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Tough times ahead for Infy, Sikka says transformation to continue

On Thursday morning Infosys’ share price fell by 2.88%, but had barely recovered while this story was published. Since the beginning of the month, the fall has been more drastic -- of 7.4%.

business Updated: Apr 13, 2017 10:56 IST
Sunny Sen
Infosys CEO, Vishal Sikka addresses a press conference in Mumbai.
Infosys CEO, Vishal Sikka addresses a press conference in Mumbai. (PTI)

Most times the way the stock market reacts after a company has declared its results reflects the investors’ confidence in the firm, and that depends on a bunch of factors, including immediate profits or loss, or how the company looks in the long-term.

On Thursday morning Infosys’ share price fell by 2.88%, but had barely recovered while this story was published. Since the beginning of the month, the fall has been more drastic -- of 7.4%.

Infosys declared it fourth quarter and full year results on Thursday. Its profits were down by 2.8% to Rs 3,708 crore in the January to March quarter compared to the previous one. Revenue was down by 0.88% to Rs 17,120 crore on sequential basis.

Vishal Sikka, CEO of Infosys, which has struggled for the past three years, and recently faced criticism from its founders and early executives, said that there were “unanticipated execution challenges and distractions” in the fourth quarter that impacted performance.

N.R. Narayana Murthy, the co-founder and the most respected CEO of Infosys raised issues of corporate governance and over executive salaries. He was backed by other co-founder, Kris Gopalakrishnan, and some old friends such as Mohandas Pai and V Balakrishnan.

Infosys for decades has been an IT bellwether, but not so anymore. Sikka was brought in to turn around the company, but from the projections that he made, it seems that it will take more time for Infosys to get back on track.

The revenue for the 2017-18, according to the company, is expected to grow at 6.5% to 6.8%, which is less that what analysts expect, which was in excess of 7%. In rupee terms the growth is expected to be 2.5% to 4.5%.

Sikka said that Infosys should be resilient, and that the “transformation journey” should continue.

Meanwhile, Infosys has decided to pay out 70% of its free cash flow, which is the total cash the company makes minus its operating expense. Alongside, Infosys had earlier said that it will pay Rs 13,000 crore to its shareholders in the current financial year.