Sunday, August 20, 2017

Infosyian Roads....!!

One of the companies that has never been out of the Nifty 50 since the incepton of the Nifty is at tipping point.

INFOSYS                                                                                                                 CMP Rs 896

Considered the bell weather of the Indian Information technology industry since ages and a laggard of late is still an impressive business.Established in 1981 and listed on NYSE its a US $ 10.4 billion company with a market cap of approximately USD 35 billion.

From 2004 to 2016 it has moved from a revenue of USD 1 billion to USD 10 billion which Mr Sikka when he joined promised to double by 2021.From banking software to ERP to now getting into Cloud computing there are few things that Infy has not been doing.

I strongly feel that the ouster of Mr Sikka will not have any material long term impact on Infosys bottomline or strategy.The executives at the top level have been trying to find strategies to counter the change in environment especially after the election of President Trump.

Promoters of Indian companies do not know how to let go and Mr Murthy moving out of executive roles on turning 60 was a welcome change where children and grandchildren acquire an early role in management of family companies.It is not surprising that he too was unable to let go.

Mr Seshadri the chairman had been some scrutiny in his previous company Essar and elevating him was Mr Murthy's biggest blunder.Was it friendship or something else is not clear but it was an irrational decision from a logical person.

Mr Sikka with his MNC background and capitalist business methods were bound to clash with the orthodox tamil brahmin culture at Infosys. And it has happened.

Yes there will be attrition and short term disruption again depending on who becomes the new CEO.Going ahead my feeling is that in a couple of years infosys will adapt and change to its environment and become a better ROI generating business.

They have the pedigree and long term investors can buy a solid business at disruptive prices !!

( I have not taken into account the buyback offer at Rs 1150 which is at a whopping 26% premium to today's price)