Vishal Sikka’s New Mantra for Infosys Wows Analysts

Infosys organised an investor meet at its Pune campus on Thursday, where analysts who track the company got a chance to speak to CEO Vishal Sikka and get an insight into the thinking of the new management.

This was the first analyst meet the 47-year old Dr Sikka addressed since taking over as CEO on August 1 and he did not fail to make a mark, it seems. “What stood out was the positive body language of the new management versus the cautious optimism of the promoter managers preceding them,” said Girish Pai, head of research at domestic brokerage Nirmal Bang.

Global brokerage CLSA also sounded optimistic and said, “We were impressed by the fresh vision from a round of new faces heading key verticals and sources of differentiation around analytics and digital.”

Dr Sikka reiterated his “New+Renew” theme, which involves renewing Infosys’ core business (consulting, BPM, infrastructure management, ADM, Finacle, etc.) and innovating into new businesses such as design thinking, Infosys Info Platform and startups.

Analysts say winds of change are clearly visible at India’s number two outsourcer under Dr Sikka. Here are the key bits the management shared with analysts:

1) Acquisition: Infosys, which has been criticised for not being aggressive with acquisitions, will focus on acquiring companies with newer technologies in the areas of automation/artificial intelligence/collaboration/Internet of things/design/select geographic markets, the management indicated to Nirmal Bang. The company is sitting on cash reserves of Rs 28,432 crore as on September 30, 2014.

2) Attrition: Higher staff compensation, more promotions and training, better quality of work, better morale etc. are ways through which Infosys is trying to curtail industry-leading attrition, the company told analysts. Infosys is committing a high level of investment into re-skilling its entire work force to address the opportunity in the new market place, Dr Sikka indicated. The sales team has also been expanded significantly and being re-skilled, he added.

3) Industry leading growth rates: Dr Sikka indicated that Infosys has the potential to grow at a CAGR of 15 to 18 per cent in the long run with a 25 to 28 per cent EBIT margin. To return to a high growth path, Infosys will have to become a next- generation services company, he added. It is currently growing at around 9 per cent, while its margins are around 25 per cent.

4) Client engagement: Infosys is conducting design-thinking workshops with clients to identify problems and to find solutions in a bid to move up the value chain, Dr Sikka said. The project sizes are small currently, but has led to deeper engagement with customers and should help Infosys get a greater share of the customer wallet going forward, Nirmal Bang said.

5) New technologies: Infosys will ignite new growth engines from new technologies like social, mobility, analytics and cloud, the company told CLSA. Infosys has also seen increasing efficiencies in traditional verticals like financial and manufacturing, the company added.