Infosys Cuts Sales Forecast Again as Clients Trim Spending

Infosys Ltd. cut its annual sales forecast for the second time in three months as growth slows in the banking and financial services sectors and clients adopt a more cautious spending approach. Shares slumped.

Sales in U.S. dollar terms will rise 7.5 percent to 8.5 percent in the 12 months ending March, the Bangalore-based company said Friday. That compares with a July forecast by Asia’s second-most valuable exporter of software services for growth of more than 10 percent. The company also posted second-quarter net income of 36.1 billion rupees ($540 million), slightly ahead of analyst estimates.

Slackening spending as companies tighten their contracting budgets is hitting India’s outsourcing industry, raising the challenge for Chief Executive Officer Vishal Sikka to hit long-term sales goals. The industry’s trade body is expected to find it harder to maintain its forecast for industry growth while Infosys itself lowered its full-year sales forecast in July.

“The company’s constant currency guidance is a dampener. We expect very low growth for the next two quarters,” said Varshit Shah, IT industry analyst at Mumbai-based Centrum Broking. “The stock is not going to deliver any returns for the next six months.”

Infosys shares fell as much as 5.3 percent and were 2.6 percent lower as of 10:22 a.m. in Mumbai.

Infosys cut its annual growth target in July to 10 percent to 11.5 percent based on June 30 currency rates and then a month later announced the loss of a key contract with Royal Bank of Scotland Group Plc.

Sales for the second quarter were 173.1 billion rupees, compared with analysts’ projections for 171.8 billion rupees. Rising global volatility, intensifying competition and Britain’s decision to depart the European Union is fueling uncertainty for Infosys’ industry. Worldwide IT spending is forecast to be flat in 2016, according to Gartner Inc.

Sikka said Friday he is sticking by his goal of $20 billion in revenue by 2020.

The company is reporting results a day after larger rival Tata Consultancy Services Ltd. posted quarterly profit that beat estimates.

© 2016 Bloomberg L.P

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