Infosys faced a number of issues since the 2008 crisis, but the appointment of a new head has enthused the company
10-Sep-2015 •Mohammed Ekramul Haque and Vikas Vardhan
The situation
The global recession of 2008 saw IT orders dry up, especially in the US, the world's largest tech market. Fresh orders were won by aggressive bidders, even at lower margins. Infosys stuck to its guns; it would not compromise on margins - and it paid the price. Growth faltered; margins took a hit; and, more importantly, employees, the most vital asset for tech firms, began to flee Infosys. Around 36,000 techies left Infy in 2013-14. Another 37,000 left in the following year. To make matters worse, close to a dozen top executives exited.
What's changed?
The appointment of Sikka as the head in August last year has enthused the company and the markets.
Triggers
What lies ahead?
It is still early days for Sikka. But he has stemmed attrition and arrested margin decline. A bigger task for him is to change the perception that Infy is a sinking ship. He has set a target for both employees and investors to look forward to. Infy today is still between the old ways of its founders and the new methods of Sikka. Turning this ship into shape will likely take a couple of years.
Valuations
Infy trades at a P/E of 18. Buy.
