Will Infosys’s dream run continue in FY17?

Infosys Ltd’s chief executive officer Vishal Sikka has told employees he wants to grow revenue by 16% in 2016-17. That’s materially higher than lobby group Nasscom’s estimate that the industry will grow 10-12% in FY17. But investors shrugged off Sikka’s statement; Infosys shares have been flat in the past two trading sessions.

Internal targets are materially different from a guidance given to investors. An analyst at a multinational brokerage says that Sikka’s statement to employees sounds like good intentions more than anything else. “A statement of intent tends to be more generous than the best case scenario. On the other hand, because guidance is a public commitment to investors, it tends to be far more pragmatic,” he said.

Having said that, Sikka’s statements to employees suggests a confidence that Infosys’s good run this fiscal year will continue into the next year. There’s no disputing the fact that the macro environment has become tougher in recent months. If Infosys ends up growing materially higher than the industry next year, it will be because gains from low-hanging fruit will persist.

The above-mentioned analyst says that under its earlier leadership, Infosys had been rigid on pricing and contract structuring, which limited opportunities with some clients who were otherwise sold on the company’s delivery capabilities. Sikka has increased attention to such clients, which has helped growth in the past few quarters. It remains to be seen if gains from such manoeuvres will sustain for some more quarters.

 

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