Moneycontrol
Apr 13, 2018 09:22 PM IST | Source: Moneycontrol.com

Salil Parekh treads along Infosys strategy to focus on digital and agile business models

Reskilling employees, scaling up Infosys’ core businesses and building greater localisation in the markets Infosys operates, are at the centre of the strategy laid down by Parekh.

Neha Alawadhi @alnehaa
Salil Parekh. (Image: Reuters)
Salil Parekh. (Image: Reuters)

The more things change, the more they remain the same, seems to be the mantra of new Infosys CEO Salil Parekh.

The Capgemini long-timer, who took over the reins from the first non-Co-founder chief executive Vishal Sikka in January this year, was widely expected to draw from his experience in IT services and consulting.

However, the strategy unveiled by Parekh on Friday, seems to build largely on the steps taken by the company in the past couple of years.

A focus on agile digital, reskilling employees, scaling up Infosys’ core businesses and building greater localisation in the markets Infosys operates, are at the centre of the strategy laid down by Parekh.

How this strategy pans out will come to light in the next few quarters, but industry experts seem optimistic.

“Infosys’ current performance is in line with what can be expected from an organisation where the dust is just settling after a plethora of leadership and governance related issues over the past few years. It is neither spectacular nor dismal, yet the optimism looming in the background with new leadership bringing in a refreshed strategy focused more strongly on the marketplace rather than internal issues can be sensed in investor sentiment,” said Sanjoy Sen, Doctoral research scholar, Aston Business School, UK.

The company also put subsidiaries Skava and Panaya on sale while reporting the company's fourth quarter earnings, and acquired WongDoody Holding Company, a US-based digital creative and consumer insights agency for about USD 75 million.

The units being hived off were acquired under Sikka.

The WongDoody acquisition, said Parekh, was more in line with the company’s new strategy to focus on digital and agile business models.

“The promise of a refreshed strategy appears to be transformational in nature rather than just 'nibbling around the edges' or making superficial changes. This would be spearheaded by new global acquisitions like WongDoody and ruthlessly divesting businesses such as Panaya, whose intended value proposition has now eroded in the light of current macro economic and business circumstances," Sen added.

The new capital allocation policy has promised a payout of about USD 2 billion to shareholders. Of this, about USD 400 million would be paid in June 2018 and the board would decide on the payout of the remaining USD 1.6 billion.

In response to a question, Chief Financial Officer MD Ranganath said the payout would not affect the acquisition strategy of the company.

Infosys reported a 28 percent sequential fall in net profit to Rs 3,690 crore in Q4FY18, in line with analysts' expectations.

The sequential drop in fourth quarter profit was because the third quarter included positive impact of USD 225 million on account of conclusion of an APA with the US IRS.

The company's full year constant currency revenue guidance is at 6-8 percent and dollar revenue at 7-9 percent, which is in line with estimates.

However, it revised the EBIT margin guidance downwards to 22-24 percent from 23-25 percent. This will include the impact from revised compensation for FY19.

Dollar revenue growth was at 1.8 percent and in constant currency terms it was 0.6 percent.

The company reported consolidated revenue of Rs 18,083 crore for the quarter ended March 31, compared to Rs 17,794 crore reported in the December quarter.

FY18 revenues grew by 7.2 percent in USD terms, 5.8 percent in constant currency terms, with operating margins at 24.3 percent, which was in line with expectations.

At close, Infosys stock price was at Rs 1,169.00, up Rs 6.75, or 0.58 percent. It touched an intraday high of Rs 1,184.00 and an intraday low of Rs 1,150.20 on BSE on Friday.
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