Infosys Q2 results: Analysts expect concrete guidance, stability with Nandan Nilekani at helm
Besides answers to the controversies, Infosys stakeholders will be looking at dates for the its Rs 13,000 crore share buyback plan
New Delhi: Ahead of Infosys' second quarter earnings announcement, analysts expect the outcome of the board meeting to reflect on long-term stability in the business along with short-term confidence building measures like date for share buyback and employees salary hike.
A meeting of the board of directors of the company will be held at registered office on 23 October and 24 October, 2017 to consider consolidated and standalone financial results and recommend payment of interim dividend, Infosys said in a regulatory filing.
"The financial results would be finally approved by the board of directors on October 24, 2017," the filing said. This will be first financial result that Infosys is set to announce under second innings of co-founder Nandan Nilekani at the helm of company's affairs and after controversial exit of Vishal Sikka as its chief executive officer.
"The Infosys Board has two key issues to manage currently -- one, ensuring stability by way of managing stakeholder sentiment and two, offering visibility by way of sharing concrete guidance," Greyhound Knowledge Group CEO and Chief Analyst Sanchit Vir Gogia said.
He further said while multiple short-term tactics like share buyback, employees salary hikes and active client conversations can be expected to ensure stability, it is the concrete guidance that needs most focus and work.
Infosys has been in the headlines since the beginning of 2017 due to sharp differences between its founder N R Narayana Murthy and the company's board under R Seshasayee as Chairman and Sikka as CEO over governance issues.
Murthy had also expressed concern over Rs 1,250 crore acquisition of Israel based IT firm Panaya based on anonymous letter, which alleged wrong doing in the deal. An audit done by international law firm Gibson Dunn and Control Risks found no evidence of wrongdoing in the Panaya acquisition.
Sikka resigned from the company on 18 August after series of allegations levelled by Murthy. Seshasayee and Infosys Co- chairman Ravi Venkatesan resigned in the following week.
Nilekani returned to the board of the company after a gap of about seven years as non-executive chairman on 24 August. His appointment seems to have settled the dust of controversies around board, however, stakeholders are now looking for uptake of the company's business under Nilekani's regime.
Infosys Chief Operation Officer UB Pravin Rao was given interim charge of managing director and CEO on 24 August. The announcement of regular CEO is due from the company.
"While visibility on the new CEO announcement is important, we at Greyhound believe Infosys board must also offer concrete guidance on the company's stand on some of the initiatives that were launched in Vishal's term, steps being taken to ensure development of mid-management and reduce senior level exists and most importantly reforms that are either already being executed or planned to ensure zero governance issues in the future," Gogia said.
Shareholders advisory firm Stakeholders Empowerment Services (SES), which recently critically examined Murthy's stand, has suggested that allegations levelled by the Infosys founder on the basis of unknown whistleblower should be investigated, plug governance loopholes and make the report public.
"SES is of the view that if the report is not made public in full, NRN (Murthy) will lose his credibility and prove that he was firing wrong shots ostensibly to hurt individuals he disliked and which undeniably caused irreparable damage to the baby he gave birth to," SES report had said.
Besides answers to the controversies, the stakeholders will be looking at dates for the its Rs 13,000 crore share buyback plan. Infosys has fixed price of Rs 1,150 per share, about 24 percent more than its stock closing pricing of Rs 927.1 a unit.
As per an analyst of a banking investment firm, who did not wished to be named due to business reason, said that as per their research, investors will focus on changes in Infosys digital and growth strategy, demand environment across verticals it operates specially financial services and progress on automation and artificial intelligence which gathered pace under Sikka's regime.
The firm expects Infosys to cut constant currency revenue growth guidance for current fiscal from 6.5-8.5 percent to around 6-7 percent.
The company had posted 1.3 percent increase in net profit to Rs 3,483 crore for the June quarter, helped by client wins in key markets, and raised its annual US dollar revenue outlook.
Its revenue grew 1.7 percent to Rs 17,078 crore in the first quarter of 2017-18 as against Rs 16,782 crore in the year-ago period.
Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.
The founders and families -- classified as promoters group -- held 29.28 crore shares, or 12.75 percent, in Infosys at the end of June 2017
For the current year, Vishal Sikka's yearly compensation has been fixed at $11 million, sharply higher than $7.08 million in 2016
Infosys files settlement plea with Sebi on ex-CFO Rajiv Bansal's severance pay, neither admits nor denies wrongdoing
Infosys, under new chairman Nandan Nilekani, moved the application as part of its attempt to settle the issues that had cropped up during the tenure of former CEO Vishal Sikka.