Parekh and the art of turning around Infosys


Bengaluru: The more than fourfold jump in Infosys Ltd’s stock under chief executive Salil Parekh in five years has come on the back of industry-leading growth. India’s second-largest IT services firm has also grown ahead of its larger rival, Tata Consultancy Services Ltd (TCS), for three consecutive years.

Since Parekh took over as the boss in January 2018, Infosys has added more incremental revenue than all IT services companies, barring TCS, or $6.82 billion between 1 January 2018 and 30 September 2022, an analysis by Mint has shown.

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In comparison, TCS, which until a few years back was twice the size of Infosys, has added about $7.3 billion in the same period.

Faster growth implies that Infosys, which ended with $16.31 billion in revenue last year, is expected to topple Cognizant Technology Solutions Corp. in the January-March period, a little more than a decade after the New Jersey-based company raced past the Bengaluru firm in 2012.

The credit for the turnaround goes to Parekh, who has helped steer the company well and bolstered his credentials to emerge as the second-best CEO behind co-founder N.R. Narayana Murthy in Infosys’ four-decade history. Mint looked at four metrics, including incremental revenue and compounded quarterly revenue growth, to evaluate the performance of the six CEOs [Chart].

Murthy, who led the company for two decades, passed on the baton to Nandan Nilekani in March 2002, when it clocked revenues of $525 million.

The late 90s were the heyday for the technology services sector, and Infosys under Murthy was well ahead on each of the four metrics.

As Infosys was much smaller then, Infosys added much less incremental revenue but managed to record faster growth under Nilekani and S. Gopalakrishnan. But its profitability under Nilekani was worse than what it achieved under Parekh. Infosys, under the current CEO, has fared better than what Shibulal and Sikka achieved on growth and shareholder returns.

According to three executives who worked with Parekh, two things underpinned his success. One, Parekh has quietly worked on improving the execution ability of Infosys. Two, he has pushed the company to chase far larger deals.

Some of the recent large contracts (valued at more than $1 billion) include the transactions with German automotive major Daimler and American asset management firm Vanguard.

Therefore, it came as no surprise when Infosys gave a second term to Parekh earlier this year, allowing him to continue at the helm until 31 March 2027.

The one sore point in Parekh’s stint has been the dip in operating margin, making a few executives question whether the company was prioritizing growth over profitability.

“From a tumultuous period, when there were questions on corporate governance under Vishal Sikka’s leadership, Salil’s tenure has been a sobering experience,” said a former board member of Infosys, seeking anonymity. “It has focused on growth and stability, and that has paid off. But when it comes to business, Infosys has won many large contracts at lower prices, bringing down the overall margin. The unanswered question is if these depleting margins augur well for the company and whether the strategy is growth over everything else.”

“Beyond this growth, there are other deep challenges, including the leadership pipeline and attrition and salary compensation to the graduates. All of these need to be examined before concluding if the current boss is the best,” the executive added.

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