pokharna, Research Analyst, and Vice President at Kotak Securities highlighted that Infosys' Q2FY24 headline numbers were impressive on the back of 2.3% c/c revenue growth on a sequential basis and EBIT margin increase of 40 bps qoq despite higher subcontracting costs and partial wage revision. The company has posted good net profit numbers and a record TCV of US$7.7 bn.

However, Pokharna added, "weak volumes have been fed into the guidance which now stands revised to 1-2.5% from 1-3.5% earlier, while guidance cut once again at the upper end of the band implies flat to 1.9% decline in revenues in the next two quarters. The EBIT margin of 21.2% was ahead of our estimate of 20.6% despite higher pass-through revenues. While net headcount increased by 7.5K employees to 328.7K employee qoq, the headcount decline on yoy comparison stands at 16.5K employees or 5%. Employee utilization of ex-trainees has increased to 81.8% from 81.1% earlier, indicating that utilization has scope to increase further."

Looking ahead, Dhruv Mudaraddi, Research Analyst, StoxBox said, "Infosys is well-positioned with a robust foundation due to its highest-ever large deal order book, distributed across various verticals and geographies. The adoption of their Generative AI offering, Topaz, is expected to enhance market share and deliver consistent value. We will be keeping a close eye on management guidance on a revival of demand in the BFSI sector and their outlook on the demand scenario in Europe in the coming quarters."

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