Analysts laud Vishal Sikka’s plans for Infosys2 min read . Updated: 05 Dec 2014, 11:24 PM IST
Sikka spells out blueprint to bolster revenue by focusing on core IT businesses and make strategic acquisitions to enter newer segments
Bengaluru: Analysts cheered Infosys Ltd’s chief executive officer Vishal Sikka’s blueprint to bolster revenue by focusing on its core information technology (IT) businesses and making strategic acquisitions to enter newer segments, a day after he spelled out his plans at an analysts’ conference in Pune.
Sikka, who took the helm in August, is attempting to rebuild Infosys’s fortunes and win back its status as the sector bellwether.
Infosys plans to improve its training, induction and designing programmes, increase fixed salaries and average bonus payouts, encourage quarterly promotions, focus on existing key clients while trying to get new clients of higher quality, analyst Shashi Bhusan of Prabhudas Lilladher Pvt. Ltd said in a note.
“What I liked about Vishal Sikka is that he is actually trying to grab new customers, trying to address problems that even the clients are not aware of," said analyst Girish Pai of Nirmal Bang Equities Pvt Ltd. Pai, who currently does not have a rating on the company’s stock, added that the new management has been more proactive in trying to drive revenue growth.
He said these steps taken by Infosys will eventually help the company improve and protect its margins.
“We think margin pressure from new investments will be limited as these are not investments in transition for large deals but investments in internal capabilities," analysts at Centrum Equity Research wrote in a note. The brokerage raised its price target on the company’s stock to ₹ 2,680 from ₹ 2,410 and maintained its “buy" rating.
Higher staff compensation and quarterly promotions to employees could help stem the churn of employees at Infosys, which saw an attrition rate of over 20% in the July-September quarter.
Infosys also indicated it would focus on buying companies with newer technologies, possibly in areas such as automation, artificial intelligence and Internet of Things. Although there has been no upper limit put on the size of the acquisitions, analyst Pai believes the size of such deals is unlikely to be large.
Infosys has indicated that in some of the areas where automation has been used, the effort involved decreased by as much as 40%.
The Bengaluru-based company is trying to dramatically lower costs for both clients and itself by using open source software components and products.
The common sentiment shared by analysts is positive and they believe the new management’s more engaging approach towards interacting with Infosys employees will prove beneficial.
Shares of Infosys closed 1.55% lower at ₹ 2,069.70 apiece on BSE on Friday, while the benchmark Sensex lost 0.37% to end at 28,458.10 points.