Markets

Infosys drops 7%; focus once again on high attrition rate

K Venkatasubramanian BL Research Bureau | Updated on March 13, 2018 Published on May 29, 2014

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The Infosys stock has nosedived, falling more than seven per cent in trade so far, and expectedly so, given the resignation of yet another high-profile senior management personnel and board member - BG Srinivas.

With the recovery of cyclical stocks, the IT pack has already been an underperformer over the past six months. Infosys is further challenged by a slower-than-industry growth rate for three years now.

The attrition rates for the company, at more than 18 per cent, is among the highest in the industry. Though its valuations have slipped below that of HCL Technologies, and is also much lower than its historic average, investors have still cold-shouldered the stock and refrained from taking exposure.

Now, with a series of senior management exits, culminating with Srinivas' resignation, there are concerns on how the European geography, which he is credited with building, would shape up. Specifically, concerns revolve around client and key account management, as customers would be looking for continuity.

Though founder Narayana Murthy has managed to somewhat revive growth over the last one year, it may take another 1-2 years before Infosys gets to industry-level growth of 13-15 per cent.

As one former board member put it, an entire generation of leaders has left the company, so it would be quite a challenge for Murthy and the board to rebuild a solid senior management team, which appears to be increasingly looking at external candidates for the top job.

Published on May 29, 2014
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