Street awaits Vishal Sikka's strategic road map at Infosys Q2 results

Written by P P Thimmaya | Bangalore | Updated: Oct 10 2014, 13:42pm hrs
Infosys-SikkaNew business strategy is likely to determine the future growth path of Infosys under new CEO Vishal Sikka.
Indias second-largest IT services exporter Infosys is expected to post modest growth and a stable operating profit margin for the September quarter on Friday even as investors await a new strategic road map from new CEO Vishal Sikka. The new business strategy is likely to determine the future growth path of Infosys under Sikka, who took over the role of CEO in August this year after the IT major witnessed a tumultuous FY14.

Barclays Equities Research in its note said, The key investor focus will be on management commentary about the new strategic path of the company under the new CEO, Vishal Sikka, and what new steps would be implemented to bring the company back to an industry level growth path.

There are expectations from the industry that Sikka would veer the company towards the products, platforms and solutions segment, which will give Infosys an edge in the marketplace. However, this is unlikely to have any short-term positive bearing on growth numbers it is expected that Infosys would maintain its 7-9% revenue growth guidance for FY15.

Kotak Institutional Equities in its note said, We do not expect the company to change its full-year revenue growth guidance of 7-9%. For the second quarter of FY15, the expectation is that Infosys will post quarter-on-quarter (qoq) revenue growth in the range of 2.2-3.5% in dollar terms with no major surprises likely.

Barclays said, We expect US dollar revenues to increase 3.1% qoq with its EBIT margin having likely to increase by 45 basis points qoq. For the first quarter of FY15, Infosys had reported a qoq revenue growth of 2%.

Infosys is likely to hold onto its operating margin for the second quarter, and it could move slightly higher in the absence of pressures like wage hike or visa costs. The company ended the first quarter of FY15 with a 25% OPM.

Kotak Institutional Equities said, Reported operating margin for the quarter is expected to increase by 50 bps to 25.6%. Margin improvement will be driven by lower visa expenses, rupee depreciation, offset to some extent by decline in utilisation rate.

Infosys will also be moving into a more conducive macro environment as there are positive economic data coming from the US, the overall deal momentum has seen a uptick and the rupee-dollar equation is more stable.

"Cross-currency movement will partially mask volume growth pick-up in the reported $ revenue numbers, in our view. We expect deal momentum to remain strong albeit at a moderated pace after the spike in 1QFY15," said a note from Standard Chartered.