Infy's Swiss co buy a step in right direction: Ambit Cap

In an interview to CNBC-TV18, Ankur Rudra of Ambit Capital says the acquisition seems to be clearly in the right direction, something that Infosys management has been talking about quite extensively for the last four years.

He has a sell on Infosys. "Our valuation is about Rs 2,580," he adds.

Also read: Market cool to Infosys' Swiss co buy; deal size disappoints

Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.

Q: What are your initial thoughts on the Infosys deal?

A: Acquisition seems to be clearly in the right direction, something that Infosys management has been talking about quite extensively for the last four years. This seems to be a bit too small for the overall business now, the consulting segment for Infosys is about USD 2 billion. So, this is about USD 220ish million, about 10% of the size. It is a step in the right direction, one might say a bit too small for its size. They may need quite a few more of these.

Q: What kind of reaction do you expect to see on this stock? Where have you pegged the stock price at right now?

A: Our recommendation is a sell on Infosys. Our valuation is about Rs 2,580. We think the stock might react positively because expectation of an acquisition has been in the work for a long time. The fact that they have deployed capital with a relatively interesting asset, which gives them greater presence in Europe, I would expect the stock to react positively to it. That said, given that it will only be earnings accretive from FY15 could be something the market will take time to chew on.