Incremental positives is a better strategy for Infosys: Daiwa AMC

In a chat with ET Now, David Pezarkar, Head-Equities, Daiwa AMC, shares his views on Infosys.

ET Now: Would you agree my assessment, the fact that Infosys has acquired a consulting company, it means that they really want to migrate up the value chain?

David Pezarkar: This is an important announcement as far as Infosys is concerned and the market was expecting this, for a particularly long time now, and Infosys has been concentrating on the consulting space within the company as well and it is a very important space for them. Unless one gets the exact financial details, it is difficult to comment but this is definitely a significant announcement.

ET Now: The size is approximately $350 million. So this is not going to be a game changing acquisition by Infosys Technologies. They are sitting on $5 billion of cash and they have just utilised less than 10% of that.

David Pezarkar: Yes absolutely but it at least signals the management intention to focus on key verticals and it is an incremental positive no doubt.

ET Now: Infosys is doing the right thing by acquiring a consulting firm because consulting firms only give you margins, good quality work but they never aid your growth. The problem for Infosys is not margins but the problem for Infosys is growth and the fact that they are growing at a run rate which is slower than the industry average.

David Pezarkar: I cannot comment too much on specific stocks but I am sure the management is aware that they need to allay investor concerns, at the same time balance their internal requirements in terms of maintaining margins and attaining healthy growth. So I am sure the management there is keeping those interests in mind and taking the right decisions. Yes in terms of the underlying cash balance, it is not a large acquisition but then incremental small steps which are causing incremental positives is a better strategy rather than a big bang kind of an acquisition.