Shares of Infosys jumped on Monday as investors cheered the return of founder N R Narayana Murthy to boost the Indian outsourcing giant's sagging fortunes, but analysts questioned his chances of success.
On Saturday Infosys recalled its co-founder and former chairman Murthy to take the reins, almost two years after he retired in August 2011 on turning 65. Murthy is returning as executive chairman to Infosys, India's second largest software outsourcer by revenue, at a time when it is struggling with weak earnings, loss of market share and waning employee morale.
"It would be too simplistic to assume that Murthy has a magic wand to turn things around," said Ajay Bodke, head of investment strategy at Mumbai's Prabhudas Lilladher brokerage.
But he said that Murthy's "deep relationships" in the global corporate world would help Infosys.
Murthy, after his reappointment, described Infosys as his "middle child" and said that was why he had accepted the request by the company to return.
Many of India's IT outsourcing firms have been going through a rough patch, and they say the outlook for the industry remains difficult due to uncertainty in key US and European markets.
But Infosys has been conservative and strict in its approach in scouting for big deals, often losing out to rivals which have focused on volume growth.
"Murthy will want to put his stamp, demonstrate that the leadership is different," said Sonam Udasi, head of research at IDBI Capital.
"Infosys will be different, post-Murthy, but for any firm which has had a tough two to three years, the change cannot come overnight," said Udasi.
Infosys, whose earnings have traditionally been seen as a bellwether for the sector, has lost much of its halo in recent years.
Net profit rose just 3.4 per cent year-on-year to Rs 2,394 crore ($439 million) for the final quarter to March.
AFP
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