In many ways, Infosys is no longer the company it was several years ago. One reason being, it is no longer delivering industry-leading growth. But this reason is also pushing the company towards change and this was never more evident as in the fourth quarter, when Infosys CEO & MD SD Shibulal said - in stark contrast to its stance so far - that inorganic growth was an imperative.
The software exporter is looking for acquisitions - not only small tuck-in ones - but even large opportunities in products, platforms and solutions. In an interview with ET, Infosys CEO says this is the time when the company needs to make investments. For the first time, the company will also set up a $100-million innovation fund for exciting initiatives - both internally and externally. Edited excerpts:
Has Infosys put in a place a structure and identified a person to head the $100-million fund?
There will be a core committee set up to head it. The committee will include 2-3 board members, and there will be an internal committee to identify ideas and bring it to the table. In terms of single person, for the time being, Deepak Padaki (AVP, head M&A) will have responsibility for it.
Can you provide some colour on the acquisitions you are looking at? You mentioned small tuck-in as well as large acquisitions, and about valuations being high and time-consuming.
Product and platform valuations are always high. The interesting ideas you see - even in start-up firms the valuations are high. Products and platforms are not geography-specific and we will look across industry verticals.
Is the investment mandate for the $100-million fund global?
Mandate is global, but some of it will go into incubating ideas from inside the company. Some will go into funding ideas, which are outside. The whole plan is to create an innovation ecosystem. So, we can leverage that.
Will the exercise be similar to ventures such as Yantra and Onmobile, which Infosys incubated earlier?
Yantra and Onmobile are both spin-offs. So, there could be spin-offs but it could also be that we identify something outside and later on, fold it within the company or not fold it.
You were said to be looking at digital marketing but found valuations to be expensive. Is that still an area of interest?
What else are you speculating (laughs). When you look at acquisitions, you can't have a very narrow perspective. We have identified seven themes such as digital consumer, emerging market, sustainability, e-commerce. Digital marketing is interesting to us because retail is very important sector for us. In retail, we work with 10 of the largest retailers in the US and for eight of these 10, we work on digital marketing. There are multiple other areas where we have shown interest in. Infosys Public Service is one such area which we are looking at for scale.
Some analysts are of the view that the Infosys 3.0 strategy is not paying off.
If you look at the early phase of a strategy, you have to judge it by the response you get from industry analysts and clients. In 15 months, we have got around 75 clients for our Products Platform Solutions offerings. Also industry reports are acknowledging this is the right way to go. This is a long-term strategy of 5-7 years. Traditionally, the third quarter is thought of as a weak quarter although Infosys seems to have performed better in Q3 than Q4. Business volumes were the same for us in both quarters. But revenue productivity was higher in Q3.
Was that because of the business mix or pricing pressure? Has pricing stabilised?
Our portfolio has not shifted much. So, there is some impact from pricing. We expect some pricing pressure to continue even going ahead.
The growth guidance of 6-10% for the current fiscal is in a fairly broad range. Is there scope to narrow it as visibility improves in coming quarters?
We will see.
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