Infosys $20 billion goal up in smoke with Vishal Sikka's exit from IT giant

The abrupt exit of Vishal Sikka has put the limelight back on the growth of the company while analysts see the development only as a short-term setback.

The development comes at a time when IT industry is on the cusp of change - moving from a traditional outsourcing to more of a service approach -- mainly digital, artificial intelligence and internet of things (IoT). Sikka was brought in as the company's first non-founder CEO in August 2014.

The Institutional Investor Advisory Services (IiAS) said the Infy Board has been "unable to protect its CEO" and to select a successor it must begin by "reinventing itself".

"It must convince Nandan Nilekani to join the Board once again, as its non-executive chairperson," the leading proxy advisory firm said in a report.

Nilekani was one of the seven founders that set up Infosys more than three decades ago and served as its CEO between March 2002 and April 2007.

According to IiAS, Nilekani is possibly the best candidate Infosys can find globally. "He has kept pace with technology advances, has been instrumental in digitalising the country, and is well- networked with the bureaucracy and global leaders. He also has skin in the game: having started with Infosys early in its journey, Nandan Nilekani will intuitively understand the corporate culture, and as such also have matching of minds with some of Infosys founders," IiAS was quoted by an agency.

Infosys Board came out in full support of the ex-CEO Sikka by saying the company has delivered competitive financial performance through profitable revenue growth.

"Under the leadership of Sikka, Infosys developed and articulated a strategy to transform itself to meet the rapidly changing needs of the marketplace in the 21st century. The company was lagging significantly behind industry in growth rates when he took over and now we are in top quartile from a performance perspective," the Board said in a statement.

Infosys has grown in revenues, from $2.13 billion in Q1FY15 to $2.65 billion in Q1 of this fiscal. This was done while keeping a strong focus on margins, closing this past quarter at 24.1% operating margin, beating some competitors for the first time in many years, and improving against nearly everyone in the industry.

IiAS also said transitioning from a 'promoter' led culture to a professionally managed company is a challenge - for both the company as well as the professional manager.

V K Sharma, head - PCG, HDFC Securities, says Sikka's exit draws a long-drawn out board room battle to a close.

"While the company did better than the industry during Sikka's tenure, it was nowhere near achieving Sikka's own $20 billion target by 2020. The forthcoming buy back may belay the stock from falling more," he said.

Another analyst from Angel Broking -- Sarabjit Kour Nangra, VP Research- IT, says that the current development is a setback for the company in near term. "But, given the strength of the board of the company, we believe that the company will be overcome the setback."