Infosys delivered a steady performance in the second quarter and after a numbers of quarters, the company management seemed confident about the path that it has embarked upon.
Kawaljeet Saluja of Kotak Institutional Equities says some of the metrics that it tracks to assess progress on turnaround seems to be falling into place. However, whether the company can catch up with the industry on growth or not will have to be seen, he adds.
According to Saluja, sales and marketing, delivery infrastructure and re-scaling of people are areas where the company needs to invest in.
Also Read: Buyback best way to use cash, not bonus: Ex-Infosys CFO Pai
Below is the verbatim transcript of Kawaljeet Saluja's interview with CNBC-TV18's Menaka Doshi and Senthil Chengalvarayan.
Menaka: Outside of the beat on the earnings front it also seemed that after many quarters the Infosys management sounded more confident about the path that they were embarked on and were not constantly looking over their shoulders?
A: First of all the performance which they delivered was nice and upbeat, the performance was steady. Some of the metrics that we track to assess progress on turnaround seems to be falling in place. There was some margin of improvement in client progression metrics. The company has stepped up investment in sales and marketing. So to that extent the metrics also give you comfort on the turnaround and on the back of these results and the strategy articulated by the company they sounded lot more confident. I still hope to see can they catch up with the industry on growth but (audio problem 1:12) it has been laid out very nicely.
Menaka: Would you say that given this cycle of reinvestment as Reema has pointed out education, you have spoken of sales and marketing that Infosys will do better in terms of gross margins from here onwards but we would expect, let’s say, 25 percent sort of number on a quarterly basis because they will reinvest a lot of those extra margins in either sales, education etc?
A: There are a number of areas such as sales and marketing, infrastructure delivery and rescaling of people where the company will have to invest. Optimism on margin side can be in and around the company stated bandwidth of 25 percent.
Menaka: Have you sort of revised your price target on this stock on the basis of what you have heard this quarter? Are you feeling more bullish about where the stock is headed?
A: My current target price is Rs 4,100 for March 2016 earnings.
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