Vishal Sikka pulled Infosys out of rut, stock outshone all peers

NEW DELHI: Vishal Sikka’s decision to step down as MD and CEO of Infosys came as a shock not just for company’s shareholders, but also for the broader market.

The news sent the stock tumbling by over 9 per cent in trade on Friday.

The former Silicon Valley executive’s resignation came just ahead of the company’s board meet on Saturday to discuss a share buyback proposal.

Analysts said while the quantum and price of share buyback has not been finalised, the management’s earlier announcement of Rs 13,000 crore payout (including dividend) was hint of a bigger buyback than its peers.

Sikka, a former SAP executive board member, was the first non-founder CEO of Infosys.

Also read: Separation blues: Vishal Sikka updates Twitter bio, posts e-mail on personal blog

Data showed the Infosys stock fared well against its peers during Sikka’s regime that lasted just over three years. Sikka was named Infosys MD and CEO on June 12, 2014 and he took over the reins from then CEO SD Shibulal, one of Infosys founders, on August 1 the same year. Here's how Infosys as a company performed in the past two years.



Since Sikka assumed office, Infosys has declared dividend six times besides two bonus issues, first in December 2014 and then in June 2015.

Under Sikka, the Infosys stock rose 22 per cent from Rs 835 on August 1, 2014, to close at Rs 1,021 on Thursday.

When Sikka took over, Infosys was lagging behind industry growth. During his tenure as CEO, Infosys revenues have grown from $2.13 billion in Q1 of FY15 to $2.65 billion this past Q1, with strong margin performance and cash generation, throughout his tenure.

The company’s market-cap, which stood at Rs 2.34 lakh crore on Thursday, added one-fifth to market value, or roughly Rs 43,700 crore, during Sikka’s regime.

Taking dividends into account, the stock delivered a 33 per cent returns during this period.

In comparison, peers HCL Technologies delivered 23.86 per cent, Wipro 11.72 per cent, TCS 3.84 per cent and Tech Mahindra 15 per cent (all returns on a dividend-adjusted basis).

Infosys delivered 61 per cent return during SD Shibulal’s regime, which also lasted just over three years. Sibulal took over as CEO and MD on April 30, 2011, at a time when IT stocks were the favourites on the Street.

Peers HCL Technologies, Tech Mahindra and TCS delivered between 190 per cent to 310 per cent returns (total shareholder return) during the period. Wipro gained 69 per cent.

Before Shibulal, Kris Gopalakrishan headed India’s second largest IT firm for four years from June 2007 tp July 2011. As is the case with Sikka, Gopalakrishan was later appointed as Executive Vice-Chairman of Infosys board.

During his tenure as CEO & MD, the Infosys stock delivered 51 per cent return (dividend adjusted), compared with a 116 per cent surge in TCS shares, 66 per cent in HCL Technologies and a 32.64 per cent rise in Wipro shares.

Kris had replaced Nandan Nilekani as the company CEO. Nilekani was made CEO of Infosys from March 31, 2002 to June 2007. During this five year period, Infosys stock returned 317 per cent, compared with HCL's 160 per cent and Wipro's 82 per cent. TCS was not listed during the period.

Data monthly data available for 1995-2002 suggests that the stock returned over seven times under NRN era.

Under Sikka, Infosys' revenue rose from $2.13 billion in Q1FY15 to $2.65 billion in Q1FY18, with operating margin for the latest quarter rising to 24.1 per cent, beating some competitors for the first time in many years. The revenue per employee of the company has grown for six quarters in a row, while the attrition has fallen from 23.4 per cent in Q1FY15 to 16.9 per cent Q1FY18. Besides, the company grew its $100 million plus clients from 12 in Q1FY15, to 18 this past quarter, and increased its large deal wins from $1.9 billion in FY15 to $3.5 billion this past year.

TIMELINE

1981: Infosys was established by NR Narayana Murthy and six engineers in Pune

2002: Nandan M Nilekani took over as CEO from NR Narayana Murthy, who was appointed Chairman and Chief Mentor

2006: Narayana Murthy got retired on turning 60. The board appointed him as an additional director. He continued as chairman and chief mentor

2007: Kris Gopalakrishnan, COO, took over as CEO. Nandan M Nilekani is appointed Co-Chairman of the board of directors

2011: SD Shibulal, COO, was made new CEO; NR Narayana Murthy handed over chairmanship to KV Kamath

2013: Infosys Board appointed Murthy as Executive Chairman of the board

2014: Vishal Sikka took over Shibulal as new CEO

Today: Sikka resigned, U B Pravin Rao is made interim CEO