Light at the end of the Infy tunnel ?

The quarterly results of former industry bellwether Infosys have thrown up many answers and one lingering question. The answers that should please all the well-wishers and shareholders of this company pertain to execution, acquisitions and stability of management and the company seems to be shining on all counts.

The solid profit numbers for the quarter which beat street expectations bears testimony to the caliber of COO and Acting CEO Pravin Rao and his execution team. Robust delivery has always been the hallmark of Infosys and there is reason to believe that this has been untouched in all the recent upheavals and has not been weakened by any new directions that the company may have taken in the last few years ! The reconfirmation of the veracity of the Panaya acquisition is also timely since the future growth of the company will definitely call for significant acquisitions and the valuations of tomorrow will not be on simple EBITDA multiples as in the past. Management will have to pay revenue multiples and be prepared to bet on exciting new technologies which may be yet unproven and for this to be the norm at Infosys it is important that accusations and innuendos should be addressed and put to rest quickly, as has happened in this case.

The maturity of interactions and dialog which was sorely lacking at the board and promoter level leading to the unseemly imbroglios of the past also seem to have cooled off with the mature hand of Nandan at the wheel of the Infy ship. His generous reference to founder Murthy and the deft restructruring that has seen Infosys veterans manning key positions will serve the company well even if a new CEO comes in. As other companies have seen in the industry, wholesale change of management is never a good idea and any CEO who is foolhardy enough to bring in a majority new team in a well run company will do so at his own peril. A strong sales and execution team which is what is now being built will serve the company well to face the inevitable new challenges of the future.

So what is the residual question ? Clearly that of growth ! While the optimists will opine that the substantial lowering of growth guidance is simply a return to the old days of "ünderpromise and overdeliver" there is no getting away from the reality that these are difficult times for the industry and business as usual is not going to happen unless bold measures are taken to get the growth engines charged up again. Every digital boost will have to be given and a majority of the investments need to be directed in these areas, even as delivery efficiency continues and value migration to other more nimble competitors is avoided at any cost. The task is still cut out for this team and the next two or three quarters will be carefully watched !

------------------------------------------------------------------------------------------------------

Dr. Ganesh Natarajan is Chairman of 5F World, a Digital Transformation Advisory and Investment firm.