Exits are inevitable in any reorganisation. What matters, however, is the magnitude and the replacements. The challenges for Infosys are numerous constant reorganisation has led to accelerated drain of management talent and the organisation does not appear to be open to absorbing external talent at the senior management level. It is plausible that the company has strong leadership bench strength but will have to put it to use quickly to give us and the Street comfort. Senior management exits can have an impact in the medium term if the company does not act decisively to correct the course.
Our positive stance on Infosys is driven by our expectation of catch-up in revenue growth with industry and an improvement in margins (ex-currency). We maintain our ADD rating on Infosys with unchanged target price of R3,750. Infosys is our preferred pick in Indian IT.
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