Infosys’s stock has had a brutal run this week.
Since Aug.10, shares of the blue chip company have tanked 4%. This at a time when the benchmark Sensex index of the Bombay Stock Exchange added 1%. Infosys’s drop, spread over four trading sessions, has eroded over Rs10,000 crore ($1.5 billion) from its market capitalisation, the value of a firm based on its share price.
As of Aug. 17, the company’s market cap stood at Rs2.4 trillion compared to Rs2.5 trillion on Aug.10.
Investors are panicking because, on Aug.05, the Royal Bank of Scotland (RBS) announced that it had cancelled plans to spin off and list its UK subsidiary, Williams & Glyn (W&G). RBS had given Infosys and IBM a five-year, €300 million IT services contract for W&G.
The change in RBS’s plan means Infosys will now have to allocate new projects to some 3,000 employees, the firm said in a statement on Aug.14 (pdf). Such setbacks could hinder Infosys’s ambitious plans to touch $20 billion in annual revenue by 2020, from the current $9.5 billion.
Here’s Infosys’s stock movement:
Meanwhile, some media reports in India said Brexit was a factor behind RBS’s decision. However, the bank was mulling to divest W&G even before the UK decided to leave the European Union.
“RBS is exploring alternative means to achieve separation and divestment. The overall financial impact on RBS is now likely to be significantly greater than previously estimated,” the bank said in a statement in April 2016.