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Infosys Q2: An unusual event as all eyes on Nandan Nilekani commentary than on earnings

The Financial Express logo The Financial Express 23-10-2017 FE Online

A lot of unusuals are lined up at the Infosys second quarter earnings announcement scheduled for tomorrow October 24. First, all eyes would be on the second innings of co-founder Nandan Nilekani as company's non-executive chairman and his long-term strategy, rather than on just numbers. For, this will be the first quarterly earnings release post Vishal Sikka's controversial exit as MD and CEO in August -- only after posting a profit that beat street expectations in the first quarter of the current fiscal.

Second, Infosys delayed the announcement of results by nearly two weeks. And third, it is going to release results after trading hours as against the practice of making a morning announcement.

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The company had outshined rival Tata Consultancy Services (TCS) in the first quarter of the current fiscal by posting 1.4% growth in its net profit at Rs 3,483 crore. While analysts seem to be focused more on management commentary, Motilal Oswal has estimated company's net profit to rise 1.8% on-year to Rs 3,600 crore. The company's constant currency revenue growth, which was 2.7%, in the first quarter, is estimated to slow down. Motilal Oswal has estimated 2% sequential growth in constant currency revenue in the second quarter and ICICI has estimated it at 2.5%.

Analysts are also keeping a close eye on whether there would a deviation from Vishal Sikka's "software plus services" model, and the introduction of services such as cloud, big data, analytics and IoT, which had played a big role in boosting the first quarter performance.

"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 told PTI. "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," Vir Gogia said.

Vishal Sikka resigned on August 18 following series of allegations by co-founder Narayana Murthy, mainly over Rs 1,250 crore acquisition of Israel based IT firm Panaya after an anonymous whistleblower alleged wrong-doings in the deal. Most board members including the co-chairman R Seshasayee resigned soon after, and co-chairman Ravi Venkatesan stepped down to continue as an independent director.

Within a week, Nandan Nilekani returned to the board of the company after a gap of about seven years as non-executive chairman, while Chief Operation Officer UB Pravin Rao was given interim charge of Managing Director and CEO on August 24.

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