Info-tech

Sikka effect: Infy may deliver over 2.7% growth in Q2 revenue

Adith Charlie Venkatesh Ganesh Mumbai / Bangalore | Updated on November 25, 2017 Published on October 08, 2014

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Investors eagerly awaiting Sikka's long-term plans

Come Friday, Vishal Sikka will be cynosure of all eyes as he takes the dais to elaborate on his first 60 days as the Managing Director and Chief Executive Officer of Infosys.

While the broad expectation is that Infosys may report a 2.7-3.5 per cent sequential rise in second quarter revenue, investors are keen to know if Sikka — who became the company’s first non-founder CEO in August — plans to significantly alter Infosys’s long-term strategy.

“We expect Infosys to deliver a 3.2 per cent quarter-on-quarter revenue growth, decent in the context of the volatility the company has faced in the past many quarters,” Citi Research analysts Surendra Goyal and Rishi Iyer said in a report. The second quarter is generally a strong quarter for the Indian IT sector.

Ashish Chopra, IT analyst, with Motilal Oswal Securities, believes that Infosys may retain its 7-9 per cent annual growth estimate for fiscal 2015. He added that investors are keen to know whether the company can improve its margins given that the rupee has stabilised.

Margins may improve

“Infosys’s margins are likely to improve by 150 basis points as it ramps up deals won earlier, thereby improving operational metrics. Commentary on margin trajectory and levers available, particularly in wake of the stable currency scenario, will be keenly monitored by investors,” a report from Edelweiss Securities said.

Rupee impact

The rupee had depreciated by 2.85 per cent against the dollar in the three-month period ended September 30, while the Euro strengthened by 5.5 per cent.

The depreciating rupee is good news for software companies, as a lion’s share of their revenue comes from software exports to the US. Despite Infosys’ revenue growth expected to be slower than that of TCS and HCL Technologies, analysts were confident that Infosys is on the path to recovery, as it has managed to stem top-level attrition after Sikka came on board.

Design Thinking

Infosys is also expected to provide more details on its ‘Design Thinking (DT)’ strategy. It is one of the new ideas that Sikka had brought to the table in a bid to energise the company, which has been lagging peers in the last three years. Recently, Infosys entered into a partnership with Stanford University to train its employees around principles such as DT.

“We are waiting for more details regarding DT and want clarity on whether it will form an integral part of the Infosys’s strategy going forward,” said Shashi Bhusan, Senior Research Analyst-Institutional Equities at Prabhudas Lilladher.

Published on October 08, 2014
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