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Infosys Q2 results: Analysts expect concrete guidance, stability

This will be the first financial result that Infosys is set to announce after the controversial exit of its erstwhile CEO, Vishal Sikka

Press Trust of India  |  New Delhi 


Ahead of Infosys' second-quarter earnings announcement, analysts expect the outcome of the board meeting to reflect on long-term stability in the business along with short-term confidence-building measures like the date for the share buyback and employees' salary hike.

A meeting of the board of directors of the company will be held at the registered office on October 23 and October 24, to consider consolidated and standalone financial and recommend payment of interim dividend, said in a regulatory filing.

"The financial would be finally approved by the board of directors on October 24, 2017," the filing said.

This will be first financial result that is set to announce under second innings of co-founder at the helm of company's affairs and after controversial exit of as its chief executive officer.

"The Board has two key issues to manage currently -- one, ensuring stability by way of managing stakeholder sentiment and two, offering visibility by way of sharing concrete guidance," Greyhound Knowledge Group CEO and Chief Analyst Sanchit Vir Gogia told PTI.

He further said while multiple short-term tactics like share buyback, employees salary hikes and active client conversations can be expected to ensure stability, it is the concrete guidance that needs most focus and work.

Infosys has been in the headlines since the beginning of 2017 due to sharp differences between its founder and the company's board under R Seshasayee as Chairman and Sikka as CEO over governance issues.

Murthy had also expressed concern over Rs 1,250 crore acquisition of the Israel-based IT firm Panaya based on an anonymous letter, which alleged wrongdoing in the deal.

An audit done by international law firm Gibson Dunn and Control Risks found no evidence of wrongdoing in the Panaya acquisition.

Sikka resigned from the company on August 18 after series of allegations levelled by Murthy. Seshasayee and Infosys co-chairman Ravi Venkatesan resigned in the following week.

Nilekani returned to the board of the company after a gap of about seven years as non-executive chairman on August 24.

His appointment seems to have settled the dust of controversies around the firm's board, however, stakeholders are now looking for uptake of the company's business under Nilekani's regime.

Infosys Chief Operation Officer UB Pravin Rao was given interim charge of managing director and CEO on August 24. The announcement of regular MD and CEO is due from the company.

"While visibility on the new CEO announcement is important, we at Greyhound believe Infosys board must also offer concrete guidance on the company's stand on some of the initiatives that were launched in Vishals term, steps being taken to ensure development of mid-management and reduce senior level exists and, most importantly, reforms that are either already being executed or planned to ensure zero governance issues in the future," Gogia said.

Shareholder's advisory firm Stakeholders Empowerment Services (SES), which recently critically examined Murthy's stand, has suggested that allegations levelled by the Infosys founder on the basis of unknown whistleblower should be investigated, plug governance loopholes and make the report public.

"SES is of the view that if the report is not made public in full, NRN (Murthy) will lose his credibility and prove that he was firing wrong shots ostensibly to hurt individuals he disliked and which undeniably caused irreparable damage to the baby he gave birth to," SES report had said.

Besides answers to the controversies, the stakeholders will be looking at dates for the Rs-13,000 crore share buyback plan. Infosys has fixed price of Rs 1,150 per share, about 24 per cent more than its stock closing pricing of Rs 927.1 a unit.

As per an analyst of a banking investment firm, who did not wished to be named due to business reason, said that as per their research, investors will focus on changes in Infosys digital and growth strategy, demand environment across verticals it operates especially financial services and progress on automation and artificial intelligence which gathered pace under Sikka's regime.

The firm expects Infosys to cut constant currency revenue growth guidance for current fiscal from 6.5-8.5 per cent to around 6-7 per cent.

The company had posted 1.3 per cent increase in net profit to Rs 3,483 crore for the June quarter, helped by client wins in key markets, and raised its annual US dollar revenue outlook.

Its revenue grew 1.7 per cent to Rs 17,078 crore in the first quarter of 2017-18 as against Rs 16,782 crore in the year-ago period.

First Published: Sun, October 22 2017. 21:10 IST