Infosys expects 2014-15 growth to be in the range of 7-9 per cent, lower than 2013-14 growth at 11.5 per cent. Infosys is likely to grow much slower than the IT industry and its bigger competitor TCS in the current fiscal.
But leading brokerages are willing to be patient with Infosys, which is in the midst of a restructuring under its executive chairman NR Narayana Murthy, who returned from retirement in June 2013 to lead the company he founded.
Mr Murthy expects Infosys to get to the median growth rate in the industry within three years and in five years the company will get back to industry-leading growth rate, which it enjoyed till 2007-08.
Credit Suisse says Infosys guidance has been a relief. The investment bank's comments are a reflection of the muted expectations from Infosys, which not so long ago was considered to be a bellwether for India's over $100 billion outsourcing industry.
In fact, some analysts expected Infosys to guide for a mere 6 per cent growth in revenues in the current fiscal year after Infosys sounded out alarm bells last month.
Domestic brokerage Kotak says FY15 guidance of 7-9 per cent is better than estimates. Motilal Oswal, a Mumbai-based brokerage said Infosys guidance is in line, while global brokerage Nomura dubbed Infosys' guidance as "decent".
For the fourth quarter, Infosys reported flat sales, but margins rose by 50 basis points, surprising the Street positively. Increase in EBIT margin on back of cost optimization is a positive, Kotak said.
The company's focus on aggressively cutting cost has started yielding results, as evidenced from the rise in margins in December and March quarters, analysts say.
Brokerages on Infosys
Infosys' performance is still weak relative to top peers and its current valuations at a discount to TCS is deserving, Credit Suisse says. It retained its neutral call on the stock with a target of Rs. 3,650.
Kotak says Infosys is trading at 15 times FY15 earnings and is inexpensive. It expects the stock to move up.
Infosys shares ended 0.76 per cent higher at Rs. 3,260.