Infosys Revenue Grew 36%, Profitability By 35% Under Sikka’s Leadership
Vishal Sikka’s tenure at Infosys has not been without its share of controversies, but despite constant media and promoter glare, the stock seemed to have got its mojo back.
Infosys stock surged 36 per cent in the last three years, and compared to the broader market Nifty, the performance has been remarkable. The Nifty delivered 35.9 per cent in the same period.
But now the stock has again taken a pounding, and the uncertainty looms large on the future with analysts downgrading the company. The stock lost over 10 per cent in value, approximately Rs 20,000 crore.
Prior to Sikka, joining as the MD and CEO, the Infosys stock was hovering at a price of Rs 736 on 30 May. The stock had remained range bound at around 750-800 levels in the three years preceding Sikka’s tenure, and his tenure seemed to bring life back into the flaying Infosys stock.
The new CEO was hailed as giving a broad direction to Infosys through a new direction on technology and product development such as artificial intelligence and driverless cars.
Infosys revenues also got a fillip under Sikka. From March 2014 to March 2017, Infosys revenues surged 36 per cent to Rs 68,488 crore, while net profits zoomed Rs 14,833 crore up 35 per cent.
Analysts are skeptical about the prospects of Infosys now citing that Infosys has changed four CEOs in the last 10 years.
Under Sikka, Infosys created a ‘new services and software’ which accounts for 50 per cent of incremental revenues over FY15-17, as per a report by Emkay Stock Brokers. This added nearly $1 billion in new revenue streams for the company. By contrast, traditional service lines grew merely 3.9 per cent under his regime.
Infosys stock lost 10.37 per cent of its value on Sikka’s resignation, down to Rs 915.
Analysts are saying that the exit is a severe blow to the company, and that its financial performance could get impacted in the short-to-medium term as it will impact employee morale, and brand reputation. Most analysts have now placed the company on a rating watch and have downgraded the stock to underperform.
Infosys for now has appointed an interim CEO. But analysts are now skeptical about the immediate future citing that it would be difficult to find a replacement given that there have been string of internal exits in the company.
The new CEO will have a lot to chew, particularly in finding new business lines to get the behemoth to grow, given that traditional IT growth is slowing. Over the last 10 years, the company has seen four CEOs suggesting that it’s becoming increasingly difficult to manage the IT behemoth. Being an Infosys CEO is not an easy job anymore.
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