Infosys Q2 results: Many steps to take in transformation, says top brass

Newly appointed Infosys CEO Salil Parekh (centre) flanked by CFO M D Ranganath and COO U B Pravin Rao (right). The company bosses credit stability for growth
Infosys, gaining momentum in the large-deals space recently, is confident of improving its performance in the coming quarters. Having clinched a large deal from Verizon, it is in the process of rebadging — assigning a new job or designation — 2,500 of its employees. Chief Executive Officer and Managing Director Salil Parekh and Chief Operating Officer U B Pravin Rao tell Debasis Mohapatra and Alnoor Peermohamed the company is on its way to achieve its 2018-19 goals. 

Edited excerpts:

How far has the company been able to bring back stability — the goal for the current fiscal year? Despite positive momentum in business, attrition at the top continues…

Parekh: We’ve gone through two quarters of the (current fiscal) year and I think we are in a fairly stable position. We have a very deep bench of talent across the segments. These are the individuals who’ve been with the company and have grown here, along with folks who are running the business on the delivery side. I think this team is starting to come together. We have a three-year transformation programme. So, there are many steps to take.

Infosys has traditionally stayed away from rebadging contracts. But, with Verizon, you are doing this as well. Is this the way forward to ensure revenue growth?

Rao: I don’t think we’ve ever said we won’t do rebadging. We have always been open to it, and we’ve done it in the past. It’s an element (of the deal). If deals come with a rebadging element, we’re open to it. 

Will there be a margin pressure because of rebadging, as a lot of this is being done for high-cost on-site staff? 

Rao: Whenever you rebadge people, you have an opportunity to engage them in the work that they’re doing in another project. We have an opportunity to engage them in the incremental work we get in that account. We also have an opportunity to deploy them in other accounts as well. As long as we have a growing business, as long as there is demand for talent and we continue to recruit, we don’t see any issues. This will also help with our localisation efforts.

The momentum of large deals looks quite good this time. Will this continue?

Rao: Large deals by nature are lumpy because the cycle times to close such deals are not fixed. About 63 per cent of these (new deals won by the company in Q2FY19) are net new and 37 per cent are rebids. In some quarters, you may win a lot of large deals, but in other quarters you may not. Many deals may not close in a particular quarter itself. 

On the digital revenue side, will this growth momentum continue in the coming quarters? What percentage of the large deals won in Q2 are digital?

Parekh: Digital is definitely a big market. We’ve estimated that it’s about a $160-billion market opportunity and is growing at about 15-17 per cent annually. We are gaining market share in this space and we hope to continue. As for what percentage of large deal wins are digital, that’s a metric we track internally, but we do not disclose it externally.