New CEO faces twin tests at India’s Infosys

By Sankalp Phartiyal and Euan Rocha

MUMBAI (Reuters) – Investors on Monday cheered the appointment of Infosys Ltd’s new chief executive, in hopes the Indian IT services firm can move past a costly boardroom spat, though questions remain over how the new boss will navigate strained corporate ties internally.

After well over a decade with Capgemini, Salil Parekh is returning to India to head Infosys, where he is tasked with reinvigorating growth, while keeping the peace.

Parekh joins Infosys, historically a bellwether of India’s $154 billion IT services sector, as it tries to heal following a nasty public spat between its board and founders that led to the dramatic exit of its previous CEO, Vishal Sikka, in August.

Shares in Infosys closed 2.8 percent higher on Monday following Parekh’s appointment as markets welcomed the board’s move to tap an industry veteran with both deep experience in leading a consulting firm and knowledge of the Indian IT model.

But investors remain concerned about how he will deal with potential strains in the relationship with the founders, which cost Infosys billions of dollars in market capitalisation earlier this year.

“The incoming CEO will have to maintain a good rapport with the founders and take care of corporate governance,” said R.K. Gupta, managing director at Taurus Asset Management, which owns shares in Infosys. “I believe both the CEO and founders will be cautious in their dealings with one another.”

Parekh joins Bengaluru-based Infosys in January from Paris-headquartered Capgemini, where he headed their core application services business in key markets like North America and the United Kingdom, and their cloud services and cloud infrastructure businesses. He also managed Sogeti – a unit of Capgemini focused on digital transformation.

In its most recent quarter, Capgemini’s digital and cloud services grew 23 percent in constant currency terms. Capgemini also reported 6.9 percent revenue growth in North America – a market largely under Parekh’s watch and one which accounts for nearly a third of its revenues.

Infosys, by comparison, saw its North American revenue grow at the pace of just 3.9 percent over that same period.

“We believe Infosys’ slowing growth in the past 18 months has more to do with patchy execution rather than strategy,” CLSA analyst Ankur Rudra wrote in a note to clients. “Infosys needed a dyed-in-the-wool execution-focused leader who understands services and can build consensus.”

Nomura analysts said they…

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