Infosys Ltd is on a roll, or is it?

The company’s shares have risen by over 50% since N.R. Narayana Murthy took charge as executive chairman on 1 June. Coincidentally, the company’s results in the past two quarters have beaten analysts’ expectations, and its recent commentary has sounded far more sanguine than those of the past few years have.

Still, every now and then the company announces the resignation of one of its senior executives. The regularity of these announcements is causing concern among some investors and analysts. Analysts at CLSA Research said in a note to clients last month: “Murthy’s return has no doubt brought optimism among junior staff and greater accountability from senior management. That said, continuous churn and reallocation of responsibilities at the top does bring along the risk of undermining some of the good work done post Murthy’s return. A change in CEO scheduled in 18 months time could continue this top management flux."

Board member V. Balakrishnan’s exit late last week, on the back of resignations by senior employees such as Ashok Vemuri (who was also on the company’s board), is causing investors to sit up and take notice.

On the other hand, the company is benefiting both from the upturn in demand for IT services as well as the corrective measures it has taken to recapture market share. The exit of senior employees is unlikely to retard near-term momentum, although in the medium- to long-term it has the potential to affect growth. Thankfully for Infosys, none of its top executives have joined rival firms, and the risk of taking business away is relatively less. True, Vemuri joined iGate Corp., but the company’s size is extremely small on a relative basis to pose immediate threats of clients shifting loyalties.

Infosys shares fell by 2.4% on Monday, reflecting some concern about the latest senior management exit. Even so, the sharp rise in the company’s shares in the last few months reflects strong confidence about its recovery.

The caution being expressed by some analysts doesn’t seem to be yet reflected in valuations.