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Infosys continues to be weak post Sikka’s exit; brokerages not upbeat on stock

Cite leadership vacuum and possibly more exits on the cards for the negative view on the stock.

Shares of Infosys fell nearly 4 percent intraday on Monday following developments around its CEO and MD, Vishal Sikka’s resignation on Friday and the buyback announcement on Saturday last week.

In a surprise move, Sikka announced that he was stepping down from the company’s top post on the back of ‘constant distractions’, pointing towards the all-out war between the management and founders of the IT bellwether.

Additionally, on Saturday, the company also announced a buy back offer of 11.3 crore shares at Rs 1,150 apiece. It will be spending up to Rs 13,000 crore for the same.

Brokerage houses are not very upbeat on the stock on the back of leadership vacuum, more likely exits as well.

Moneycontrol takes a look at what top brokerages are talking about the stock.

Brokerage: CLSA | Rating: Underperform

CLSA said that post Infosys’ buyback announcement, the impact on FY19 EPS is likely to be 0.9 percent, while the return on equity may increase by 550 basis points. Further, it sees a significant senior level departures over the next six months till a new CEO is found. It also sees downside risks to the guidance for FY18/19, and pegs the acceptance ratio around 4.9 percent.

Brokerage: JPMorgan | Rating: Downgrade to Neutral | Target: Reduced to Rs 905

The global research firm said that the leadership vacuum and likelihood of more departures may hurt the company.

Brokerage: Edelweiss Securities | Rating: Downgrade to Hold | Target: Rs 1,010

The brokerage house said that the key risk of management instability has now played out and saw the target multiple cut to 14 times.

Brokerage: Deutsche Bank

The global financial services firm said that CEO’s resignation created another roadblock to business transformation. Further, TCS and Tech Mahindra are the top buys for the firm, while it prefers Wipro over Infosys.

The stock has fallen over 10 percent in the past three days, while its three-day loss stood at over 9 percent. At 09:21 hrs, Infosys was quoting at Rs 886.45, down Rs 36.65, or 3.97 percent on the BSE. It touched a 52-week low of Rs 882.55.


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