Brexit impact may force Infosys to lower guidance for second time

Infosys expects to grow at a better pace sequentially in the July-September quarter, but also flagged the risks that may lead to a second downward revision of its revenue guidance, including Britan’s decision to leave the European Union.

“We see that our Q2 growth is going to be higher than the Q1 growth,” Vishal Sikka, Chief Executive Officer of Infosys said during JPMorgan’s investor conference. “But we do see risks that would get us toward (the) territory of downward revision of guidance because the atmosphere during the course of Q2 has worsened compared to what we saw in the beginning of Q2. You see the example of RBS.”

In July, Infosys cut guidance and said it expected full-year revenue to grow between 10.5 per cent and 12 per cent, down from 11.5- 13.5 per cent in constant currency terms because of lack of near-term visibility of business due to uncertainties caused by Britain’s decision.

Last month, it had also confirmed the loss of a contract with the Royal Bank of Scotland (RBS).

As a result, about 3,000 employees are to be redeployed in other projects. On the impact of Brexit, Mr. Sikka said it was likely to have a negative impact on the IT industry in the short-term, particularly the BFSI sector, but that it was still a long-term opportunity.

“The immediate impact of this is negative. It has created a sense of anxiety. Overtime, this will become an opportunity for companies like us to provide services in a more compartmentalised world…when walls come up, there is more need for transparency...,” he said.

“We do see some challenges in BFSI but not nearly to the degree to what some other folks have talked about,” according to him. He added, “RBS we have talked about, there are a few clients in Europe which are seeing downward pressure but at the same time there are many that are growing significantly for us.”

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