FE Editorial : Infy back on track
The Financial Express: Jan 12 2013, 00:40 IST
It should be a boost to the management’s confidence as much as it was for the Infosys stock that the IT heavyweight was able to beat the Street’s expectations for the December 2012 quarter. To be sure, analysts weren’t expecting too much given how disappointing the company’s performance has been in recent quarters; for some time now, there has been a nagging suspicion that the management didn’t really have the edge to compete with rivals in tough times. But it is to Infosys’ credit that it managed to convince the Street that it has got a better grip on the business and that this will show up in the numbers from now on; with the stock rallying a remarkable 17% on Friday, the valuation gap between Infy and peer TCS narrowed significantly. While on Thursday Infoys was trading cheaper than TCS by a multiple of between 3 and 3.5 times estimated FY14 earnings, things changed in the matter of one trading session—after estimates of Infosys’ earnings were upped to around R178 per share, the stock was trading at around 15 times, cheaper by just a multiple of two times than TCS. This kind of movement would suggest the market believes this is a sustainable turnaround, and not a flash in the pan, despite CEO Shibulal pointing out that Infosys was dependent on discretionary spends in a challenging environment and also that IT budgets this year could stay flat or even fall marginally. Some of the confidence would have come from
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