Sectors other than aviation and retail are doing quite okay: Infosys CEO

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By Nikunj Dalmia


Salil Parekh, CEO, Infosys, says there have been no large cancellations overall except for the sectors where there is some impact and there has been no real impact on pricing.


You were cautiously optimistic in April when you spoke last but that was the April end. It is June now. In your assessment has anything changed between April and now?
A lot of things have changed. First, we have gone through a tremendous transition where we have stabilised operations. Our primary focus was the safety of our employees and I really want to thank all our employees who have done an incredible job of providing service to our clients. The second objective is to make sure all our client service delivery was absolutely as per our commitments; and the third, with all the changes going on, we wanted to make sure Infosys was taking all the right steps for the present as well as the long-term future of the company, its clients and employees.

In April end, about 93% of our employees were working from home. Today, of course, all of our work is being done extremely efficiently. The majority of our employees are working from home at this stage as well. However, some of our campuses are open again. 5% of our employees are already working from campuses. Our approach has been extremely flexible and open and we have shared with our employees that they are welcome to come back.

There are some client situations where it has been very useful to have them. In general, all of our service deliveries have worked extremely well. Many of the segments that we talked about then like retail or manufacturing, obviously had some difficulties but the other segment, sectors, industries are starting to look quite okay.

At that stage, we did not know how this was going to play out today or few weeks later. We see that many of those other sectors are actually in good shape and many of the western markets, European countries, and the United States are opening up. Now we are much more careful with the cases in India still going up in a small percentage. We want to be extremely cautious as to how we manage our service delivery going forward.

Many things have changed but overall, I remain quite positive because the pace of acceleration of technology has become faster. We see the adoption of digital, the adoption of cloud going at a faster pace with our clients. Those were the themes that we were driving before and those are the themes that are going to become faster as we come out of this.

Hypothetically, if you have to announce your numbers tomorrow morning, are you in a position to give a guidance? You shied away from giving your guidance largely because of the messy environment we were in till April end.
Yes, in terms of the guidance we said at the end of March, early April that we did not have visibility for the full year. At this stage, we will take a decision as we end the quarter. In our business, we typically have a good idea of what is going on a quarter or two ahead and then we have a good trend line based on large deals and other indicators of how the future quarters look like. At the end of this quarter, we will relook at it and come back to what we do with the guidance.

But based on your choice of the words, it seems things are becoming better, returning to normal. There are some areas of concern in retail and aviation but barring that, things are looking up. Can I safely conclude that?
We can absolutely say that we see the other sectors outside the ones you just mentioned doing quite okay. The concern in April was will sectors be impacted and we do not see that now.

Then why is your SEC filing really not in sync with what you are communicating?
No the SEC filing you are referring to is 20-F filing which takes into account all of the factors that we see in the market. So as a responsible company, we have to share what are the possibilities that can happen. My comment is in no way to diminish what we have put in the 20-F filing, those are legitimate points. Those represent some of the concerns and some of the opportunities in a typical way that a risk statement represents that.

Now a scary word which Infosys has used in the past is profit warning. So what you are saying is look folks, this is not a profit warning, this is a pure acknowledgement of what is good and what is bad?
That is right. If you look at the 20-F filings from previous years, we as a responsible corporate provide all the possible situations which can be of concern and which are opportunities within our business.That is how 20-F filings are reflected normally.

How has your business changed? What has your client communication been because historians like to divide the world into BC and AD. The modern businessmen are likely to divide the world into pre-Covid and post-Covid?
What is happening here is a consequence of this. The connect with our clients has significantly increased in the sense of more communication through these channels or video communications almost on a daily basis. What I have learnt from those communications is many of our clients, especially those which are not in retail or some level of manufacturing are really accelerating what they are driving through digital or cloud and options.

I was in a discussion with a US client’s CIO two weeks ago on how they could enable their sales force to use digital much faster because that is one of the only ways in this world, in this environment, to connect with their end customers and clients. We also see that where the segments are impacted, there is much faster adoption but also with the view on what is the most affordable way to get this adoption done.

If you recall, when we had shared our strategy a couple of years ago, our focus was very much on playing and approaching this world through a digital lens. In the Q4 of last year, our digital business was growing at 38% and was about 42% of the overall company. My takeaway really is that all of that is going to go faster and accelerate. So while we will have some discretionary spend which is impacted because of the Covid situation and we may have some near term impact, in the medium and long term I am more optimistic of where we are ending up.

In the annual note, I have written that we are on a very good trajectory where we are going to drive all the transformation that our clients are going through on their digital and cloud journey.

When you say near-term challenges, how would you like to define them?
They are going through a lot of difficulty so there there is going to be some constraints in what kind of spending they do on discretionary projects which are more long-term contracts and are more stable but they will have to be careful about more discretionary spending because in some of those businesses, a large part of their revenue has gone away in a short instance. My sense is as revenues return, those projects will come back. The near term nature of this is difficult to define but it can be a quarter or two from now.

So can I safely assume that there have been no massive cancellations and there is no large drop in billing rates?
Oh yes absolutely. There have been no large cancellations overall except for the sectors where there is some impact. And there has been no real impact on our pricing as well.

Are clients still engaging with you for billion dollar deals? You had a Hallmark deal which you announced in your Q4 numbers. Is the new normal changing the size of the deals?
What is happening is we are seeing many of our clients want to consolidate their work away from some small partners and also some of the larger partners who have not handled the change. My sense is if we engage with our clients well, we will continue to build their trust and we might see some of those large deals coming up even in the future as we look at the Covid environment. I do not think the large deal momentum necessarily disappears. Only it is a different kind of large deal environment. Of course, in the near term, decision making will be a bit slower but this type of consolidation opens up new opportunities for us.

Where do you think the industry is headed? A couple of quarters ago, you had said that Infosys is working towards becoming a company which wants to grow higher than the industry average?
Last year we grew at 9.8%, the year before at 9%. We are the fastest growing large tech services company. My sense is we want to keep that momentum going but it is really a function of how we work with our clients and how they choose to trust us. So, in itself, it is not a goal. The goal for us is to become a trusted partner or remain a trusted partner with our clients as they go on their digital and cloud journey.

If we can do that well, if we have the right capabilities, my sense is the rest will follow — be it large deals, be it growth, be it rewarding our stakeholders. Those outcomes will follow if we stay with our clients in their journey.

Should shareholders completely ignore FY21, not only for Infosys but for any IT company and all reference checks and views be based only on FY22 now?
It is difficult to advise shareholders on those sorts of things. The reality is worldwide,there is a medical situation. All companies including Infosys have to adapt and address that for their clients. We are fortunate to be sitting with $3.6 billion in cash, very strong relationships and we have also transitioned well, looking at the market and our client needs.

Hopefully, we will start to see the benefits of that but in general shareholders like all other human beings or citizens of different countries are seeing what is going on in the world and I am sure they will factor that in.

If I have to use the weather terminology, do you think in the short term. predicting the weather would be difficult but the season which is the long term, two-year view, three-year view — both in terms of relevance and importance for Indian IT and Infosys — is solid as ever?
My sense is that the technology themes — the digital themes, the Cloud themes are even more strong now because what the pandemic has shown everyone is that there are ways to address it and if we can do digital and Cloud well, we can be even stronger.

Infosys had adopted those themes even before the pandemic and the acceleration will help us as long as we continue to invest in those and as you said, we can really build the trust of our clients.




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