Infosys Q1 results ready, will rupee spoil the party?

New Delhi: It's a contrast they won't like, but can't avoid. As another season of earnings announcements gets under way this week in India, investors will probably look forward to Infosys Technologies' results Wednesday with butterflies in bellies, hoping the market bellwether won't cut its outlook for the year started April 1.

The rising rupee is expected to play spoilsport and Infosys is expected to miss guidance, atleast in rupee terms. Investors too have turned cautious, with Infosys results just a day away.

Analysts expect that Infosys quarter on quarter growth (earlier at A 7.5 per cent in dollar revenues) will be reduced to just 1 per cent in rupee terms. Net profit is expected to decline by 4.5 per cent to Rs 974 crores.

Infosys Q1FY08 (QoQ) CNBC-TV18 Estimates
	Net Profit down 4.46% from Rs 1020 crore to Rs 974.48 crore
	Revenues Up 1.08% from Rs 3772 crore to Rs 3813 crore (Excluding Rs 125 crore tax write back)
	Revenue growth in dollar terms at 7.5% QoQ
	Likely to miss Q1 Rupee EPS (earning per share) guidance on account rupee appreciation
	To lower annual guidance by 4-5% in Rupee terms; up in dollar terms
	EBIDTA margin expected to decline by 340 basis points

For investors who are used to the company's superlative earnings growth and staggered earnings forecast revision (upwards) at the end of each quarter, it will probably be a first.

But the near 6 per cent appreciation for the Indian rupee against the US currency during the April-June period was just too bad. Together with the salary hikes Infosys was to give its employees during the quarter-wages are its biggest expenditure item-the impact on margins could be significant.

Sure, Infosys could have deflected some of that impact by executing an extra bit of work at its low-cost centers in India than at client locations in the west, cutting costs or by billing customers more dollars per hour. It will be really shocking if it didn't, but the impact from a giant move in currencies and wage inflationary pressures in an otherwise booming industry can't just be wished away.

Still, after the unusual underperformance of Infosys and its peers on the Bombay Stock Exchange during the past several weeks, the street seems to believe that the bad news is already priced in, and some devils in its earnings announcement could be overlooked. A 2% to 4% reduction in its earnings-per-share forecast for the year, for example, may be forgiven, as some still believe that it will easily make up for it in subsequent quarters.

On the other hand, Infosys may just have to retain its forecast on Wednesday for another champagne bottle to be opened.

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#infosys #quarterly results #Currency impact