India's second-largest software exporter Infosys on Friday reported an inline set of quarterly results but the company's decision to lower its operating margin band to 22-24 precent for 2018-19 is a cause of worry for investors.
Infosys posted a 28.2 percent drop in sequential net profit at Rs 3,690 crore for the March quarter.
The IT firm guided for 6-8 percent constant currency revenue growth for fiscal 2019. Citi had anticipated Infosys to guide for 5.5-7.5 percent revenue growth in constant currency terms.
Infosys reduced its target margin band to 22-24 percent from 23-25 per cent earlier. This was on account of higher investment in new technologies, according to the management.
The company said it had begun looking for buyers for Kallidus, Skava and Panaya - firms Infosys had bought in 2015, during former CEO Vishal Sikka's tenure.
The Bengaluru-based company plans to give a special dividend of Rs 10 per share over and above the final dividend of Rs 20.5.
Lets take a look at analysts' reaction to Infosys results:
- The markets are likely to view the lower margin guidance band negatively, in our opinion, given the current expectations and the likely impact on fiscal 2019 earnings growth: UBS Securities wrote in a note
- "We view this as a longer-term positive as it should allow the company to focus on revenue and market share."-UBS
- Infosys has highlighted issues regarding relatively low revenue growth, margin compression, leadership churn, and high employee attrition. Management has taken steps to remedy this, but it is still early and there is the risk that these problems become inflated - Morningstar
- Infosys' fiscal 2019 revenue guidance is in line with our expectations, while margin guidance disappoints a little bit considering its additional investments in digital and setting up onsite delivery centres - Sharekhan
- Infosys shares were up 0.58 percent at Rs1,169 on the BSE at the close of trading. The results were reported after market hours. Infosys American Depository Receipts fell 8 percent in early trading in New York.