Sikka says all's well, but Infosys promoters lost over Rs 1,200 crore during March quarter

While IT major Infosys disappointed investors and analysts by reporting a 2.83 per cent drop in consolidated net profit at Rs 3,603 crore for the quarter ended March 31, 2017, the company’s promoters and promoters group lost over Rs 1,200 crore in combined wealth during the quarter.

The company’s stock slipped 4.14 per cent during the quarter, falling to Rs 968 on April 12, 2017 from Rs 1,010 as of December 31, 2016.

The slide in stock eroded the wealth of founder NR Narayana Murthy and his family, who together held around 8 crore shares in the company as of December 31, 2016, by Rs 331 crore during the quarter.

Likewise, co-founders Nandan Nilekani (including family members), S Gopalakrishnan, SD Shibulal and K Dinesh saw wealth erosion by Rs 268 crore, Rs 307 crore, Rs 179 crore and Rs 118 crore, respectively.

In his customary post-earnings press conference, Infosys CEO Vishal Sikka on Thursday said the IT major was doing well on all segments, especially in the new businesses, but a seasonally soft quarter affected the company’s performance.

He said the company cross the $10 billion annual revenue mark for first time ever and it aims to achieve $20 billion annual sales by 2020. “The 2020 aspiration is a 'moonshot' and it has always been so,” he said.

The Infosys stock zigzagged through the quarter as a fresh row erupted between founder NR Narayana Murthy and the company’s board over a pay hike given to Chief Operating Officer U B Pravin Rao.

In its financial results announced on Thursday, Infosys reported a consolidated net profit of Rs 3603 crore, down nearly 3 per cent from Rs 3,708 crore reported for the sequential quarter ended December 31, 2016.

Consolidated revenue declined 0.89 per cent quarter-on-quarter (QoQ) and 3.44 per cent year-on-year (YoY) to Rs 17,120 crore.

The board of the company has identified Rs 13,000 crore, or $2 billion, to give back to shareholders via dividend or share buyback in FY18. The board announced a dividend of Rs 14.75 per share.

The company’s stock was trading 2 per cent lower at Rs 949 in morning trade on Thursday following the quarterly earnings.

While the decision to change the capital allocation policy to increase payout to shareholders in the form of dividend and buyback of up to 70 per cent of the free cash flow compared with 50 per cent at present cheered investors, analysts said the medium-term outlook for the business remained weak. Some analysts expect the stock to see more pressure in the coming days.

Trip Chowdhry of Global Equities Research said the IT sector was seeing severe challenges and it is going to get much worse before things improve. "The dividends and share buyback are sugar-coating. They are trying to sugar-coat even more bad news that is going to come over the next six to eight months.

"I do not understand why investors should be cheering about this. I say let those stocks take a hit, let the stock go to $8-9, let it really tank because share buybacks will be beneficial if the company buys its share at its bottom. It is total stupidity if this company buys its shares at $15 because in six eight months, the stock is going to go to $10. It is better for them to postpone share buybacks till the stock takes the hit because the fundamentals of the company and the industry is going to get much worse before it improves," he said.