Infosys' unique founders

How the IT company acquired a certain elan

An era has ended in Infosys, one of the most outstanding Indian companies in the post-liberalistion era. The last of the founders have bowed out and, what is more, asked to be considered as ordinary shareholders and not promoters. Aside from the value that Infosys has created for its shareholders (its market capitalisation rose from Rs 30 crore in 1993 to Rs 2 lakh crore now), Infosys put India, associated most often with poverty and backwardness, on the global map of information technology (IT). What is perhaps most fascinating is that Infosys was not the first large Indian IT company to raise its head, nor has it been the largest; but it has often shown a remarkable ability to market itself so that it has punched above its weight. It managed to acquire a certain elan.

The Infosys story is so real because it has had its ups and downs. Over the last few years it has fallen from its high pedestal for a number of reasons, foremost being losing it growth momentum and ability to charge a price premium over what the rest of the industry could command. From being a company which always promised conservatively and then over-delivered, it repeatedly missed its own guidelines. On top of this two governance issues stalked the company that was considered the role model till then. It fell foul of US visa regulations and had to pay a large fine. Worse, seeing the hard times the company had fallen into, the board brought back founding leader N R Narayana Murthy, who inducted his son into his personal team. This led critics to ask how the company was any different from family-led concerns, even though Mr Murthy helped the company regain its value in the market as also show better results.

The good part of the story is that the company appears to have recovered as the founders bid final goodbye. Mr Murthy has put in place a widely regarded successor at the top, Vishal Sikka, and has left the firm, along with his son. Thus Mr Murthy has kept his word and removed one question over corporate governance practice. A turning point has also been clearly marked out by the latest results - for the second quarter of the current year. Net margins have recovered, taking the company back to the 2012-13 levels. This has been achieved by simply tuning up things - cutting costs and improving delivery. Utilisation levels are up. Topline growth has not picked up but going by the number of new clients acquired and deals closed, rapid growth is foreseen in the next quarter onwards. In view of all this, the guidance of 7-9 per cent topline growth for the current year seems conservative. So the company appears to be back to being its old self. Not all the issues have been addressed. Attrition, for example, remains high which does not speak well of a workplace. India owes a debt to Infosys' founders, who have written one of the few glorious chapters in India's corporate history.