Infosys 3.0: In Execution Mode

Infosys became the first Indian company to be listed on the Nasdaq in 1999. It moved further up the value chain on December 18, 2006 to become the first Indian company to be included in the Nasdaq 100. Six years later, on December 12, 2012, as a part of a broad strategic decision, the company had its American Depository Shares (ADS) listing transferred to the NYSE.

The motive behind this shift was driven by the desire to leverage the NYSE and Euronext partnership to seek a listing on markets in Paris and London. This would give Infosys the advantages of a larger base of investors and an increased trading window. Moreover, Infosys plans to create a balanced portfolio through the implementation of Infosys 3.0. One of the areas that this strategy would focus on is Europe. In line with the strategy, a listing in Europe would help it create strategic branding in Europe and also give it access to European investors. Considering the fact that in Q2FY13, 22% of its revenues came from Europe; this move has been part of a bigger picture.

Infosys recently acquired Swiss-based leading global management consulting firm, Lodestone Holding AG for an aggregated enterprise value of CHF 330 million (approximately USD 350 million). With this acquisition, it would benefit from Lodestone’s client base, 858 employees and CHF 207 million (USD 225 million) in revenues. Moreover, it will provide Infosys with more strength in its Consulting and Systems Integration business and its presence in Europe.

Infosys 3.0 is expected to put the company back on the high growth track. Its execution is already in place and will start yielding results soon. However, the short term outlook of the company looks bleak. There’s increasing talk about a possible downward revision of the 5% guidance for FY13 or the possibility of Infosys not being able to meet its guidance. To achieve its guidance of USD 7.343 billion, it would have to make USD 3.79 billion in H2FY13 (growth of 6.90% over H1FY13). Considering low revenue growth figures in the last 2 quarters, a cyclically weak Q3 and fresh troubles due to Hurricane Sandy, we doubt Infosys will be able to meet its revenue guidance in FY13.

Having said this, with a robust strategy in place and execution underway, we however remain bullish on the long term prospects of Infosys.