Shares in Infosys fell as much as 4.23 per cent to Rs. 3,185.80 on Monday after analysts said its growth revival will take time.
Infosys, which announced its financial results for the April-June 2014 quarter on Friday, beat profit estimates after reporting consolidated net profit of Rs. 2,886 crore ($480.20 million) from Rs. 2,374 crore in the same year-ago period. Analysts polled by Reuters had expected Infosys to report net profit of Rs. 2,672 crore.
Brokerage house Maybank Kim Eng says volatile margin, muted growth in large client addition, high employee attrition is the main concern in Infosys. Maybank says that it will take at least 12 months for Infosys to get on par with sector growth again in the best case. The brokerage house maintains sell on the stock with a target price at Rs. 2,859, based on 13 times its expected FY16 earnings.
Infosys’ revenue from its top ten clients, which contributes 23 per cent to its revenue, fell 0.2 per cent sequentially making it the third straight quarter of decline.
Infosys shares rose nearly 1 per cent on Friday after its Q1 operating margins came in at nearly 25 per cent, which were 250 basis points ahead of estimates. Analysts expected its margin to drop on the back of salary hike and rupee appreciation.
Chief financial officer Rajiv Bansal in an analyst conference said there were 110 basis points increase in their operating margins due to change in depreciation accounting policies.
Ashish Chopra, IT analyst at Motilal Oswal Securities, says, “(There is a) healthy deal pipeline and strong volume growth at the start of the year. Efforts to revive growth are taking place amid significant leadership changes, and hence we expect revival to be gradual.”