India's export-driven software services companies are bracing for a slower pace of outsourcing contracts due to the troubles in Europe, Infosys's second-biggest market.

Bangalore-based Infosys forecast dollar revenue growth of 16.4 percent for the fiscal year to March 31, down from 17.1 per cent to 19.1 per cent projected in October.

The company, however, managed to beat street forecasts with a 33 per cent rise in its fiscal third-quarter profit as a weak rupee boosted margins.

The outlook of Infosys this year will depend largely on the US and European markets, which contribute more than half of its revenues combined, said Michael Huang, manager of Yuanta India Fund at Yuanta Securities Investment Trust in Taipei.

Its prospect might not be as good as it has been over the last few years. But in the longer term, this is a company that has a solid track record of its management and financial quality, said Huang whose fund owns Infosys shares.

Infosys shares were down 6.4 percent at 2,646 rupees by 0406 GMT, after falling nearly 8 percent to their lowest since Nov. 30. The overall market was down 0.2 per cent.

The reduction in its dollar revenue guidance is a matter of concern, said Dhananjay Mishra, an analyst with brokerage Sushil Finance in Mumbai.

Global spending on information technology will rise at the slowest pace in three years in 2012 as Europeans, worried about the region's sovereign debt crisis, are cutting back on investments, research firm Gartner Inc said last week.

Gartner predicted global IT spending would rise 3.7 per cent in 2012, down from its earlier estimate of 4.6 per cent. The forecast for Western Europe was slashed to a 0.7 percent drop in spending from a previously expected rise of 3.4 per cent.

The global economy, driven by slower growth in developed markets coupled with the European crisis, could impact the growth of the IT industry, Infosys Chief Executive S. D. Shibulal said in a statement.

Comments from Fitch about the risk of the euro's collapse and bankers expressing a grim view over the Greek bailout on Wednesday heightened investor caution about the course of the debt crisis.

The head of Fitch's sovereign ratings urged the European Central Bank to beef up its buying of euro zone debt to support Italy and prevent the euro's collapse.

NET PROFIT RISES

India's $76 billion IT services industry competes with Accenture Plc and IBM for orders to maintain information technology infrastructure and build software applications.

More than half of Infosys's revenue is generated from the United States.

Infosys, which is also listed in New York, said consolidated net profit rose to 23.72 billion rupees ($457 million) in the third quarter ended Dec. 31 from 17.8 billion rupees a year earlier, helped by an 8 percent fall in the rupee.

Revenue rose 30.8 percent to 92.98 billion rupees, as the company, whose customers include BP Plc, Procter & Gamble Co and Volkswagen AG, added 49 clients -- its strongest pace of client addition in more than three years.

A Reuters poll of 10 brokerages had forecast a profit of 23.1 billion rupees on revenue of 92.2 billion rupees.

The rupee was the worst performer among Asian currencies in 2011, losing nearly 16 percent against the dollar.

The company, worth about $31 billion, fell nearly a fifth in 2011, far more than its bigger rival Tata Consultancy Services that dropped 0.4 percent and compared with a fall of about 16 per cent in the sector index.

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COMMENTARY:

DHANANJAY MISHRA, IT ANALYST, SUSHIL FINANCE, MUMBAI

The reduction in its dollar revenue guidance is a matter of concern. One reason could be delays or reductions in (its) client budgets, because of which the company has taken a conservative view. Going forward we will need to see what deals it closes in the next quarter, and watch the level of recruitment.

MANISH SONTHALIA, FUND MANAGER, MOTILAL OSWAL AMC, MUMBAI

The current rupee numbers are better than expected, but they have scaled down the dollar revenue guidance, which is a disappointment. This means the fourth-quarter numbers are likely to be flat, and a lot will depend on how the rupee moves.

There may be a knee-jerk reaction in the stock, maybe 4 to 5 percent, but I don't think there is a case for re-rating the stock or the sector yet.

K.K. MITAL, HEAD OF PORTFOLIO MANAGEMENT SERVICES, GLOBE CAPITAL, NEW DELHI

Their guidance is muted and the market may not be happy. But one has to accept the reality that some short-term pressures are there. There have been worries that clients are asking for moderation in rates, and this may put a little pressure on the outlook. But I think the latter half of next fiscal year should be OK. By that time there would be clear picture on Europe.

Infosys shares have gone up recently, so there would be some amount of profit-taking, but we don't expect the stock to slip sharply.

R.K. GUPTA, MANAGING DIRECTOR, TAURUS MUTUAL FUND, NEW DELHI

Despite of heavy depreciation in the rupee, if in dollar terms there revenue has gone up, then it's a positive thing for Infosys in particular and IT sector in general.

ROHIT ANAND, ANALYST, PINC RESEARCH, MUMBAI

The results for this quarter are better than expected but there is slight disappointment over the fourth-quarter guidance. The important number to watch in the future will be the FY13 growth outlook and dollar revenue. Even if market growth is at about 10 to 12 percent and the rupee is at 52, it will be good for the company. We do not expect the stock to plummet today.

AMBAREESH BALIGA, CHIEF OPERATING OFFICER, WAY2WEALTH, MUMBAI

The performance is better than expected. You could see a bump-up in the stock but the question is whether it will sustain or not because of the outperformance that is already built in.

MICHAEL HUANG, MANAGER, YUANTA INDIA FUND, YUANTA SECURITIES INVEST MENT TRUST, TAIPEI

The outlook of Infosys this year will depend largely on the U.S. and European markets, which contribute more than half of its revenues combined. Its prospect might not be as good as it has been over the last few years. But in longer term, this is a company that has a solid track record of its management and financial quality.

Infy's Q4 revenue guidance terrible, says CS

Infosys' muted Q4 revenue guidance would keep expectations under control, the stock range-bound and probably some cuts in earnings estimates for the company, said several institutional sales persons and analysts, in first-cut reports. Credit Suisse says that Q4 revenue guidance is terrible, while Nomura says that it's estimates are likely to go down marginally. Excluding likely revenues worth $6 million from recently acquired BPO company in Australia (likely to be consolidated by Mid-Jan'12), organic guidance is 0.11-0.33 percent (sequential) decline in (Q4) US dollar revenues, said RBS in a note. Morgan Stanley says key to the stock, from here onwards, would be FY13 guidance which comes out in April.

Infosys says business sentiment has worsened since Nov

Infosys Ltd, the No.2 Indian software services exporter, has seen business sentiment worsen marginally since November as clients have tightened discretionary spending on technology, Chief Executive S. D. Shibulal told reporters.

December quarter operating margins rose to 31 percent from 28 percent in the previous quarter, he said, adding that the company would retain its hiring targets for the fiscal year ending March 2012.

Earlier on Thursday, Infosys cut its full-year revenue outlook because of the debt crisis in Europe, sending its shares down by as much as 7.7 percent to their lowest in more than a month. However, the company beat market forecasts with a 33 percent rise in fiscal third-quarter profit, helped by a weak rupee.

Infosys sees margins stable in March quarter

Infosys Ltd, the No.2 Indian software services exporter, expects margins to remain stable in the current quarter, and client technology budgets to be flat or slightly down in 2012, Chief Financial Officer V. Balakrishnan said on television.

Earlier on Thursday, Infosys cut its full-year revenue outlook because of the debt crisis in Europe, sending its shares down by as much as 7.7 percent to their lowest in more than a month.