Commenting on Infosys stellar second quarter numbers, Moshe Katri, IT industry analyst said market should focus on the long-term strategy of the company because the management seems to be firing on all cylinders to get the growth rates back on track. Katri is confident of the company meeting the FY16 constant currency guidance of 10-12 percent and match industry growth. When the company is going through a transformation lot of things happen but the management is executing on all fronts to get the company back on track, so the long-term prospect of the stock remains bullish, said Katri.Although CFO of a company leaving does not help, Katri is confident that the management will get in someone strong to replace him. However, according to him Vishal Sikka the CEO and MD of the company is doing all the things he spoke of. Below is the verbatim transcript of Moshe Katri’s interview with Sonia Shenoy and Reema Tendulkar on CNBC-TV18.
Sonia: How would you react to these numbers because the pros and cons are equally stacked up but the stock is down 4 percent after the company has lowered their FY16 revenue guidance? What would your reaction be?
A: A couple of things. One, this is a multi-year journey. I think this management team is probably really focusing on all the important things that will transform Infosys during the next two to three years. The numbers are impressive, the metrics look good. Stock could be down 4 percent today, could be up 4 percent tomorrow. I would suggest looking at the long-term strategy that this management team is taking. I think they are really hitting all the right cylinders in order for this company to get back to industry-like growth rates. So, one of your guests said that it is really difficult to do an encore every quarter, but the numbers look, from my perspective, very strong.
Reema: Typically, when an old hand resigns, there is always fear of a lot of flux of management restructuring and that generally impacts business. How would you read Rajiv Bansal resigning as the CFO and would that be a key reason for the stock to be under pressure today?
A: Every time a CFO resigns, typically, that raises concerns over a lot of things. But I am assuming some of it is also a function of the fact that there is a new CEO on board and typically, that is not a very surprising move. I mean we see these things happen. Rajiv, I thought he was a very strong CFO for Infosys and I am assuming this management team is going to be able to go out and get somebody else on board that is going to be as strong, if not, probably of the same quality.
But yes, CFO leaving does not help, but I would suggest also looking at the numbers, the actual results and the metrics and again, the multi-year plan seem to be working and that is the important thing.
Reema: After a 4.5 percent revenue growth in Q1, a 6 percent revenue growth in Q2 in dollar terms, what do you think Infosys will do for FY16 in terms of its dollar revenue growth? Will it beat its guidance of 10-12 percent considering how strong H1 has been?
A: The September quarter typically, is a very strong quarter for the group and it is always a challenge to look at December and March. The second half is typically the slowest for the sector, but at this point it seems to be that they are at least on track to hit that 10-12 percent constant currency number guidance that they provided us with. It seems that they are on track to get to industry like growth rates in fiscal year 2017.
Sonia: For an investor, who has been invested into this stock for the long-haul, should he be concerned about a lot of these cons that my colleague referred to or should he look at the positive side and look at the glass half full with this extremely strong dollar revenue growth and perhaps stay invested into Infosys?
A: In these situations, when a company goes through a transformation, you to look at earnings power. So, the numbers for example, next year factor maybe a 10 percent earnings growth. They do go back to somewhere double digit growth rate. Obviously, the numbers look pretty conservative for next year. So, from our perspective, you have to look at this stock from a long-term perspective, beyond this quarter if the stock is down 3 percent, again look at the metrics, look at all these things that you are talking about anywhere from the deals flow, the margins, pricing. It seems that they are executing on all these fronts to get this company back on track and this is where you look at earnings power and this is where you look at Infosys more as a long-term investment opportunity from our perspective.
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