A Brief Look At HCL, Infosys, Wipro Sensex Report Card

The Indian rupee gained in early trade against the dollar. The rupee opened higher by 22 paise at 71.33 as compared to previous day close of 71.55. Shares of information technology (IT) companies are trading lower as a stronger rupee is dragging marquee names such as Infosys and Wipro, among others.

Rupee in the last few sessions consolidated in a wide range of 71.20 and 72.30 ahead of the important FOMC policy statement that will be released tomorrow. Expectation is that the Fed could consider raising rates by 2bps and a hawkish stance could extend gains for the greenback. On the domestic front, rupee extended its gains after India’s trade deficit narrowed in November, said Motilal Oswal.

At 09:30 hrs Infosys was quoting at Rs 681.00, down Rs 12.55, or 1.81 percent. Wipro was quoting at Rs 334.50, down Rs 5.30, or 1.56 percent.

CEO Salil Parekh- A Man Par Excellence; Brushed Aside Conflicts Inside Infosys

Infosys Ltd chief executive Salil Parekh is still two months away from completing one year in office, but the 54-year-old has already ironed out differences within the organization, restructured compensation for the benefit of employees, given the digital business the required urgency, appointed new leaders for key roles and bagged billion-dollar deals. Parekh comments on his journey of the past 10 months at Infosys.

“Last quarter, the company had a very large number of big deal wins, the largest the company have had in many quarters. The company the companyre the company within the guidance the company had given both on growth and on margin. The company are still putting in the building blocks. But the real test is over the next 3-5 years, as the company put all these things together and as it starts to hum in an efficient way” said Parikh.

With acquisitions, things are always available. It is a question of whether they are ready to sell, and does the price make sense. The point is about the cultural fit and then the strategic fit. So many things have to come in place together. It’s a little bit like getting married. There’s always people willing on every side, but a lot of things have to come together.

In terms of the strategic fit, the company will look at those five elements of digital, plus some of our core services, which are growing the company. For example, our engineering services, which is growing very the company today, and business process management, which is also growing the company. So the company are open to those, in addition to the digital ones. And among geographies, my preference is definitely the US, but the company’ll also look at some continental European ones, especially markets such as Germany and Switzerland.

Board decisions are really about what Nandan and the board will decide. I have a very good equation, from my perspective, with Mr Murthy. The company met socially a few times. I make it a point to try and reach out to him every few months, just to say hello. He has been kind enough to invite me to his home, have coffee or dinner. The company have not talked about Infosys. He is deeply involved in so many areas, in NGOs, in the social sector, I am happy to learn and listen. But that’s clearly been the nature of our equation.

The company essentially gave a margin guidance of 22-24% and, in the last quarter, the company the companyre at 23.7%. This quarter is pretty close to the high end of that guidance. The reason the company did that is twofold. One, there is a lot of new work in the digital area which needs investments, and for us to scale up. To make those investments, the company needed some room. And, this was one way for us to make some room. The second, on our employees, the company had not handled all employee changes in terms of compensation appropriately.

 

Infosys To Land in Texas with New Technology Hub

The global software major Infosys is geared up to mark its arrival in Texas with a bang by 2020 with its new technology hub which will house a capacity of 500 employees.

“The new hub will drive expansion and create jobs in Texas to reinforce our commitment to workforce development in the US,” said the city-based IT major which seeks to hire more almost 500 techies by 2020.

The new employees would include graduates from Texas universities and colleges. They would benefit from upskilling through its training curriculum.

“The new technology and innovation hub will focus on telecommunications, retail and banking sectors,” said the statement.

The investment in Texas reinforces the outsourcing firm’s commitment to driving digital transformation for American enterprises by leveraging talent from the area alongside the best global talent available.

The investment in Texas is part of the company’s strategy to drive digital transformation of American businesses.

“Digital is changing every industry, and our hubs will allow us to co-locate, co-innovate and co-create alongside our clients,” said Infosys Chief Operating Officer U.B. Pravin Rao on the occasion.

Infosys Q2 results shows growth at a High Cost

Infosys Ltd’s revenue growth in the September quarter (Q2) was it’s highest in the past eight quarters. In constant currency terms, i.e. after eliminating the impact of exchange rate fluctuations, revenues grew 8.1% year-on-year in Q2, much better than the average growth of 5-6% in the preceding four quarters. The bad news is that the company’s operating profit margin is at a 20-quarter low. And although the rupee has depreciated by over 11% in the past six months, Infosys is continuing to guide for margins of between 22 %and 24% for the full year, the same levels it had forecasted back in April.

This is not how things were supposed to go. The sharp depreciation in the rupee was expected to boost profit margins at least in the near term. Last week, the company’s chief competitor, Tata Consultancy Services Ltd (TCS), reported a 150 basis points improvement in margins sequentially. Its margins reached a 14-quarter high, boosted by the decline in the rupee.

Infosys, on the other hand, has been forced to hand over the gains from the currency to employees and sub-contractors, to support growth and rein in employee attrition. In the second half of the year, the company plans to step up investments to capitalize on opportunities in digital services, which will put a lid on margins as well.

Since Infosys still lags TCS by a wide margin in terms of revenue growth, the strategy to sacrifice margins for growth may be a sensible one, unless it has struck large deals that entail low margins for some time to come. The company’s revenues were considerably ahead of the Street’s estimates. Besides, it announced deal wins worth over $2 billion, the highest ever for a single quarter, and nearly double the levels it reported in Q1. While this is nothing to sneeze at, the fact remains that expectations have been running high with IT stocks, including Infosys, which has outperformed the Nifty 500 index by about 40% this year.

In that backdrop, investors will be disappointed that the higher-than-expected increase in revenue growth is not translating into higher earnings growth. Infosys’s net profit grew by 10.3% year-on-year in Q2, less than half the rate at which TCS’s net profit rose.

Of course, one can argue that Infosys also trades at a lower price-earnings multiple of 19 times estimated FY19 earnings, compared to TCS’s valuation of 23 times earnings. But given the large differential in earnings growth rates between the two companies, investors now need to consider if the valuation discount is wide enough.

Lost Arbitration Case: Infosys To Pay Rs 12.17 Crore to Its Former CFO

Arbitral Tribunal decreed a 12.17 crore compensation with interest to Rajiv Bansal, Former Chief Financial Officer of Infosys Limited after the latter lost the arbitration case over severance package.

Infosys said it will take legal advice for further action on the issue.

The IT firm had agreed to pay Bansal a severance amount of Rs 17.38 crore or 24 months of salary, but the company suspended payments after he got Rs 5 crore as co-founder N R Narayana Murthy and others objected to the severance package as excessive.

Following this, Bansal had dragged his former employer to arbitration to claim the remaining Rs 12 crore of his severance pay.

Bansal’s severance payout has been one of the issues that Infosys founders had raised to allege governance lapses at the Bengaluru-based firm.

When Bansal left Infosys in 2015, Infosys had agreed to pay him Rs 17.38 crore in severance pay, equivalent to 24 months of pay.

Infosys & Temasek to Join Hands Together

India’s second-largest software services exporter Infosys Ltd said on Friday it formed a joint venture with Singapore state investor Temasek as it expands its presence in Southeast Asia.

Temasek looks to enhance its IT services through the venture in which Infosys will hold a 60 percent stake and Temasek 40 percent, Infosys said in a statement.

The joint venture will integrate teams from Infosys and the operations of Temasek’s unit in Singapore, Trusted Source Pvt.  Ltd, which currently delivers IT services to Temasek and a number of other clients.

Headquartered in Singapore, the joint venture will have more than 200 employees and contractors from Trusted Source, while Infosys staff will join over time.

The companies named Shveta Arora, Infosys vice president and regional head in South East Asia, as chief executive officer of the new venture.

Infosys Stocks Slipped Below Rs 1,400

Infosys slipped over 3 percent in morning trade on Monday after company on Saturday announced that its Chief Financial Officer M D Ranganath has stepped down to pursue “professional opportunities in new areas”.The stock which rallied by about 40 percent in 2018 came under pressure. The index breached its crucial psychological support at Rs 1400.

His resignation was accepted by the Infosys Board on Saturday. Ranganath will remain CFO until November 16.“After a successful career spanning 18 years in Infosys, including as CFO for the last three crucial years, I now plan to pursue professional opportunities in new areas,” said Ranganath in a statement.NR Narayana Murthy, Infosys’ co-founder, said, “I have worked with Ranga for over 15 years. He is clearly one of the best CFOs in the country. His ability to take tough decisions in challenging situations, his solid financial expertise, strong value system, unfailing courtesy and flawless execution always distinguished him as an exemplary leader and a key asset for the company.”

At 09:29 hrs Infosys was quoting at Rs 1,397.50, down Rs 33.85, or 2.36 percent on the BSE.