Narayana Murthy’s back, but he is still to really start delivering

It is good enough to be not bad but not good enough to be great — which it once used to be.

Analysts gave a thumbs-up to Infosys last Friday after it reported better-than-expected results, but old loyalists of India’s No 2 software exporter should be in no hurry to reach for a champagne bottle - though its shares soared.

The Murthy Effect — a reference to co-founder NR Narayana Murthy's return to the company as executive chairman — may be a fancy term, and may have played a subtle role in the April-June quarter. But the jury is still out.

Ankita Somani, research analyst at brokerage firm Angel Broking  puts it on watch for one more quarter. “It will be interesting to see how the company maintains its revenue stream and margins,” Somani added.

"It still needs to be seen how Infosys will retain services of its existing clients at the higher price points. The company, in the near future may need to either lower its prices or justify higher price to its clients," said Achen Jakher, chief executive of US-based Svelte Systems, a consultancy firm.

Murthy has traditionally been a strong proponent of higher profit margins. He is now in a hypercompetitive market in which Western clients are licking the wounds of a prolonged recession.

A senior research executive at a leading brokerage requesting anonymity said Murthy formally took charge only a month back and it would be unfair to deny credit to chief executive SD Shibulal for the latest quarterly performance.

“Most IT deals take more than a month to fructify and yield revenues,” he explained.

Murthy took charge as executive chairman from June 1 though industry sources say his return was in the air, and felt in the company weeks ahead of his formal anointment.

Experts are also keenly watching how will the company utilize its huge cash pile of Rs 24,078 crore. A big acquisition is awaited. “Acquisitions offer new markets, newer businesses and capabilities that ultimately translates into faster growth,” said Jakher.


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