 "Vishal Sikka gets top ranking from analysts for rewiring Infosys")
H1-B visa issues have once again cropped up for Indian IT majors operating in the USA. Reports say that the US government has opened an investigation against two of the biggest Indian outsourcing companies, TCS and Infosys, for possible violations of H1-B visa rules.
It is not the first time that Indian companies are being pulled up for H1-B visa violations. Analysts have taken these issues in their stride and rated the companies accordingly. In fact, these days the issue does not even find a mention in analyst reports.
What the analysts are focusing on is growth. No better place to hunt for growth than at the doorsteps of Infosys, as growth was missing in the company. Infosys has been under the magnifying lens of analysts after Vishal Sikka took over the reigns of the company as its CEO.
Foreign broking firm CLSA came back bullish after meeting with the management. Infosys, it’s top pick, is expected to generate a 40 per cent return in 12 months, says CLSA after revising its target price to Rs 2,800 from Rs 2,500.
Morgan Stanley after its interaction with Sikka, writes that the new found rigor instills confidence that the company will deliver on its growth numbers. The CEO highlighted several steps to bring rigor to his teams internally, and this has already started showing results. The company has won six deals greater than US$50 million each in the last 10-12 weeks, says the report.
Kotak Institutional Equities team after an interaction with the CFO of the company, Rajiv Bansal, says that significant progress across multiple dimensions of the business is noticeable. Infosys is the broking firm’s top pick.
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Sikka seems to be reviving Infosys slowly but surely. CLSA gives Infosys a high conviction rating saying that with the new management in place, Infosys will accelerate its revenue growth through leadership in SMAC (Social, Mobile, Analytics and Cloud Services) and media/digital services. Both these segments with a 10 per cent of revenue contribution is growing at 30 per cent YoY. Its realigned operations enable a higher utilization rate and greater automation while helping to reduce staff attrition.
Morgan Stanley highlighted the changes that Sikka has brought in the company. Infosys now has added an additional layer of scrutiny from the Office of the CEO for the top 15 accounts (three key accounts in each of the five verticals), where company has underperformed significantly relative to the competition, signalling a close monitoring and focus on top clients. The company has streamlined the RFP (request for proposal) process, so that all the proposals now go out through a single team.
Importantly, consulting has now become the keyword of Infosys after its integration with sales. The Top 100 partners (consultants) together with the account leader from the sales organization will have responsibility for two accounts (one from the top 100 clients and another from 100 clients that are strategically relevant to the company).The company has established a clear incentive structure, with no ambiguity and overlaps, so that these people grow business in a meaningful way.
On the demand front, Kotak says that it is healthy on all verticals, except for energy and telecom. Banking and capital markets segment is seeing healthy demand in compliance, digital and consumer channels while large deal wins in the past two quarters will propel growth in the retail vertical. Demand from manufacturing sector is steady. Sikka expects the energy division to stabilise by year end, but there is little clarity on telecom, says the Morgan Stanley report.
Analysts in general seem to be pleased with what they see in Infosys. On the perennial issue of its huge cash reserves, CLSA feels that the company can create further value via buybacks, a higher payout ratio and smart acquisitions.