Though Indian IT major Infosys's stock saw one of the sharpest single-day fall in the past six years and brought down its market cap by over Rs 53,000 crore, experts said that the current crisis was only a temporary phenomenon. The company's fundamentals were strong enough to overcome similar setbacks in the future too, they added.
According to reports, a US law firm was contemplating action against Infosys in the backdrop of the whistleblower's allegations. This, too, is expected to fizzle out in the long-run, unless the allegations are proved correct.
The current allegation was not the first instance of India's IT poster boy courting controversies. "It (Issues) had happened due to visa issues or during the exit of its former CFO Rajiv Bansal with regard to his severance package. Even in case of the previous events, which were more or less related to corporate governance issues, the organisation faced only temporary setbacks and bounced back. It has healthy cash-flows and good cash-reserve. It is unlikely to have further damage to its stocks in the near future. The company is geared to deal with any such issues and will make a comeback. It will eventually stabilise,” said Amit Chandra, Assistant Vice President, IT Research at Mumbai-based HDFC Securities.
He added that the first level of damage, including in the US, in response to the event has happened. “The US market has already reacted. Stock will take time to stabilise, but since it is not a mid-cap company, nothing will happen in the long-run. I don't see any immediate and further damage. Cash-flows have not been affected and I do not see an impact on the company's earnings, too," he explained.
He observed that Infosys was becoming a preferred option for many investors compared to its Indian counterpart TCS. "For the last many quarters, it had been performing better than TCS. If at all the charges are proved, then Infosys may resort to management changes, including changing the CEO. It then would like to bring in a CEO from the in house team rather than bringing in an external person,” Chandra added.
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Interestingly, though the Infosys stock took a plunge, there were many buyers, who took advantage of the fall in its price and bought Infosys stocks. “On the day of the fall, I bought 500 Infosys shares. I bought it for Rs 666 per share. The stock further fell to about Rs 650 per share. The company is fundamentally strong and that instills my confidence in its stock. In September, the stock had reached a high of Rs 840 per share. Gradually, the fallen stock price will bounce back. It can fall only in case the allegations are proved correct and that too would be a temporary set back,” said Kris Lakshmikanth, CEO and founder of Head Hunters India.
He opined it was unlikely there would be any top-level management changes and CEO Salil Parekh was expected to stay with the firm until the probe was over. “I am confident that Nandan Nilekani will be able to guide the management and help it come out of the crisis. At the same time, the CEO and CFO will stay put as they would like to come out clean on the whole issue,” added Lakshmikanth.