Infosys ADR tanks 10% on Nasdaq

The impact of the poor show by Infosys, India's second largest software services exporter, was evident in the US financial markets as well. The ADR of the company plunged 10 per cent on Nasdaq. At 23:29 Indian time, the ADR was trading at $43.72, down 9.34 per cent. An American depositary receipt (ADR) represents securities of a non-US company that trade in the US financial markets. The company reported a 24 per cent year-on-year gain in quarterly profit for the fiscal second quarter ending September 2012. On a sequential basis, net sales rose 2.5 per cent at Rs. 9,860 crore while net profit jumped 3.5 per cent at Rs. 2,369 crore. In the June quarter, Infosys had reported Rs. 9,616 crore in sales and Rs. 2,289 crore in net profit. Analysts say results were in line with the expectations, though the Street expected some positive surprise after three straight quarterly disappointments. Infosys has failed to meet its dollar revenue outlook over the last few quarters and shares have been under tremendous selling pressure on the days when results have been announced. And this quarter has proved to be no different. Although Infosys retained its full year dollar revenue guidance at 5 per cent, investors had expected the company to raise sales outlook after the acquisition of Swiss consultancy Lodestone. Infosys had acquired the consultancy for $350 million in September. Shares in the company, which plunged over 8 per cent on the Bombay Stock Exchange initially, closed 5.4 per cent lower at Rs. 2,395.35 on the NSE after the company clarified that the revenue growth forecast for the current fiscal year that ends in March 2013 does not include revenue from Lodestone Holding AG. While top line and bottom line were in line, other operating parameters disappointed analysts and investors leading to selling pressure in the counter. Operating margins at Infosys will decline by 200 basis points in the current fiscal year that ends in March 2013 from a year earlier, Chief Financial Officer V. Balakrishnan said on Friday. The other key negative was a sharper than expected cut in rupee earnings per share (EPS) forecast. Infosys pared its fiscal 2013 rupee EPS guidance to Rs. 160.61 from earlier forecast of Rs. 166.46 in the June quarter. Dollar revenue, probably the most crucial matrix for a company earning a bulk of its revenues from overseas, rose to $1797 million from $1752 million in the June quarter against estimates of $1806 million. "The numbers are in line with expectations. The earnings per share revision in rupee terms is a function of wage hike and the rupee appreciation... There is limited downside in the stock, but upsides may be capped because of rupee appreciation," Nilesh Shah of Axis Direct said. The Street closely tracks Infosys' numbers for signals if there has been an uptick in outsourcing business from the US and Europe - the key markets for India's $100 billion IT industry. “Global economic uncertainties continue to face the industry,” said S. D. Shibulal, CEO and Managing Director at Infosys. “We have increased employee wages, used some of our cash in a transformational acquisition of a consulting business and enhanced our investment in R&D (research and development) and solutions. These initiatives will position us well in the industry and provide a strong platform for future growth.” Infosys, which has seen a slew of management changes in the last couple of years, said its chief financial officer V. Balakrishnan would give up his position from October 31 and will be replaced by vice president finance Rajiv Bansal. Balakrishnan will, however, continue to be on the company's board.

Infosys ADR tanks 10% on Nasdaq

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