Days after announcing what is being seen as a premature exit, Infosys CEO S.D. Shibulal told The Hindu that he was leaving behind a “stronger Infosys”.
In an interview after he announced the company results, he spoke about the legacy he leaves behind, the company’s muted guidance and the worrisome attrition numbers. Edited excerpts:
What are the main factors contributing to the subdued outlook for the next fiscal?
The main reason is our Q3-Q4 base, because when you have a Q4 when you have had de-growth, it is mathematically impossible for us to be bigger in the following year. This is the predominant factor. Apart from these, we are expecting the challenges we are currently facing to continue — decline in discretionary spending. Last quarter, we faced challenges in retail and hi-tech, and an unforeseen ramp downs in our business segments.
In coming fiscal, do you see Infosys’ growth becoming a little closer to the industry average?
We’re well on our way. If you look at this year, we’ve already bridged the gap. Last year, our growth was 5.8 per cent, and the gap was approximately 10 per cent compared to the rest of the industry.
This year, we have bettered that and we have bridged the gap from there to some 2.5 per cent currently. Next year, we have given 7-9 per cent and I think next year is similar to last year, that is FY’13, when the Q4 had dropped.
Attrition has touched a record high at the company. Is this a cause for worry?
Yes, it is high. If I take out involuntary attrition, it is 17.5 per cent. We have done many things—two compensation increases, promotions and progressions, enormous training, fast-tracked programmes for employees and certification programmes and increased utilization.
We are focusing hard on reducing our attrition.
Could you explain the 50 bps margin movement? How will margins be in Q1 going forward, and will this be impacted by the wage hikes?
Margins for next year will be somewhat similar to next year. We have achieved margin movements and are very focused on margins. Utilisational efficiency is up by 6 basis points, but at the same time we have also given a compensation increase. The compensation increase will have an impact of 300 basis points in the first quarter but year-on-year we expect margins to be somewhat similar.
The company announcement on the hunt for the new CEO has sparked speculation on your early exit. Your comments.
It was important to clarify my stance as I go into superannuation in March. The nomination committee has started its search so it was important for me to clarify my stance.
You've expressed disappointment with the company’s performance . Are you happy with what you've been able to do with your tenure?
When I took over, Infosys was going through challenging times. In the first year of my tenure we grew by 5.8 per cent, this year we grew by 12 per cent in constant currency terms. So I have been able to bridge the gap already. Back then, internally also, there were many challenges—we were transforming from 2.0 to 3.0, we were battling some employee litigations and the U.S. Justice Department investigation; these had impacted client confidence in us and our brand. We had also not applied for adequate visas in FY’13, which created a visa shortage. We were battling such regulatory overhangs.
Today, these challenges are all behind us. I have put an organizational structure in place that can be easily managed by the next CEO.
In that sense, I believe that Infosys today is much stronger than the time when I took over. So if I look at the legacy I am leaving behind, I am leaving behind a stronger Infosys.
Performance is another legacy that I would have liked to leave behind and we are very clear that we are not happy where we are over the last two years—but the reasons are obvious. On the positive side, the growth percentage has doubled and I have managed to bridge the gap.