Yesterday Infosys came out with its financial results and the stock markets tanked downwards. The second-largest IT services company in the country, Infosys Technologies Ltd saw a sharp and unprecedented decline in share prices, registering by the end of Friday a decline of 21.3 per cent in value and a loss of Rs. 36,000 crore for the company in market capitalisation. WTF? A clear example of market frenzy which is dominated by gamblers and punters and not investors.
The company registered a net profit of Rs. 2,394 crore in 2012-13 which is up by 3.4 per cent over the previous year. A business which has given humongous returns to shareholders who invested at the right price and kept that investment locked up. Infosys is not winding up like Kingfisher Airlines. It is a business which is up and about. Growing steadily. It can never show growth rates which it showed when it was a young company because of a large base and matured business now. What was Infosys fault?
The Hindu newspaper report says, “With a low and wide-ranging revenue guidance (or forecast) for 2013-14, pegged at six to 10 per cent (far below the industry average of 12 to 14 per cent) and the 2012-13 results falling short of its own predictions, the IT bellwether painted a cloudy and dismal picture for the ‘sunshine’ sector.”
So, it was a result of prediction going wrong and not the business going wrong. It is like a T 20 match where you predict that Chennai Super Kings will win the match against Rajasthan Royals by 14 runs. Let us say at the end of the evening CSK , instead of a margin of 14 runs win the match by 3 runs. Will you as a CSK fan mourn that win? I doubt. Similarly, end of day Infosys is still one of the best run professional company, it still is generating upwards of Rs 2200 crores profits every year, it is still giving its shareholders decent returns — dividends, bonuses and is still paying salaries to its employees. Did Infosys deserve this? You decide. Meanwhile, the same share will bounce back in the next two to three trading sessions, making you wonder on the shenanigans of the stock markets.
I have been approached by a few readers whether they should buy Infosys at these levels? I have not analysed and researched Infosys and have thus not arrived at a fair price to buy. The business is good and intact, is the price good? I can’t say.