It’s all about giving space for youngsters, says Infosys’ outgoing CFO

K Giriprakash Venkatesh Ganesh Bangalore | Updated on October 12, 2012 Published on October 12, 2012

Changing order: Infosys' outgoing CFO V Balakrishnanduring the announcement of the 2nd quarter results of the company in Bangalore on Friday. - PTI

The last 18 months has seen Infosys making major changes in the top management. The latest one is its CFO V. Balakrishnan who will now head the India and BPO businesses of the company. In an interview with Business Line, Bala talks about what lies ahead for the company:

Analysts say you are quitting at a wrong time…

There is no right or wrong time. It’s all about giving space for youngsters to come and demonstrate. If you look at it, Infosys is a young company. The average age of an Infoscian is 25 years. So, whenever you find a hugely talented young person, you have to leave the space and let them perform. Markets will evolve. Earlier, economic cycles took five years. Now, we are living in the new normal where cycles take place every two years or so. If you are stuck with that, you can’t make a decision at any point in time.

Last time you said that the company will stabilise by the second quarter. But that has not been the case.

The global economy has not stabilised. Europe is in a recession and so is the UK. In US, growth is there but it is still recovering. It will be a slow, painful recovery. Globally, it is a challenging environment.

Analysts are saying that even to get five per cent revenue growth, you have to do post 3.5 per cent growth each for the next two quarters.

If you look at historical numbers, first two quarters are good, the third and fourth are challenging for multiple reasons. But when we talk to our clients regarding IT budgets, there is enough money to spend. Tomorrow, it could change. But based on our understanding of client’s budgets, we give our guidance.

Whatever is happening externally is impacting internal changes?

When you are in a high growth sector and if you are a large company, you have to keep making the changes, you have to just do it, continually make investments. For example, why did we give wage hikes? Even now, it is challenging but we are comfortable in our execution. When the cycle turns, we will have all the levers in place.

Your margins are down

Our aspiration is to get the highest margins in the industry. The economic challenges are one thing and when it impacts growth, margins are challenged. But the good thing is you can control some of the cost levers. There will be some peculiar years. Also, remember we are carrying a $500-million cost involving our employees who are non-billable (on the bench). We go ahead of the year and recruit from the campuses. If we had not done that our margins would have been better. But these are the things that we have to do. In medium to long term growth, we can get the margins back.

You are sitting on a cash pile which keeps increasing despite the Lodestone acquisition. What are you going to about it? Will you give it back to shareholders?

Cash is most strategic for us. We have announced a new strategy that focuses more on products, platforms and services- from 6 per cent to 30 per cent in the next few years. For that we have to look at inorganic growth. Focus is to use the cash to meet our strategic objectives. If not, we will take a call.

What do you think are the latest pain points for Infosys?

At present 90 per cent of revenues is from North America and Europe. Both these economies are in a mess. Europe is in a mess and US will take a while to recover.

Is that the reason why you will be taking over the Indian business whose growth could bring some balance to your geographical spread?

At the end of the day, we have to see new areas of growth. We see India as a huge market and it is reflective on our recent wins like India Post. Also, the government is talking about the Right to Electronic Services which entails a citizen to get services electronically. India could be an interesting market for us.

Infosys BPO is a $500-million business. Finacle has got decent acceptance and we want to take it bigger.

Your client acquisition has seen marginal growth; there has been one less client in the $300 million and $100 million deal size.

We added 39 clients and the gross addition is good. There is attrition in small clients but the lack of momentum and the lack of clients spending is a concern and it doesn’t help us much. One of the clients moved down by a few million and that’s why you see one less in $300 million client list.

Q: So, is everything fine in the kingdom of Infosys?

You can see it in our numbers.

Published on October 12, 2012
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