Infosys has appointed N R Narayana Murthy as executive chairman in a bid to revitalise Indias best know tech company. Mr Murthy has requested the board to appoint his Harvard-educated son, Dr. Rohan Murthy, as his executive assistant for the next five years. The current executive co-chairman S. Gopalakrishnan will be re-designated executive vice chairman, while current CEO S.D. Shibulal will remain in his position.
Here are 5 reasons why Infosys badly needs the charisma of Mr Murthy
- Infosys no longer the leader: Infosys was regarded as the bellwether of India's over $100 billion IT industry for long. The company had the amazing knack of beating its own growth guidance quarter after quarter. However, after a string of disappointing performances - starting fiscal year 2011-12 - the leadership mantle moved on to Tata Consultancy Services, India's biggest outsourcer.
- Infosys struggling to grow: India's best known tech company has been under-performing its peers over the last few quarters. After growing at a mere 6.6 per cent in FY13, Infosys aims to grow between 6-10 per cent in FY14, which is below industry estimates of 12-14 per cent growth. Infosys' profitability (measured by EBITDA margins) has fallen by 760 basis points (7.6 per cent) from 31.2 per cent in December 2011 to 23.6 per cent in March 2013. The company has stopped giving quarterly sales and earnings per share (EPS) guidance.
- Investors have lost confidence: The last quarter (ending March 2013) was a major disappointment for investors as Infosys missed its guidance for the second year in a row. Infosys shares fell 21 per cent the day earnings was announced. Global investment bank CLSA said the stock could be dead money for quite some time. The harm done to Infosys' credibility is likely to last long, it added. Shares in Infosys are up 4 per cent so far in 2013, compared to a nearly 7 per cent increase in the sectoral index.
- Employee morale down: Infosys, which was among the first Indian company to introduce employee stock option to retain talent, is struggling with high attrition, which hit a 10-year high in the March quarter. Infosys, once the favourite destination for IT graduates, had been in the headlines for all the wrong reasons - from delaying joining dates of new employees to laying off unproductive ones.
- Conservative management: Infosys has come under fire from investors for what some said was an overly conservative approach that put it at a disadvantage to rivals. Infosys has loads of cash on its books, but it has been unwilling to make a big acquisition or return some cash to shareholders.