Infosys was the subject of some upheaval on Thursday after investors and players made manifest their disappointment over the company's subdued guidance for 2003-04.

The scrip found itself in a downward spiral in morning trades today and is currently down 17% to Rs 3,455. In a little over two hours of trading, the stock clocked volumes of 7 lakh shares on BSE.

Though volumes on the counter do not seem extraordinary, dealers say, even small quantities of selling is having quite a telling effect on the counter.

Ahead of the announcement of results, Infosys moved in a range of Rs 4,000-4,400 (over the last few days).

Dealers say unwinding of positions in the derivatives section is also materialising. This, in turn, is having a cascading effect on the scrip in the cash market. Infosys' April 2003 put options premium for Rs 4,000 series soared to Rs 580 a share in mid-morning trades from Wednesday's close of Rs 75.65, dealers inform. This means that option writers would have to bear huge losses.

There was also fresh short selling taking place in the stock following the muted guidance. Market men say the possibility of the scrip finding support at the lower levels will depend on FII initiative on the counter. Usually, FII (London-based FIIs) activity on the domestic bourses commences at about 13:30 IST, when it is early morning in London.

Dealers further say that Infosys is hit by its wide holding ie almost every fund has Infosys in its portfolio and the fund holding ranges from 4-5% to as high as 10%. Besides a number of high net worth individuals too hold the stock. This wide holding has also contributed to the sharp setback on the Infosys counter . "It is certainly worth looking at the stock from the buying perspective at the current level of Rs 3,400," a dealer now insists. The stock, at the current Rs 3,455, trades at a PE multiple of 21.3 based on its projected FY 2003-04 EPS of Rs 162.

The starkly muted earnings guidance by the software bellwether has hurt the stock volubly today. The challenging external environment (including the recession in the US), pricing pressures on outsourcing deals, competition and uncertainty due to the incidence of SARS as also the U.S.-Iraq war have been cited as responsible for the muted earnings guidance by the software bellwether. The incidence of SARS in Asia has set off cancellation of visits by some clients.

For the full year 2003-04, the company has projected an EPS of between Rs 162 and Rs 164 (non-consolidated) as compared to the EPS of Rs 144.68 recorded for FY 2002-03. This implies a growth of 11.9% to 13.3% for the full year. IT analysts have deemed the guidance as quite disappointing.

Income from software development services is expected to be between Rs 4,484 crore (Rs 44.84 billion) and Rs 4,565 crore (Rs 45.65 billion), indicating a 23-26% growth over the Rs 3,62.69 crore (Rs 3.62 billion) recorded in FY 2002-03.

For the fourth quarter, the Bangalore-based software major posted a 23% rise in net profit to Rs 259 crore (Rs 2.59 billion) on net sales of Rs 1,020 crore (Rs 10.2 billion). The company's quarterly net profit growth of 23% came in on the lower side of estimates by capitalmarket.com (in an analysts poll) - a 23-33.6% rise in net profit to Rs 259-281 crore (Rs 2.59-2.81 billion) and sales of between Rs 980 crore (Rs 9.8 billion) and Rs 1,043 crore (Rs 10.43 billion), up 44-53.3%.

The company, itself, had predicted a net profit of Rs 259-261 crore (Rs 2.59-2.61 billion) and an income from software development services and products of between Rs 975 crore (Rs 9.75 billion) and Rs 989 crore (Rs 9.89 billion).

Software revenues in US dollar terms grew by 7.7% for the quarter as compared to the quarter ended 31 December 2002. Revenue growth comprised volume growth of 12.8 % offset by a price decline of 5.1%, as compared to the quarter ended 31 December 2002.

Fiscal 2002-03 was a challenging year for the Indian software industry said Nandan M Nilekani, chief executive, president and managing director. "The global delivery model has become mainstream as offshore outsourcing gains momentum. However, uncertainties relating to the US economy continue to have an impact on industry growth." "The weak economic environment, coupled with the pressure on billing rates and a stronger rupee, has exerted tremendous pressure on the margins," said T V Mohandas Pai, member of the board and chief financial officer.

Infosys added 28 new clients in Q4 compared to the 23 clients it added in Q3.

The utilisation rate including trainees was 77.80% for the quarter as compared to 76.10% for the quarter ended 31 December 2002 and 72.40% for the quarter ended 31 March 2002. The utilisation rate excluding trainees was 82.10% for the quarter as compared to 82.20% for the quarter ended 31 December, 2002 and 72.90% for the quarter ended 31 March 2002.

Infosys increased its total employee strength to 15,356 as on 31 March 2003, up from 14,058 as on 31 December 2002. The number of software professionals as on 31 March 2003 increased to 14,001 from 12,801 as on 31 December 2002. Of these 14,001 software professionals, 572 belong to the Banking Business Unit.

The net addition to employees during the quarter was 1,298 as compared to 948 during the quarter ended 31 December 2002. Gross addition to employees during the quarter was 1,539, of which 363 were lateral employees.

BSE code: 500209