In an unexpected development, the India-based technology giant Infosys has lost the Royal Bank of Scotland deal. As such, the company will probably layoff nearly 3000 jobs based in Bangalore and other locations across the world. This is after the decision of the bank to cancel a proposal to establish a separate bank in the United Kingdom. Infosys was scheduled to play a key role of a technology partner in the new UK standalone bank, Williams & Glyn (W&G), which was expected to be setup by the RBS. As a result of the development, Infosys shares tumbled by over 3 percent when stocks opened on Tuesday.
Earlier, RBS announced that it will not go ahead with its plan to separate and list a new UK-based bank, Williams & Glyn (W&G). According to analysts, the cancellation of the deal is likely to affect Infosys revenue to the tune of $40 to $50 million during the current fiscal year. This could translate into earnings per share cut of 1 to 2 percent and job losses over the next several months.
In a statement, Infosys revealed that the company has been a W&G program technology partner for consulting, application delivery and testing services. After this decision, the company will carry out layoff of over 3000 personas based in India over the next few months since the overall revenues will be affected to a large extent.
According to analysts, the loss of the five-year 300-million pound RBI deal could force Infosys to downgrade its FY17 revenue guidance for the second time in 2016. In July, Infosys cit its annual outlook citing weak demand. This triggered a selloff in the stock. If you look at the market figures, Infosys shares are down 10 percent since July 2014. However, the weakness in Infosys shares is a great opportunity for the company to accumulate the stock.
Commenting on the development, SV Prasad of Chime Consulting revealed that Infosys is the counter one should buy for exposure in the IT space.
When stock markets opened its doors after a long weekend, Infosys was emerged as the top Nifty 50 loser. As of 9.40 AM, the stock went down 1.8 percent at Rs. 1042.95.
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