Infosys, which just a year ago was bleeding senior managers and reporting industry-lagging performance, posted strong quarterly results on Friday in a bounce-back plan crafted by new CEO Vishal Sikka. Its shares zoomed 5% as the numbers beat market expectations.
But more than the immediate numbers, there were signals that India’s second-largest software exporter was undergoing a profound high-technology-based innovation shift whose impact will be felt in the next fiscal year in what could be its “Achhe Din” (good days) promise echoing the mood of Prime Minister Narendra Modi.
Infosys reported a 5.9% year-on year growth in revenues at Rs 13,796 crore and 13% growth in net profit at Rs 3,250 crore in the October-December quarter. In US dollar terms, the export-centric company posted $2.21 billion in revenues, up 5.6% on the year, and $522 million in profits, up 12.7%. Its shares ended at Rs 2,074, up 5%.
Former SAP board member Sikka, the first Infosys CEO from outside its founders, is emphasising on technologies such as artificial intelligence and neural networks to take the service business to higher profit margins, and also announced a rise in a venture fund that would invest in start-ups to $500 million from $100 million.
The former is part of the “renew” and the latter “new” under Sikka’s revival strategy. The company already has 1,000 artificial intelligence experts.
“More innovation, more productivity, more automation – clients are looking for that,” he said.
Sikka said that Infosys was steadily moving towards a revenue model that would be different from the traditional billed-by-the-hour labour, marking an industry
shift whose impact would become visible beginning the next quarter, and even more so a year later.
“You will see new business models emerging. It is too small to quantify now,” he said.
Infosys is blessed now by a strong recovery in the prime US market.
The company maintained its dollar-denominated revenue growth guidance at 7 to 9% and added 59 clients, taking the client base to 932.
“Given the client additions, we expect the company can easily meet its guidance in constant currency terms. We maintain our buy rating on the stock with a target price of Rs 2,417,” said Sarabjit Kour Nangra, Angel Broking analyst.
Infosys said Parvatheesam Kanchinadham, chief risk & compliance officer and company secretary will leave the company effective January 10 and David Kennedy, general counsel,will take his place.