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Analysts see Infosys at cusp of change, say revival to be gradual

Once a bellwether for the over $118 billion Indian outsourcing industry, the $8-billion Infosys has been lagging behind peers like Tata Consultancy Services and HCL Technologies.

twitter-logoPTI | July 12, 2014 | Updated 16:45 IST
Infosys revival to be gradual, say analysts
(Photo: Reuters)

Infosys is standing at the "cusp of change" and will now widen its focus on software assets and intellectual property under its new CEO Vishal Sikka, say analysts.

Sikka, who takes over from the current CEO and MD SD Shibulal on August 1, brings in his extensive experience in products at enterprise software giant SAP.

Once a bellwether for the over $118 billion Indian outsourcing industry, the $8-billion Infosys has been lagging behind peers like Tata Consultancy Services and HCL Technologies.

Added to that were the exits of senior level executives that added tremendous pressure on the management.

"Infosys is at the cusp of change... Infosys is all set to undergo a transformation shift in its DNA - from a pure-play system integrator to a firm with increasing focus on software assets and intellectual property. Vishal has an important role to play," Greyhound Research CEO Sanchit Vir Gogia said.

He added that the industry is closely watching the next steps Infosys will take under his leadership.

However, the revival is expected to be gradual.

"(There is a) healthy deal pipeline and strong volume growth at the start of the year. Efforts to revive growth are taking place amid significant leadership changes, and hence we expect revival to be gradual," Motilal Oswal Securities IT Analyst Ashish Chopra said.

He added that the leadership change would be a positive signal for investors.

Infosys, which on Friday announced its financial results for the April-June 2014 quarter, saw profits growing 21.6 per cent to Rs 2,886 crore, while revenues were up 13.3 per cent to Rs 12,770 crore in the said period.

"The company posted better than expected numbers on the Earnings before interest and taxes (EBIT) and net profit front," Angel Broking VP Research (IT) Sarabjit Kour Nangra said.

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