Why KPIT Technologies Shares Slumped 20%

Small outsourcers are following their bigger counterparts - TCS, Infosys, Wipro and HCL Tech - in reporting weak earnings for the March quarter. The difference, however, is in terms of magnitude of hammering these small IT companies have come under on account of weak results.
Shares in Pune-based KPIT Technologies slumped 20 per cent to their lowest permissible limit on Wednesday as March quarter earnings disappointed investors. KPIT reported a 23 per cent sequential decline in net profit at Rs 50.3 crore; sales dipped 2.2 per cent sequentially to Rs 763 crore.
Constant currency revenues declined by 0.7 per cent, while revenues in reported currency fell 3.2 per cent during the quarter. Analysts said KPIT's utilities vertical saw a 21 per cent decline in revenues; SAP business unit was down 28 per cent sequentially. EBITDA margins declined 940 basis points sequentially to 4.5 per cent during the quarter.
Ravi Pandit, co-founder KPIT Technologies, told NDTV that overall the IT sector has suffered as the trend during the previous fiscal year has not been favourable. (Watch)
"KPIT's CAGR growth has been more than 30 per cent during last 10 years... It's only last year that CAGR growth has been less than 10 per cent. We see things reversing at the end of two quarters," Mr Pandit added.
KPTI shares ended 20 per cent lower at Rs 124, underperforming the broader Nifty, which closed down 0.55 per cent.
Another mid-sized IT firm Zensar closed 5.3 per cent lower at Rs 675 after the company reported a sequential 7.1 per cent drop in sales during the March quarter. Zensar's profit rose 3.3 per cent to Rs 71.8 crore.


Ganesh Natarajan, vice chairman & chief executive officer at Zensar Technologies, told NDTV that the sequential drop in its revenue in the March quarter is due to a one-time discount given to a very large client. (Watch)
Meanwhile, the sub-index of IT stocks on the NSE posted its first gain in 11 sessions. TCS, Infosys, Wipro and HCL Tech have all fallen sharply over the last few sessions because of weak revenue growth during the March quarter.