Infosys' buyouts strategy to be a combination of verticals and geographies

Infosys is closely looking at inorganic growth as an important component to move its business. The company's MD & CEO, Salil Parekh says there are "a few specific spots", which are the areas of focus. This was during an interaction with Business Today for the special issue titled, India's Best CEOs.   

Parekh, who joined Infosys in early 2018, has successfully engineered a turnaround in the organisation, which was then struggling for growth. From elaborating on the buyout strategy, he said, "for instance, we have to deepen our cloud capability and also expand our footprint in some geographies. There is an interest in both verticals and geographies." The company is on a sound wicket financially with "a strong balance sheet with $4 billion in cash and no debt".  

Analysts tracking the company are optimistic about its inorganic story going forward. Amit Chandra, AVP - Institutional Research (IT), HDFC Securities says the Infosys growth engine has been largely organic and the acquisitions have been done for capability and filling some gaps. "The company has closed large deals which were a mix of new engagements, asset take over and managed services/annuity component." 

In terms of which geographies it could come from, he points out that Infosys is very strong in North America. "They are looking to expand into Eastern Europe and Australia. With the new delivery model expansion in newer geographies has become easier and the talent has also become very fungible," adds Chandra. 

Omkar Tanksale, Senior Research Analyst, Axis Securities, gives Infosys credit for "superior strategies in terms of acquisitions and expanding inorganically." He points out that all the buyouts have been capability-based. 

"That has helped in providing specialised services in the respective verticals and also bolstered its foothold in geographies," he says. Citing examples such as Fluido, Brilliant Basics, Simplus, Stater, Blue Acorn and the Daimler partnership (the last being a contract won), he says, "they have played a key role in helping the company achieve a strong foothold in the automotive vertical." 

In a world where digitisation is the name of the game, each move made by large IT companies like Infosys will be closely tracked. And expertise in cutting edge technologies is what will help them be relevant in a disruptive world. 

Tanksale is of the view that Infosys, over the last two years, has combined leveraging its execution prowess with a robust order book. 

"The company is well equipped to capitalise on the huge demand for digital services. Besides, it has undertaken several measures to control operating costs while continuing its focus on the revenue growth momentum," he says. 

To him, Infosys's digital platform, Cobalt, along with the geographical presence and vertical-wise specialisation, "are expected to help in capitalising on the strong demand across verticals".  

For the more detailed story, do read the latest issue of Business Today. Will be out later this week 

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