Infosys share price: Stock sees biggest fall in 2 years; plunges 10 per cent

Infosys Technologies Ltd , India's No. 2 software services exporter, sparked worries about the sector's growth after it forecast annual sales lower than expected on slower client spending, knocking its shares down nearly 10 per cent. Infosys shares closed down 9.59 per cent on BSE at Rs 2988.80.

Kicking off results for India's nearly $60 billion IT sector on Friday, Infosys estimated tepid revenue growth due to global economic uncertainty and said margins would decline for the year ending March 2012, highlighting currency risks for the export-focused sector.

"Based on what Infosys has reported and forecast, people will taper down their earnings estimates for the top players in the sector," said Tejas Doshi, vice president of research at Sushil Finance in Mumbai.

Bangalore-based Infosys, seen as a benchmark for the Indian outsourcing sector, has missed analysts' profit estimates for the third time in four quarters.

"You are seeing high fluctuations in the client spending due to global economic uncertainties. Margins will remain under pressure for the companies," Doshi said.

Infosys, larger rival Tata Consultancy Services and No. 3 player Wipro have been battling a strengthening local currency and pay increases for staff as they fight to retain talent while competing with rivals such as IBM and Accenture .

Infosys Chief Operating Officer S.D. Shibulal said the company expected to raise wages 10 to 12 per cent in fiscal year 2012, while likely not being able to raise pricing. "We have assumed for all our guidance purposes flat pricing," Shibulal said.

Infosys, which has 130,820 staff, plans to add 45,000 more this year.

In the latest management shakeup in the sector, Infosys said its human resources chief, T.V. Mohandas Pai , had quit. Pai, the former CFO, was widely seen by analysts as the only non-founder who could become CEO. Pai joined Infosys in 1994 and was a member of the board since May 2000.

"We have had transitions in the past...these things are part and parcel of a growth of a corporate and what is good is that we have the leadership required to manage these transitions," Chief Executive S. Gopalakrishnan said, referring to Pai's move.

Infosys's chairman is slated to retire in August this year, prompting media reports he would be replaced by the current chief executive in a move that would create a vacancy for the top job.

Infosys' board would meet on April 30 to discuss succession plans.

In January, Wipro replaced the chiefs of its key outsourcing business after struggling to keep up with peers.

Indian companies are seeing a shakeup in top management as some founder-led firms seek to resolve succession issues and others look to revamp strategies amid intense competition from domestic and overseas rivals.

Infosys shares ended 9.6 per cent lower on Friday, the biggest daily fall since May 19, 2009, and rival Wipro dropped as much as 5 per cent. The sector index fell 6.3 per cent in a broader market down 1.5 per cent.

More than 10 million shares were provisionally traded on the National Stock Exchange, more than 10 times its 90-day daily average volume.

ECONOMIC WORRY WEIGHS

"The biggest concern for Infosys' prospect this year is the slow recovery of the US and European economy," said Eric Lin, manager of the India fund at Prudential Plc's fund unit in Taipei.

Source: click here