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Uncertainty sees companies suspending guidance

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For the first time in over two decades, several top corporates have suspended revenue guidance issued to investors and business partners, saying they cannot reliably estimate the economic implications of the Covid-19 health crisis.

Infosys, Larsen & Toubro, Hindustan Unilever, InterGlobe Aviation, Cummins India, Wipro, HCL Technologies, Diageo, Sun Pharma and Ajanta Pharma among several others skipped disclosing growth estimates this year, citing an unpredictable business climate in terms of demand and future outlook.

“We are handling business on a day to day basis and it is an evolving situation. So no two days are the same, forget weeks,” CEO of a leading engineering firm said on condition of anonymity. “Guidance makes no sense in this unpredictability.”

Wipro, the country’s third-largest IT exporter, was the first firm to skip its revenue guidance on April 16. Larger peer Infosys followed suit, citing uncertainty over the impact of the pandemic and related lockdowns across the world. Since then, most IT companies and several others withdrew or declined to provide earnings guidance.

“There is still uncertainty all over and FY21 is a complete washout or writeoff in terms of economic growth and corporate earnings,” said Vinay Khattar, head of research at Edelweiss Securities. “Corporates are finding it difficult to predict any kind of numbers in the current environment where several factories are still shut, many of them facing labour problems, transportation issues, local corporation huddles, and so on,” he said.

Now, analysts have started estimating FY22 numbers with base as FY19 and setting a two year target price instead of one year.

Uncertainty Sees Cos Suspending Guidance

None of the infrastructure companies issued any growth estimate this time; nor any insurance firm.

“Our stakeholders are aware of the nature of the crisis and, since it is a global pandemic which has unsettled every business, investors understand the enormity and uncertainty,” chairman of a leading consumer goods company said on condition of anonymity.

There is no guidance concept in banks and finance companies, but many of them share a few data points on growth expectations. But this time all of them including HDFC Bank, Axis Bank, and Kotak Mahindra Bank refrained from sharing any growth numbers.

“The figure companies give is a benchmark for the analysts, and based on those numbers and historical data, they set their projections and target price and decide whether the business will beat their expectations or fall short,” said Amar Ambani, head of research at Yes Securities. “The stock typically rallies if the actual results exceed their guidance numbers and if it doesn’t, the stock declines,” he said.


Source :economictimes.indiatimes.com

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