Better days ahead for Infosys, back on growth track

Company expects to be back to industry leading growth in FY17.

After showing consistency in performance in the last couple of quarters, Infosys, India’s second largest information technology services company, has said it was back on growth track.

The Bengaluru-based firm also said while the present growth was primarily driven by improving the operational efficiency, the growth would be more pronounced once the results of the new initiatives it had taken started kicking in.

Speaking at the Barclays Global TMT conference in San Francisco on Wednesday, Vishal Sikka, chief executive officer and managing director of Infosys, said, “We expect to come back to industry leading growth path as we have said. When Mr Murthy came back to Infosys (in June 2013), we had put a three year time frame and we are on track to get there.”

According to him, his company was at a powerful position to make the world a software driven one.

“We believe that the world around us is being transformed by software and we have around 140,000 people who can write software. So, we are in an incredibly powerful position to help that transition of the world towards a software-driven world,” he added. 

Sikka said the measures the company had taken to improve operations were designed to make the company more competitive.

“For us, cost optimisation is not only about improving margins. It is about making us more competitive, with the ability to drive deals profitably,” said MD Ranganath, chief financial officer of Infosys, at the Barclays global TMT conference in San Francisco on Wednesday.

“We have always said we want (margins) to be 25 per cent plus or minus. There could be quarterly variation but by and large that is the trajectory,” he said.

After years of lagging behind peers, Infosys during the last couple of quarters delivered numbers well above expectations backed by big deal wins and improved efficiency.

Industry analysts believe for Infosys to deliver industry leading growth, it must eat into shares of larger rivals like TCS and Cognizant.

During an analyst call last week, Karen McLoughlin, Cognizant’s chief financial officer, said, “Some competitors that have struggled with revenue growth are looking at ways to grow their top line. Some competitors are making commitments to clients that may be aggressive.” 

According to Infosys, the average contract value of its large deals has gone up to $800 million from $450-550 million two years ago.

"The near-term results were largely driven by operational improvement. But as we go forward, this will be driven by the new things we do,” Vishal Sikka, Infosys’ chief executive officer, said at the Barclays conference.

Infosys is focusing on renewing existing business apart from new initiatives like artificial intelligence, robotics and automation.

The company claims it manages to do the same work in the infrastructure services business with 1,000 fewer people.

“The formula we are adopting is to take the people-only projects and make those people-plus-software projects. As we transform we are going to see results,” Sikka added.