Infosys may cut FY'14 guidance to 6%: Morgan

Infosys may cut FY

New Delhi (PTI): Infosys is expected to cut 2013-14 revenue guidance to 4-6 per cent as wage hikes and higher...

InfosisNew Delhi (PTI): Infosys is expected to cut 2013-14 revenue guidance to 4-6 per cent as wage hikes and higher costs are hitting its margins, offsetting the benefits of rupee depreciation, says a Morgan Stanley report. "A QoQ revenue decline for Infosys cannot be ruled out in Q1FY14, with higher costs and wage hikes dragging on margins in 1HFY14 � despite the strong inherent operating leverage of its bench," Morgan Stanley said in a research note. The report further noted that any cut in revenue guidance and lower QoQ margins could limit FY'14 EPS upgrades despite rupee depreciation. It said Infosys may cut its FY'14 revenue guidance to 4-6 per cent year-on-year, adding that "we expect first quarter (April-June) revenues to be flattish with wage hikes and productivity hitting Q-o-Q margins and offsetting rupee depreciation". The global brokerage firm said historically, the QoQ revenue growth in US dollar terms has "disappointed" large companies in times of steep rupee depreciation. "We expect large-cap stocks to absorb the tailwind due to rupee depreciation, whereas it is likely to flow through to margins and earnings for small and mid-cap companies," the report said. The rupee last week sank to all-time low of 60.72 against the dollar on heavy capital outflows and month-end dollar demand from importers. Infosys, considered bellwether for the Indian IT sector, had in April given lower-than-expected revenue guidance of 6-10 per cent growth for FY14. This was less than industry body Nasscom's estimate of 12-14 per cent growth for the Indian software services industry in the 2013-14 fiscal.
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