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Last Updated : Aug 18, 2017 02:08 PM IST | Source: Moneycontrol.com

Experts call Sikka's exit unfortunate for Infy; stock fall erodes nearly Rs 27,000 cr in m-cap

A look at what experts on the D-Street are talking about the event and the resultant impact on the stock.

 
 
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Infosys plunged over 7 percent in morning trade on Friday after Vishal Sikka, resigned from his post of MD & CEO of the company effective today. The stock was the top loser on both S&P BSE Sensex and Nifty.

The stock is down nearly 5 percent so far in the year 2017 compared to 20 percent rally seen in Nifty.

Interestingly, the fall in Infosys' stock has led to a steep fall in the market capitalisation of the company. It fell nearly Rs 27,000 crore on the back of the fall in the stock.

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As of closing price on Thursday, Infosys had a market cap at Rs 2,34,554.78 crore. Meanwhile, this figure came down to Rs 2,07,553.94 crore.

Here’s how D-Street reacted to Vishal Sikka’s resignation:

Mahesh Singhi, Founder & MD, Singhi Advisors

The move is a succession plan to the company where Sikka comes on the board as vice chairman. During the past couple of months, the resignation of Dadlani who was responsible for generating business in the company came as a setback.

These rejig at top position was calling for post the exit. This resignation is just a succession plan for him post the company transformation since he took over.

This also seems as the direct move to me at the time when the company is battling against time to put Infosys back on the growth pedestal, as an embattled board and management face questions on poor corporate governance from some of the company’s founders, led by N.R. Narayana Murthy.

T.V. Mohandas Pai, former CFO of Infosys and former board member (to CNBC-TV18)

Vishal did well in the first two years but I think it was not working out. He was alienating the majority of people. We have to understand that it is a service company and not a Silicon Valley stock. There were a lot of corporate governance issues which can’t be brushed under the carpet.

These were issues which had to be addressed at some point. You cannot take compensation for yourself and top 20 people and not pay others who deliver and get the revenue. There was a considerable amount of unhappiness among the employees.

Sanjiv Bhasin, EVP-Markets & Corp Affairs, India Infoline (to CNBC-TV18)

Constant rhetoric was sending the wrong signal. Infosys as a charm or a leading stock lost flavour. It is over-owned by foreign institutional investors (FIIs) will now only see unloading by them.

There are many investors who have been sitting on Infosys at Rs1200. Now, it is clear that uncertainty will remain at the realm and even though Vishal Sikka did the humongous amount of reworking, this constant bickering was getting too much and the buyback will be a good time to tender whatever you have if you are a shareholder.

Inderjeet Bhatia, Macquarie Research (to CNBC-TV18)

There are a lot of distractions which are going on with the stock per se. We actually like the stock and even have outperformed rating on that. But, this whole corporate structure thing emerging at the top is clearly unstable.

Two chairmen, one vice chairman and now they are looking for an MD and CEO does not bode well for the company. The headwinds from the overall macro are positive for the company.

Within the IT space, we like HCL Technologies more than Infosys. But, overall, we remain to maintain an underweight stance on IT space.

The movement of stock will depend on how quickly the board is able to find a replacement for Sikka’s position. That will be an important trigger – who the person is, what kind of faith market has in that person and how strongly the board feels are some factors which will chart the direction. A lot of these factors will decide where the stock will settle.

A.K.Prabhakar, Head -Research at IDBI Capital

Infosys enters uncertain times so we would avoid buying this stock prefer TCS, HCL Technologies & TECH Mahindra which would outperform.

Ajay Srivastava, CEO, Dimensions Consulting (to CNBC-TV18)

There are a lot of factors which will decide the fate of Infosys – is this company has a vision, and the 2020 vision of $20 billion of revenue is not going to happen. This company was known for its transparency disclosures. It was a landmark event when Infosys produced a balance sheet with the geographic distribution of revenues, customer wise break up etc.

There has been a change since then. They were hiding an investigative report on acquisitions and integrity issues. That is not the Infosys we have known.

This cleansing will be painful, but it is the right thing for the company. And, I still say it is a very attractive acquisition target for anybody.

I would not buy IT but Infosys, I can bet some money because from today onwards share price will go up amid hurdles. There could be a turbulence, but from a long term perspective, it is a better buy at this point in time.

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First Published on Aug 18, 2017 11:35 am
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