For more than a decade now, with alarming regularity, Infosys Technologies has been disappointing traders. As someone who has tracked investments since Infosys went public, I seem to have many memories of the Infosys stock doing really badly immediately after the company’s results came out. This is a company that has moved from generating a few hundred crores of revenues with a few thousand employees to a Rs 22,000-crore, 1.2-lakh employee behemoth without being able to measure up to the stock trader’s expectations.
Along the way, practically every time the company’s CFO announces the quarterly numbers, the Indian stock trader expresses his bitter disappointment at the terrible performance and awful prospects that this company has. I am not claiming that this impression I have gathered over the years is a scientific study, but certainly, this is something that many would have noticed. Somehow or the other, a good proportion of Infosys results are followed by a significant drop in its stock price.
This is inevitably followed by lamentations in the media about how the company has lost its way, can no longer scale, is losing its edge in margins, is going to be blind-sided by a stronger rupee and is facing ruinous and climbing attrition rates. You can round up a few more of the usual suspects that I may have forgotten.
To my mind, this paradox of the near-continuous disappointment with Infosys is symptomatic of the way investments are analysed. There seem to be two perspectives — a focus on the extreme short-term and a need to come up with something different just for the heck of it. In this case, the two have proven to be a lethal combination for over a decade now. These factors are present for a lot of companies and skew the thinking of the retail investor in the case of many investments. Infosys is simply the sharpest example because the contrast between the periodic disappointment and the continuous growth of the company has been so sharp and has been sustained for so long.
This column first appeared in The Economic Times on January 17, 2011