Buy Infosys; target of Rs 3900: Prabhudas Lilladher

Prabhudas Lilladher's report on Infosys

According to media report, Infosys has introduced an onsite rotation policy for employees and set an upper limit of 18 months on the duration that employees can stay in overseas locations when they go for client-specific work. The communication has not been firm-wide, but it has been communicated to some project managers and delivery managers last week. Our discussion confirmed the same. We see this as positive HR development. It will not only help curtailing attrition, but also improve employees’ client-specific domain knowledge, hence, improving delivery. TCS implemented similar HR policy in 2010, whereas Wipro implemented similar policy in late 2011. The policy of all the companies restricts onsite presence to 18-24 months. The new policy exempts certain positions, such as employees in sales and business development roles, architects, portfolio managers and programme managers, which require frequent visits to onsite locations for interactions with clients. The visa processing has cost of $2-3k, which will be an additional burden as more employees would now need visa stamping along with higher travelling cost. However, Infosys is contemplating increasing offshoring from currently 65-70% to 75-80% over next few years. Moreover, onsite is considered to be one of the perk in IT jobs. Hence, it will help curtailing attrition. We see this as another step by Infosys to fix their HR policy. We believe onsite rotation policy would help more employees to develop client-specific business understanding. Hence this will improve the delivery process of the projects. "Infosys has taken multiple steps in recent past to fix some of the ailing policies including iRACE. We see this as another positive development that will improve delivery and curtail attrition. We retain our buy rating with a target price of Rs 3,900, 18x FY15 earnings estimates," says Prabhudas Lilladher research report. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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