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Vishal Sikka may take a year to turn around Infosys, say experts

Friday, 13 June 2014 - 7:05am IST | Place: Mumbai | Agency: dna

Will the new CEO Vishal Sikka be able to steer Infosys back to the days when it was growth leader among the Indian IT pack?

Most analysts said it will take a long time for the company to gain back that stature, however new leadership would definitely reduce uncertainty and help the company to focus on priority growth areas.

Over the last three fiscals, TCS's net profit has more than doubled to Rs 19,164 crore while Infosys profit has grown 56% to Rs 10,648 crore.

Cognizant Technologies's profit has also more than doubled in past three calendar years to Rs 7,210 crore. Infosys's profit growth has been flat over the past two fiscals despite the return of its founder N R Narayana Murthy, albeit there has been some improvement in operating margins.

"It's going to be a long struggle and it's going to take time as competition has become very steep. And Infosys has lagged by few years. The company should take a year to settle down under new leadership, and this would be testing time, as Sikka will have to understand the dna of the company," Dhananjay Sinha, head of research at Emkay Global and ex-Infoscion, said.

"How Sikka articulates the company's strategy will be key as that will define how they want to fight competition," he said.

"Getting back Infosys on growth map would be a challenge for Sikka. How he handles IT services will be very crucial as that is the major chunk of the company's revenues," Ankita Somani, analyst with MSFL Research, said.

Murthy had earlier said the company's current state was mainly a result of its lost focus on the bread-and-butter traditional IT services. The management had also admitted that its strategy called Infosys 3.0, which aimed at raising revenue share from products and platforms business as well as consulting, could not take off as planned.

"Infosys 3.0 strategy has failed to take off. The company will have to regain focus on IT services," Somani said. Sinha also agreed that the new strategy had led to significant rise in the company's costs as they had to hire specialised talent.

"TCS has raced ahead in competition as it was able to improve margins constantly with reduction in costs. I won't be surprised if Infosys brings back its focus on IT services," Sinha said.

U B Pravin Rao, the new chief operating officer, will have to work closely work with Sikka to regain advantage Infosys had in IT services, Somani said.

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