Infosys Earnings Forecasts Misses Analyst Estimates, Sending Shares Lower

Infosys Forecast Misses Estimate; India Software Shares Fall

July 12 (Bloomberg) -- Infosys Ltd. forecast sales that missed analysts' estimates pulling shares of rival Indian software exporters lower amid concerns customers are holding off on new contracts because of uncertainties in the global economy.

India's second-largest code writer estimated sales in the year to March to range from $7.1 billion to $7.3 billion, Bangalore-based Infosys said in a statement today. That missed the $7.5 billion average of 56 analyst estimates compiled by Bloomberg. The company raised the outlook for earnings per American depositary receipt.

Infosys fell the most in almost three months in Mumbai, leading declines in Tata Consultancy Ltd. and Wipro Ltd. as the forecast contrasts with the raised projections at larger rival Accenture Plc last month. The European debt crisis may put pressure on the profits of banks and financial services companies and that's an "overhang" for the Indian software industry, said an analyst at Centrum Broking Pvt.

"We are structurally negative on the sector and believe that earnings expectations have to be lowered," said Centrum's Girish Pai. "The downgrade cycle for Infosys and the sector as a whole would continue in the current fiscal year and we may see larger cuts in the year starting April."

Infosys tumbled as much 6 percent to 2,746.80 rupees and changed hands at 2,780.10 rupees at 9:55 a.m. Larger rival Tata fell 1.9 percent while Wipro, India's third-biggest software exporter declined 2.5 percent. Both companies are scheduled to report earnings later this month.

Tata Consultancy, Wipro

Infosys forecast sales for the year to range from 317.8 billion rupees ($7.1 billion) to 323.1 billion rupees. The company increased its earnings per ADR to $2.88 to $2.92 from $2.83 to $2.88, according to the statement.

The software exporter also today reported net income increased 16 percent to 17.2 billion rupees in the three months ended in June from 14.9 billion rupees a year earlier. That was in line with the median analyst estimate compiled by Bloomberg.

Infosys, which builds software programs and provides back- office support to clients including BT Group Plc and Citgroup Inc., was founded by billionaire Narayana Murthy and six colleagues in 1981 with $250 they borrowed from their wives. In 1999, Infosys became the first Indian company to sell American Depositary receipts.

The company in April forecast higher wages will erode profitability as the software exporter grappled with its highest annual rate of employee turnover in at least 13 years.

To contact the reporters on this story: Ketaki Gokhale in Mumbai kgokhale@bloomberg.net

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net