Infosys shares reversed its downward journey and rose nearly 3 per cent to Rs. 897 on Tuesday. In last two trading sessions, shares of India’s No.2 IT services exporter had corrected nearly 15 per cent, wiping out nearly Rs. 35,000 crore of investor’s wealth.
Infosys’ Rs. 13,000 crore share buyback announced on Saturday also failed to cheer investors as uncertainty around appointment of a new CEO after Vishal Sikka’s abrupt exit on Friday worried investors. Here is what analysts say about Infosys shares.
1) Global brokerage Nomura says Dr. Sikka’s resignation pushes back turnaround hopes with a new CEO appointment likely to take time. “Management churn at INFO (Infosys) would make clients cautious and competitors more aggressive,” the brokerage added. Nomura has downgraded Infosys to “reduce” from “neutral” and has slashed its target price on the stock to Rs. 875 from Rs. 1,000 earlier.
2) Market analyst Ambareesh Baliga said in a blog post said: “With lack of clarity on the next leadership, investors will be waiting with bated breath. Clients will prefer to wait on the sidelines and may slow fresh orders till a future plan of action emerges.”
3) Vishal Sikka was reorienting Infosys towards new age technology service provider after he took over the reins of the IT outsourcer from SD Shibulal as CEO, three years ago. Infosys’ revenue has increased by nearly 25 per cent during Dr Sikka’s tenure. The reorientation of Infosys towards new age technology service provider may get affected after Dr Sikka’s exit, say analysts.
Sanjiv Bhasin, EVP-Markets & Corp Affairs at India Infoline, also shared the same view. He said the buyback is not likely to give a big boost to Infosys share prices. “Some foreign institutional investors may use the upside to sell the stock while domestic institutional investors may provide some support by buying at lower levels,” he added. Mr Bhasin does not see much upside in the stock given the uncertainties surrounding the company after Vishal Sikka’s exit. He suggests retail investors use the buyback opportunity to sell shares.
4) All initiatives driving Infosys’ strategic execution – NIA, Zero Distance and Edge suite of solutions – were initiated and being driven by Dr Sikka, said domestic brokerage Motilal Oswal. “The key man risk, in our view, had been the highest at INFO (Infosys) among the top-tier IT,” the brokerage said. Motilal Oswal is currently reviewing its rating on Infosys. “Near-term attractiveness may be higher, given the proposed buyback. However, beyond the event, the overhang of uncertainties and their possible consequences enlisted above limit confidence on the potential upside,” the brokerage said.
5) HDFC Securities said: “Infosys’ business transformation (focus on revenue productivity with automation and new offerings, incl AI) faces a real risk of derailment as the company gets into ‘transition’ mode. While better capital allocation (buyback) and the uptick in operations are positives, leadership transition and the risk of senior attrition can hinder growth”. The brokerage has downgraded Infosys to “neutral” with a target price of Rs. 995.
6) However, some analysts are optimistic that Infosys will be able to bounce-back soon. “While in near term it’s (Dr Sikka’s resignation) a setback for the company, but given the strength of the board of the company, we believe that the company will be overcome the setback,” Sarabjit Kour Nangra, VP (Research- IT) at Angel Broking said. As of 10:30, Infosys shares traded nearly flat at Rs. 874 apiece.