Infosys Shares Dip By 10% After Sharp Cut In FY24 Guidance; M-Cap Of Nearly Rs 57,000 Crore Eroded

The second largest tech firm in India in terms of market share, Infosys witnessed frenzy selling on Friday's trading session after the company halved its FY24 revenue guidance in the first quarter earnings. In the opening bell, Infosys share price flash dipped by at least 9.5% on BSE, and is currently trading near its an intraday low. Meanwhile, overnight on Wall Street, Infosys American Depositary Receipts (ADR) recorded their biggest single-day fall in three months.

At the time of writing, Infosys share price traded at Rs 1,326.90 apiece on BSE, tumbling by Rs 121.95 or 7.37%. The stock ranges between Rs 1,342.20 apiece to Rs 1,311.60 apiece.

Infosys market share has contracted by nearly Rs 56,943.2 crore in the early deals of Friday. On its intraday low, the market cap stood around Rs 5,44,357.45 crore compared to the previous session's print of Rs 6,01300.62 crore.

Moreover, Infosys ADR listed on the New York Stock Exchange ended at $16.22, lower by 8.41% overnight. Earlier, on April 13, Infosys ADRs plunged by more than 9% which came after March 2023 quarterly earnings. During the intraday trade on Thursday, the ADR nosedived as much as 13.44%, making it the biggest single-day decline since March 2020.

In the quarter ending June 30, 2023 (Q1FY24) period, Infosys earned a consolidated net profit of Rs 5,945 crore, registering a growth of 10.9% YoY but a decline of 3% QoQ. On the contrary, revenue from operations stood at Rs 37,933 crore in Q1, rising by 10% YoY and 1.3% QoQ. The tech player delivered $4,617 million in Q1 revenues with year-on-year growth of 4.2% and sequential growth of 1.0% in constant currency.

Further, Infosys posted a large deal TCV for the quarter at $2.3 billion, with a net new of 56.1%. , the company's operating margin for the quarter was stable at 20.8%. ROE improved 180 bps to 32.8%. Also, attrition declined further to 17.3% in Q1FY24.

Broadly, Infosys Q1 revenue was in line with estimates but net income was a miss. However, it would be the sharp cut in the FY24 outlook that has shaken investors as it is lower-than-expected.

For full-year FY24, Infosys expects revenue growth of 1.0%-3.5% in constant currency, while operating margin is estimated to see 20%-22% growth.

On Infosys quarterly earnings, Dhruv Mudaraddi, Research Analyst, Stoxbox said, "Infosys revenue increased 1.3% QoQ / up 10.0% YoY in INR terms to Rs. 37,933 crores, mostly in line with market estimates of Rs. 37,843 crores. However, the company has sharply revised FY24 revenue growth guidance downwards to 1.0% - 3.5% from 4% - 7% earlier." Adding he said, "Net income was reported at Rs. 5,945 crores (down 3.1% QoQ / up 10.9% YoY), missing market estimates of Rs. 6,245 crores. The PAT margin came at 15.7% (down 71 bps QoQ / up 12 bps YoY), lower than market estimates of 17%."

According to Mudaraddi, Infosys reported a marginal growth in revenue for Q1FY24 and large deals of $2.3 billion which helps to set a strong foundation for future growth. Operating margins were strong during the quarter despite an uncertain macro environment on the back of continued focus on cost optimization. The company also expanded the margin improvement program with a full set of actions for the short, medium, and long-term, working on key areas.

However, Mudaraddi added that the FY24 revenue growth guidance revised to 1.0% to 3.5% from 4% to 7% clearly shows that the global weak macroeconomic environment is weighing on the company's performance, with discretionary projects taking a backseat and the decision-making cycle becoming longer along with delayed start to new projects.

"It would be interesting to see how the company would maintain FY24 revenue guidance, especially against the backdrop of the demand weakening across business verticals," the analyst said.

Motilal Oswal said that FY24 guidance reset to impact near-term stock view. In its research note dated July 21, the brokerage added, that Infosys has sharply lowered its FY24 revenue growth guidance to 1.0-3.5% YoY CC from 4.0-7.0% YoY CC earlier, on account of lower-than-expected volume and discretionary spending, delays in decision-making and push-outs in anticipated. It said, "We expect FY24 revenue growth at 2.6% CC, slightly above the mid-point of the Despite the near-term weakness, we expect INFO to be a key beneficiary of the acceleration in IT spends in the medium term."

Year-to-date, Infosys shares have dropped by nearly 12% on BSE.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.