Technology bellweather Infosys Ltd. believes that it will achieve at least the lower end of its 4-7 percent revenue growth in constant currency terms in financial year 2024. However, it said that achieving the top end of the band will require a faster pace of closure some mega deals that the company has in its pipeline. Deals with Total Contract Value (TCV) in excess of $500 million is known as a mega deal.

In an interaction with brokerage firm Morgan Stanley, the management of Infosys said that improving EBIT margin in financial year 2024 is a "tall task," given the limited room for levers, such as the pyramid and utilisation in a slowing growth environment.

"However, if Macro conditions were to deteriorate further, it would have an impact on slower conversion of pipeline into orders," Morgan Stanley said in a note.

Infosys made these comments in an interaction with brokerage firm Morgan Stanley and also mentioned that the external environment has not changed much over the last month-and-a-half, since the company announced its quarterly earnings. The management said that the lower end of the 4-6 percent revenue growth guidance for financial yer 2024 is de-risked because it has already factord in the macro uncertainty.

The technology company missed expectations on all fronts during the March quarter earnings announcement on April 16. It also reported a 3.2 percent decline in constant currency revenue (adjusted for exchange rate fluctuations), which was the worst in at least a decade.

Morgan Stanley that unlike EPAM, Infosys' management commentary was more balanced on the demand outlook, possibly due to traction in cost takeout deals. However, it warned that expectations of back-ended growth would be fraught with risk. It believes that the consensus expectations of Infosys achieving US Dollar revenue growth between 5-5.5 percent in financial year 2024 appears reasonable.

The brokerage has maintained its overweight rating on Infosys with a price target of Rs 1,475. It further added that the current cost structure of the company is elevated and has gradual room for improvement.

Technology stocks saw their worst day in two months on Tuesday after global peer EPAM cut its guidance for 2023 for the second time in as many months. Analysts warned that companies with a higher exposure to discretionary spending are at a greater risk to EPAM's announcement.

Shares of Infosys have fallen over 10 percent since the company's March quarter earnings announcement. On a year-to-date basis, the stock is down over 15 percent.

(Edited by : Hormaz Fatakia)

First Published:Jun 7, 2023 9:28 AM IST