Why Infy stock will not react to Balakrishnan’s exit in the short-term?

K. S. BADRI NARAYANAN | Updated on March 12, 2018 Published on December 22, 2013


One of the questions doing the round in the markets is – what impact would the slew of high-profile exits have on the fortunes of Infosys?

The latest is the exit of V. Balakrishnan, popularly known as Bala, who heads Infosys BPO India business, banking software unit Finacle and consulting subsidiary Lodestone. N.R. Narayana Murthy, who returned to the helm of Infosys in June 2013, said: “It is difficult to imagine Infosys without Bala’s passion, commitment and intellect.”

Bala, director and former Chief Financial Officer of Infosys, said his departure was a “personal decision” and that he had been “thinking (about his exit) for the last one year”. His resignation is effective December 31.

“Bala is one of the best CFO talents in the country and I am surprised at his exit from the company,” said Mohandas Pai, a former Infosys board member and HR head who quit the company in 2011.

Ironically, on the day of the announcement of this high-profile exit, Infosys saw its market value crossing the Rs 2 lakh-crore mark, which only five other companies — TCS, Reliance Industries, Coal India, ITC and ONGC — have achieved so far.

The Infosys stock jumped a whopping 43 per cent to Rs 3,551 since the end of June when Murthy returned to the IT major to revive its sagging profit margins as the company struggled to gain market share amid a global slowdown. The S&P BSE Sensex has climbed 9.3 per cent in the same period. The company is the fourth-best performer in the Sensex so far this year.

This clearly shows that the market is giving more weightage to the fundamentals than individuals.

Ankita Somani, Research Analyst, IT, at Angel Broking, is of the view that the exit of Balakrishnan will not make any material impact at a business level as he was not bringing in a very big chunk of the company's revenues. However, the development indicates that a strategic management transition is under way in the company.

“Though the impact of top management resignations at Infosys will not immediately make an impact on the topline of Infosys, it may have some effect over the medium term. Senior-level exits remain a concern with the company and we maintain our neutral rating on the stock,” she added.

The reaction of Infosys ADR confirms this view. The Infosys ADR gained 0.8 per cent at $57 on the NYSE on Friday.


Published on December 22, 2013

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