Why Infosys may rally according to this brokerage - NDTV

New Delhi: Although Ambit Capital has had a "sell" call on Infosys for three years, it believes a statement from the newly appointed chief executive officer (CEO) NR Narayana Murthy on the capital structure of the IT bellwether can make Infosys rally.                  "...he (Narayana Murthy) could make a difference if he comments on what will the company do with its huge cash pile, the cash pile that has been accumulated over 12, 13, 14 years. We desperately need some clarity from this company as to what will be done...will there be special dividend, will there be a buyback. "If Infosys is to rally, that will be the single most important catalyst in the next 2-3 quarters. I don't see a fundamental recovery in Infosys' business for several quarters to come but if it is to rally in the near term it will have to be on the back of clarity on the capital structure from the new CEO," Saurabh Mukherjea, head of equities, Ambit Capital told NDTV. Infosys which is the country's second-largest software services provider has a rich cash balance of over $4 billion. Infosys is due to report its first quarter earnings on Friday. Infosys shares have swung over 5 per cent on six out of past 10 quarterly results. In the past two result seasons, the stock has moved over 20 per cent on the result day. Over the last two years, Infosys has turned in a string of disappointing results as it struggled with a strategy to shift to higher value-added services by offering consultancy and software products and solutions. Infosys, for years an investor favourite for exceeding its earnings targets, has found itself struggling as rivals like Tata Consultancy Services (TCS) and HCL Technologies have taken away market share. Over the past five years, Infosys' net operating profit after tax (NOPAT) declined from 25.1 per cent (in FY09) to 19 per cent (in FY13). During the same period, HCL Tech's NOPAT margins remained relatively flat at 15 per cent in FY13 against 15.5 per cent in FY09. Mr Murthy, the 66-year old founder of Infosys, took back charge on June 1 to revive the company, after stepping down as CEO 11 years ago. He is the Infosys' second-largest shareholder. Mr Murthy however at the time of taking back charge said that to return the company to a "desirable" state would take three years. Infosys will "re-focus on building a more predictable earnings model," Mr Murthy had said at the Infosys' annual general meeting, after shareholders accepted a proposal by the board to bring him back as executive chairman. "To be fair to be the great man (Narayana Murthy) he hasn't really driven expectations up, he has said it's going to be a long haul, it's a long drawn on process. Where I think he could make a difference but has as yet remained silent," Mr Mukherjea said. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNEMQos56L2TnuYIXdazLCHEOB3dVg&url=http://profit.ndtv.com/news/market/article-why-infosys-may-rally-according-to-this-brokerage-324278

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