Infosys may see positive impact on margin by 40-50 bps in Q3
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Infosys, which undertook a cost-optimisation drive — including streamlining its onsite workforce — in the last few months, is expected to see a positive impact on its operating margin by 40-50 basis points (bps) during the October-December stretch.
The third-quarter earnings season of the $108-billion Indian IT-ITeS industry will kick off on January 10 with Infosys declaring its results. The overall expectations are muted as the December quarter is a seasonally weak period due to the holiday season, though brokerage houses believe that the IT-services exporter is on track to meet its full-year dollar revenue guidance.
"It will be easy for them to achieve the dollar revenue guidance of 10% growth even if the revenue remains flat for Q3 and Q4. So beating the guidance and achieving 11-11.5% is easily achievable. If the outlook goes beyond 11.5%, it will be a positive surprise," said Ankita Somani, IT analyst with Angel Broking.
For FY14, Infosys expects its dollar-revenue growth in the range of 9-10%. The IT firm upgraded its full-year guidance during the September-quarter results from its earlier estimate of 6-10% this fiscal.
According to Sanjeev Hota, assistant vice-president, IT research, Sharekhan, the IT firm's revenue growth during the October-December period is projected to be muted. "The third quarter is relatively a soft period. We expect the revenue growth rate to be lower than Q2 but Infosys is expected to post cross-currency gain of 60-70 bps in Q3." The company has posted a cross-currency loss of 40 bps in Q2.
During the second-quarter ended September, Infosys posted a dollar-revenue growth of 3.8%. According to Somani, the Bangalore-based IT firm is expected to grow its dollar revenue at 2-2.5%. "The growth will still be led by TCS and HCL Technologies while Infosys and Wipro are only expected to follow them for the current quarter as well," she added.