How Infosys did under Vishal Sikka in three years
Under him, IT giant regained some of its mojo that it had lost under his predecessors
If the numbers could speak they would endorse Sikka's tenure at Infosys. Sikka took an iconic firm but an industry laggard and turned it into a market performer if not an industry bellwether. In his three-year tenure, quarterly revenues (in dollar terms) clocked a compound annual growth rate of 7.4%, keeping pace with the industry leader TCS for the first time after founder-promoters, Nandan Nilekani stepped down in 2007, KRISHNA KANT reports
If numbers could speak, they would endorse Vishal Sikkaat Infosys. He took an iconic company but an industry laggard and turned it into a market performer, if not an industry bellwether as Info sys was during its hey days prior to the 2008 global financial crisis. In his three-year tenure, Infosys’ quarterly revenues( in dollar terms) grew at a compounded annual rate( CA GR) of 7.4 percent, keeping pace with industry leader T CS, for the first time after founder-promoter Nan dan Ni lek a ni stepped down in 2007.
In comparison, Info sys’ revenue growth has lagged behind TC Sun der other founder-promoters, S Gopalakrishn an and SD S hi bu lal, who were in the driving seat after Ni lek a ni( see chart ).
Under Shibulal, Info sys' revenue growth in constant currency terms and profit growth were in fact nearly half that of T CS. And, it was the second worst performer among country' s top IT companies (Wi pro lagged Info sys ).
"Last three years have been tough for the industry, with slow down in revenue growth and pricing pressure. However, Info sys has been able to keep pace with the industry and its peer group after being a laggard for a significant period of time. Sikka deserves a credit for this ," says Am it Tan don of corporate governance and proxy advisory firm, Ii AS.
Sikka's biggest impact was on the company' s earnings trajectory. While most IT companies witnessed a steady erosion in their profits in the past three years due to a growing mis match between revenue growth and over heads, including employee, the impact on Info sys' margins were minimal.
In the past three years, Info sys' net profit grew at CA GR of 3.8 percent, against earnings con traction in case of TCS and Wipro. Info sys has been the best performer among domestic ally-listed IT companies and only beaten by Cognizant, which topped the earnings growth, with a CA GR growth of 8.1 percent.
Likewise, in the past three years, Info sys' net profit margin declined 220 basis points( bps ), from 22.6 per cent of net sales when Sikka took over to 20.4 percent in the quarter ended June. During the same period, T CS' net profit margin declined 510 bps to 20.1 percent, while Wipro's was down around 340 bps to 15.3 percent. Cognizant was the top performer with the least decline of 200 bps in its net profit margin to 12.8 percent during the period. Not surprisingly, Infosys re gained some of its( stock market) mojo that it lost during Sikka' s predecessors. Info sys has been the top performing tier-I IT stock on the bourse sin the past three years. The stock price grew at a CA GR of 6.7 percent, against 1.6 per cent annual is ed appreciation in the N SE IT index. The company' s performance was inline with the broader market, with the Sen sex up 7.1 per cent during the period. Sikka’s ex it has muddled the picture and many analyst snow fear the company may once again become a laggard if the uncertainty about the top leadership is not resolved soon.