Infosys Bets on Growth, Sees Acquisitions as a Path to Drive Growth

Infosys has set its three-year roadmap to not only stabilize its business but also accelerate it. The second biggest information technology services firm in India believes that acquisitions could be a key area for accelerating the growth. Only this year, the company has inducted Salil Parekh as its CEO and managing director. Incidentally, the appointment came after a lot of issues was raised by a founder, N. R. Narayana Murthy, on managing the pioneer. This included corporate governance.

Bets on Growth

The current CEO has made a detailed presentation to analysts in which he emphasized on growth. He believes that this could come through tactical investments apart from investing in inorganic moves. That would also help expand its client relevance. The new entrant has to impress upon the analysts and investors after the company’s former CEO, Vishal Sikka, resigned in August last year. Sikka also blamed Murthy for his resignation from the company. Nandan Nilekani, who also served as CEO previously, stepped in to restore confidence in the company at a time when the company faced troubled waters.

According to a BloombergQuint report, one of the primary investments of Infosys would be improving its capabilities. This apart, it would focus on increasing localization efforts. He expressed the confidence that the second biggest IT firm in India would return a maximum of 70 percent free cash flow. This is part of a disciplined capital allocation plan.

The presentation indicated that Infosys’ primary focus in the current financial year 2018-19 is the stabilization. The company believes that unless it stabilizes its business, there could not be any momentum. Therefore, the IT firm sees building momentum to be followed in the next year, i.e., the second year. The third year of the plan would see the acceleration of its plan and execution. The Bangalore-based company would invest in digital capabilities, as well as, priority services. It will not mind in infusing artificial intelligence and automation and reskilling ‘talent at scale’ for itself and clients. Aside from that, it would involve in hiring locally in different markets.

The reason behind its focus on the digital market is that it provides an opportunity in the range of $160 – $200 billion for it. The company’s presentation suggested that it has a big and growing agile digital portfolio. Infosys generated digital revenue of about $2.79 billion in the financial year ended in March 2018. This represented 25.5 percent of its total revenue.

Turning Around Task

Parekh admitted that its strategy was built on the basis of client’s requirements only. However, he sees big growth in digital business that has disrupted the IT sector through technology. The CEO has reportedly said, “We are not only digitizing core areas but also combining all our services to drive business outcomes for our clients instead of merely selling technologies or services.”

The new CEO came on the board after year-long acrimony between the previous management and founders on governance issue. Now, Parekh has been entrusted with the task of turning around Infosys.

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