India’s Infosys slashes annual sales outlook amid boardroom upheaval

Bloomberg

Infosys Ltd. slashed its annual revenue forecast, as the Indian software outsourcing giant deals with the aftermath of a boardroom coup that forced out its top executive.
The software exporter is now forecasting 6.5 percent to 7.5 percent growth in revenue in the year ending March in US dollar terms, versus the 7.6 percent rise analysts were anticipating. That reduction came even after the company reported net income of 37.3 billion rupees ($573 million) in the September quarter, slightly beating the 35.3 billion rupees projected.
Before the internal upheaval, Infosys had forecast a 7.1 to 9.1 percent climb in revenue for the year, implying a measure of stability after initiating job cuts and investing in areas such as analytics to offset losses in traditional revenue. The ouster of CEO Vishal Sikka shaved billions of dollars off the company’s market value as investors warned about meddling by founder-shareholders, though they’ve bounced back and are down about 8 percent since his resignation. The shares slid about 1.4 percent on Tuesday.
“The next few quarters will be extremely critical for the company and will require delicate handling to say the least,” said Sanchit Vir Gogia, the New Delhi-based chief analyst of consultancy Greyhound Knowledge Group. “The new management has to go out of their way and keep focus on what matters: client outcomes, employee happiness and investor returns.”
Co-founder Nandan Nilekani returned to chair the company in August when Sikka stepped down, blaming public clashes between the board and co-founders led by N R Narayana Murthy that made his job untenable. Sikka—who’d presided over 25 percent sales growth since joining from SAP SE in 2014—leaves the company rudderless as rising competition and automation curtail growth in technology services.
Infosys remains on the lookout for a replacement. Nilekani has said he’s focused on finding a new leader, reconstituting a depleted board and stabilising operations. It’s reviewing a pool of candidates in hopes of making a final decision within weeks, the chairman said in late August.
“The process of identifying the next CEO and shareholder consultation outreach have been initiated and are progressing well,” Infosys said in a statement accompanying its results, without elaborating.
“Operating margin may be under pressure amid increased investments and currency,” Anurag Rana, an analyst with Bloomberg Intelligence, wrote before the earning were released.
Whoever gets the top job will need to steer Infosys through seismic changes afflicting the $150 billion IT services industry, starting with revamping its most precious resource.