Jury still out on Murthy’s back-to-basics strategy for Infy

Venkatesh Ganesh Bangalore | Updated on March 12, 2018 Published on June 19, 2013

N. R. Narayana Murthy of Infosys

IT major has a lot of catching up to do, say analysts

While N.R. Narayana Murthy’s change of strategy has impressed some investors, others want to see results in the near and long term.

Murthy’s game plan of refocusing on bread-and-butter outsourcing services business like writing codes and boosting of employee morale, which could result in higher productivity has been welcomed by analysts.

“Infosys’ refocusing is a positive and the stock could go up to Rs 3,000 in the next 12-15 months. This change in strategy was expected and is positive,” said A.K Prabhakar, Senior Vice-President - Equity Research, Anand Rathi. It is too early to comment as this would take time, but changes would be seen in next two quarters, he added.

In the last couple of years, Infosys has been steadily losing ground to peers such as TCS, Cognizant and HCL Technologies. Further, its employee utilisation is below its competitors and attrition is very high (16.3 per cent in 2013 fiscal).

“Corrective measures like flexibility in its pricing to compete and win outsourcing deals are welcome,” said Daljeet Kohli, Research Head, IndiaNivesh Securities.

With Murthy coming back, there is a concerted effort to address this gap, which, according to industry watchers, will be very tough. “The company has lost a lot of ground and it won’t be easy to catch up,” said P.K. Mukherjee, President and Managing Partner, Avasant.

Murthy, acknowledges this himself and in the recent AGM pointed out that this turnaround could take anywhere between 3-5 years. “Will investors wait for such a long-time especially when new business models (like cloud computing) and continued uncertainty exists in the developed markets,” asks a business head of one of the top 10 companies who did not wish to be named.

Analysts are also questioning the tough decisions that Murthy alluded to in the AGM. “They will have to cut management flab and market better,” said Mukherjee.

While Infosys has seen senior management exits in the recent past, certain key business functions like head of sales and marketing have suffered since the exit of Phaneesh Murthy and Nandan Nilekani.

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Published on June 19, 2013
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