Bloomberg News

Infosys’s Painful Recovery May Take Three Years, Murthy Says

June 16, 2013

Infosys Ltd. Chairman N.R. Narayana Murthy

Infosys Ltd. Chairman N.R. Narayana Murthy will have to steer the company through proposed tougher visa rules and spending cuts in the U.S., its biggest market. Photographer: Namas Bhojani/Bloomberg

A sales recovery at Infosys Ltd. (INFO), India’s second-largest software exporter, will take at least 36 months and may be painful, Chairman and co-founder N.R. Narayana Murthy said.

The company will adopt flexible pricing and refocus on winning large outsourcing deals as it looks to boost growth and narrow the lead of bigger rival Tata Consultancy Services Ltd. (TCS), Murthy said yesterday at the annual shareholders meeting in Bangalore.

“There will be some pain along the way,” said Murthy, a billionaire who was voted to the company’s board as a director yesterday. “I request your understanding and patience.”

The 66-year-old Murthy, who helped Infosys become the first Indian company to list on the Nasdaq stock market, will have to steer it through proposed tougher visa rules and spending cuts in the U.S., its biggest market. Sales growth in the 12 months ending March 31 may be the slowest in four years, according to analyst estimates, as fewer customers commit to long-term contracts amid economic uncertainty.

Revenue at Bangalore-based Infosys may increase 8.2 percent in the year to March, according to the median of 64 analyst estimates compiled by Bloomberg. Sales at larger competitor Tata Consultancy may rise 15 percent, according to a survey of 63 analysts.

Infosys recalling Murthy echoes the returns of former leaders, including Apple Inc.’s Steve Jobs and Starbucks Corp.’s Howard Schultz. Yet similar comebacks at Dell Inc. and Yahoo! Inc. didn’t reverse sagging fortunes. Procter & Gamble Co. last month hired back A.G. Lafley as its chief executive officer.

19-Year Tenure

Under Murthy’s 19-year tenure as chief executive officer until 2002, Infosys achieved market capitalization of 234 billions rupees ($4.1 billion), according to data compiled by Bloomberg. That’s almost as big as Wipro Ltd. (WPRO) and HCL Technologies Ltd. combined. Tata Consultancy was closely held when Murthy stepped down.

Infosys in April forecast revenue will rise 6 percent to 10 percent in the year ending March. That compares with the 10 percent to 14 percent estimate of the industry group NASCOMM.

Net income for Infosys rose 3.4 percent to 23.9 billion rupees in the three months ended March from a year earlier, the company said. That beat the 23 billion-rupee median of 41 analyst estimates compiled by Bloomberg. Sales rose 18 percent to 104.5 billion rupees, less than the 107.5 billion-rupee median of 46 projections.

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Kartikay Mehrotra in New Delhi at kmehrotra2@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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