Infosys Ltd ADR (NYSE:INFY) had tough times due to the immense competition from the other players in the IT services segment and it was depending on its Q1 earnings report to give the stock a much needed boost. Nilesh Shah, MD and CEO of Envision Capital management, talked on CNBC regarding the Q1 earning for Infosys and what is in the road for them down the line.
Shah thinks that Infosys Ltd ADR (NYSE:INFY) has completed a very good Q1 since their revenues has grown by 2%. Full year guidance for the company is to grow 7 – 9% in dollar terms. This gets converted into each quarter revenue growth of approximately 2.5%. So he thinks that they are right on track to meet the full year target.
He points out that the IT service company had reported a revenue growth of 11.5% in 2013. So he feels that the target set for 2014 by the company is realistic, may be a little conservative too. He thinks that the revenue growth at the end of the year for Infosys may be slightly more than the estimate.
Regarding the attrition that happened during the first quarter in Infosys Ltd ADR (NYSE:INFY), Shah feels that the company had not lost anyone important to them and they were able to retain their customers. He brought up a fact that customer retention for first quarter is 99% which indicates the trust that customers had on the company.
Vishal Sikka was named the CEO of Infosys Ltd ADR (NYSE:INFY) a month back.
“Well, Vishal Sikka comes in with an extremely good track record. He has an excellent pedigree, he has the capabilities and competencies, especially in areas like products and new technology offerings. He comes in with a significant global exposure. He is going to be based out of Silicon Valley which means he is going to really be where the front end should be residing,” Shah said.
He also feels that appointment of Sikka would transform Infosys to Infosys Version 2.0. Sikka is going to be the first non-founder to lead the company. His appointment has put to rest any doubts or speculations that people had over the future of the company. He will act as a positive catalyst that will propel the company in right direction.
There is feeling that due to wage hikes and weaker rupee value Infosys Ltd ADR (NYSE:INFY) could face a tough task to meet operating margins which could fall by 200 basis points. Shah considers that the company has had a very good Q1 in which they had beaten the street with their margin. He thinks that this is mainly due to the leverage that the company has in operating capacity. Their utilization rates were in seventies which allows operating and delivering without any additional fixed cost. With the revenue growth of 2% and volume growth of 3% they underwent lot of pricing pressure, but even with that pressure they could deliver and meet the margins.