Stock Market In Shock As Infosys Share Price Fall 9%, Wiping Off Rs 48,000 Crore Of Investors’ Money

While wiping out Rs 48,000 crore in market capital, the shares of Indian IT major, Infosys Ltd plunged over 9 percent on Monday’s trading session.

How Did This Happen?

It seems that many analysts cut its margin estimates over its weaker-than-expected earnings for the March quarter.

Further, looks like the biggest fall in the market at 9 percent since March 23, 2020. 

On Monday, the IT firm’s stock touched a low of Rs 1,592 a share. 

Market Experts Take

In order to factor the miss, Jefferies India cut its margin estimates by 100-170 basis points further expecting 21.9 percent margin in FY22.  

On the other hand the brokerage firm Nomura Research, expects FY23F EBIT margin to drop 100bp year on-year to 22 percent and lower FY22-24 earnings per share by 5-7 percent primarily on our lower margin expectations.

Similarly, B&K Securities is anticipating the margins of 22.7/23.7 percent for FY23/24.

Hence downgraded its EPS estimates by 5 percent each year to Rs. 63/78 per share respectively.

Why Would This Happen?

Coming to the company’s performance, Infosys reported a revenue growth of 1.2 percent on-quarter in constant currency terms due to contractual client provisions impact and less number of calendar working days.

Basically, the margin was down by 193 basis points QoQ at 21.6 percent largely due to lower working days (160bps), contractual client provision (60bps) partially negated by pyramid optimisation.

The lower margin caused by the factors including higher than expected pass-through costs (90bps margin hit), higher employee costs (30bps margin hit), rise in travel costs (30bps margin hit). 

Company’s quarterly annualized attrition is down 5 percentage points in the fourth quarter as highlighted by the company’s management.

Further, the wage hikes in FY23 may be competitive and higher than last year particularly overseas.

Giving its view, Motilal Oswal Securities said “Infosys posted weak earnings with slow growth and a meaningful dip in margin. Though growth in the quarter was muted, demand remains intact and the order book remains strong. The management’s FY23 growth guidance and high headcount addition provide further visibility on demand,” in a note to investors.

“We expect Infosys to deliver margin on the higher side of its guidance band, with strong growth and reduced dependence on sub-contractors as attrition falls.  We expect Infosys to be a key beneficiary of an acceleration in IT spends,” Motilal Oswal Report added.

Besides this, the IT firm shared an encouraging growth guidance of 13-15 percent for FY23 on the back of a robust demand environment and strong deal pipeline.