1. Leading brokerages JP Morgan, Edelweiss, CLSA downgrade Infosys after Vishal Sikka’s exit

Leading brokerages JP Morgan, Edelweiss, CLSA downgrade Infosys after Vishal Sikka’s exit

JP Morgan, one of the leading asset management and advisory firms predicts that the stock will be under pressure due to leadership vacuum and the likelihood of more departures in the near term.

By: | Updated: August 21, 2017 11:59 AM
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Major brokerages have predicted a steep correction for the Infosys stock in the near-term after the high profile exit of Vishal Sikka from the company. JP Morgan, one of the leading asset management and advisory firms predicts that the stock will be under pressure due to leadership vacuum and the likelihood of more departures in the near term. Troubles at Infosys Ltd, once India’s bellwether information technology services company, seemed to rise with senior executives making a beeline towards the exit door.

The last one to leave, before Vishal Sikka was Anirban Dey, the global head and chief business officer of Edge products at Infosys’ wholly-owned unit EdgeVerve. Infosys has seen a steady exit of top level executives over the last one-two years. Earlier last month, Infosys’ $500-million Innovation Fund’s Managing Director Yusuf Bashir, and the company’s head of mergers and acquisitions Ritika Suri resigned the firm. JP Morgan had cut its target to Rs 905 from Rs 1,057. JP Morgan has also downgraded the stock to neutral from overweight.

Edelweiss has downgraded the stock to hold from the earlier buy rating. The brokerage house said that the key risk of  management stability has played out in the company. Nomura Asset Management said that it sees the executive exodus at Infosys continuing after Vishal Sikka’s resignation, with the employee attrition not expected to stop.

Krishna Kumar Karwa from Emkay Global Financial Services says  that the information technology sector has been facing headwinds for long, and the valuations have corrected. Speaking specifically about Infosys he said, “Things could have been handled much better. This is certainly not the end of the entire saga, there could be more to come.” Speaking to CNBC TV18, Krishna Kumar said that it was disappointing to see the way Mr Sikka had to finally resign. The CEO of Emkay Global says that Infosys will find the right kind of people to run the company in the long term, but it’s going to be back-ended and not in a hurry.

CLSA has maintained underperform on the stock and sees downside risk to FY 18/19 guidance to Infosys. The brokerage house sees significant senior level departures in the next six months.

Infosys share was trading at Rs 895 down by more than 3.5%  since the previous close on Friday.  The shares of Infosys plunged by over 9.5% on Friday and closed at Rs 923.15 after company’s CEO and MD Vishal Sikka stepped down. The company announced a Rs 13,000 crore share buyback at a price of Rs 1,150 per share on Saturday.

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