Going by its guidance for FY15, Infosys appears to be far more confident about itself than it was a few months back; the IT major said on Tuesday it would grow dollar revenues by
7-9% this year, ahead of the Street’s estimates. The top-end of the guidance is somewhat surprising given that just a month ago the management had, in a profit warning of sorts, suggested the momentum in revenues might slacken in the near-term. This was attributed partly to a slowdown in a couple of verticals such as the hi-tech space within manufacturing, retail and consumer goods. Perhaps Infosys wants to set itself a tough target; in any case the range of 200 basis points leaves it enough of a cushion in the event the environment suddenly deteriorates.
Going by the performance in Q4FY14, however, it’s clear it’s going to be a while before the company gets back to where it was five years back—although profits rose 4% sequentially, this had more to do with costs being reined in since revenues de-grew 1.2%. Chairman NR Narayana Murthy has been indicating in recent conversations with analysts that he intends to get Infosys’ top line back on track;
Infosys’ revenue growth, he believes, could be in line with that of the industry in three years time and once that is achieved, the aim will be to try and overtake that level in two years. While the key to Infosys’ comeback is making the sales team deliver more effectively, it’s not going to be easy. For one, some of the senior level exits at the firm—nine in nine months—would no doubt have had an impact on sales, possibly in places like North America. While fixing that, Infosys will also need to work on acquiring the right skill sets that will help it mine clients better; it must ramp up deals quickly.
Where Infosys is seeing a fair measure of success is in optimising costs and given there’s room to trim expenses further efficiencies, this should make the firm more competitive allowing it to win large traditional outsourcing deals. The firm is also focussed on enhancing productivity—utilisation has increased 480 basis points in the last four quarters. Murthy’s hoping he will have ebit margins at levels of 26-27% in a few years time—right now they are at 25.48%—but that again will depend on how the top line shapes up. FY14 has been among