Twin bombs strike Infosys’ stock price on the Indian bourses – disappointing result announcement and unexpected stepping down of its chief firefighter Mohandas Pai.
Even as I am writing this, the shares of IT behemoth has shed a whopping 9%, also dragging down with it the benchmark indices with its significant weightage of 1/10th on the BSE Sensex. This is not for the first time that Infosys results have lagged market expectations.
First things first; Infosys announced its Q4 results, which were below the Street estimates due to higher costs. For the quarter ending March 31, 2011, the company reported nearly 14% up-tick in consolidated net profit at Rs.1818 crore, as against Rs.1600 crore figured in the year-ago period.
The fourth quarter revenues surged to Rs.7250 crore from Rs.5944 crore recorded in the year-ago period, almost in line with IT bellwether’s own Q4 guidance spelled out during its third quarter results.
India’s No.2 software services exporter also forecasted tepid sales growth and earnings growth forecast for the year ending March 2012 – Infosys has projected 18-20% growth in revenue at $7.13 billion to $7.25 billion for the period, even as the company expects the demand environment to be normal this year for the industry.
[You might also like to read our earlier post on Infosys becoming the 1st Indian company to officially introduce Social Media policy – Click Here]
But, that’s not the sole reason for the steep stock price correction in Infosys. The bigger devil in the detail lays in the flash resignation news of T V Mohandas Pai, the company’s board member and Director in-charge of the Human Resource Department, with various rumors doing the rounds.
Infosys Chairman Narayan Murthy reacted to Pai’s resignation news saying:
“Mohan has been an early adopter and a keen anchor builder of Infosys. It is difficult to imagine Infosys without Mohan’s passion, commitment, joie-de-vivre and intellect. We all know that he is taking this painful decision, since he has much bigger projects in the horizon-nation building. The Board and every Infoscion thank Mr. Mohandas Pai for his wonderful contribution and wish him great success in his future endeavors.”
While the above statement suggests that Pai might well settle for much bigger projects in the horizon-nation building, other reports indicate that the ambitious HR head could have lost out in the race of internal power struggle for top-most positions within the company. The man himself says that he needs to take up new opportunities.
More than anything else, the Street is ruing the fact that Pai’s announcement of not only quitting the board but the company, was an indication of an internal rift just ahead of the large scale leadership succession plans in the company.
What do you feel could be the actual reason behind Mohandas Pai’s resignation?