Royal Bank of Scotland Cancels Infosys Contract
Brexit tremors jolted Infosys when The Royal Bank of Scotland (RBS) called off plans to set up a separate bank in the UK for which the software services company was the key technology partner.
NEW DELHI: Analysts fear that the development could impact Infosys’s revenues by as much as $100 million in this fiscal and nearly $200 million in 2017-18. There is also an apprehension that the Bangalore-based company may be forced to trim its annual guidance again. In July, the company had forecast that revenues in constant currency terms would grow 10.5-12 per cent during this year, down from its earlier estimate of 11.5-13.5 per cent in April.
RBS had announced that it was not going ahead with its plan to set up a standalone bank – Williams & Glyn (W&G) – in the UK and other options for the divestment of this business would be pursued.
In a regulatory filing with the stock exchanges, Infosys said it was a W&G programme technology partner for consulting, application delivery and testing services. Following RBS’s decision, Infosys will carry out an orderly “ramp-down” of about 3,000 persons working on the project, particularly in India, over the next few months. A spokesperson for the company said these employees would be deployed in other projects and there would be no job losses.
“RBS is a key relationship for Infosys and the company looks forward to further strengthening our strategic partnership and working with them across other strategic and transformation programme,” Infosys said.
Shares of Infosys ended lower by 1.16 per cent, or Rs 12.35, at Rs 1,050.95 on the Bombay Stock Exchange today.
In 2013, Infosys had bagged the five-year £300-million project. According to a CLSA report, the loss of the W&G project can impact Infosys’s revenues by $50-$100 million in 2016-17 and $100-$200 million in the next year.
The brokerage further warned that the development might severely affect its growth momentum in the September and December quarters.