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Business deals

India's Infosys strikes joint venture with Singapore's Temasek

Infosys to hold 60% stake in Singapore-headquartered JV

MUMBAI (NewsRise) -- India's Infosys is entering a joint venture with Singapore's Temasek Holdings to offer cloud computing solutions to the city-state's investment house, as the nation's second largest software exporter presses the pedal to kick-start its sagging growth.

As part of the deal, Infosys will integrate its team with the operations of Temasek's unit Trusted Source, which delivers cloud, data and analytics and cybersecurity solutions to the Singaporean company and its other clients, the Indian company said in a statement Friday.

Infosys will take a 60% stake in the joint venture, while Temasek will hold the remaining. The venture will be headquartered in Singapore. "Our joint venture with Temasek will accelerate our efforts in the region, enhancing our existing presence," said Mohit Joshi, president of Infosys.

The partnership comes at a time when Infosys' revenue growth is languishing in the face of a persisting leadership churn and rising competition. The Bengaluru-based company's forecast of 6% to 8% dollar-revenue growth for this fiscal year that began in April, trails industry growth expectations of a 7% to 9% increase.

Over the past few years, Infosys has been contending with attrition levels higher than that of competition amid multiple strategic flip-flops and leadership changes. Last year, the company's image was dealt a blow when its high-profile former Chief Executive Vishal Sikka was forced to step down after a public spat with co-founder N.R. Narayana Murthy. Since the beginning of this year, Infosys has seen four major executives leave, including its finance chief M.D. Ranganath last month.

Its new Chief Executive Salil Parekh, who took over at end of last year, has already drawn up a new strategy and is pushing hard to win large deals. But with thinning leadership, analysts have called out a delayed recovery in revenue growth at Infosys that is not likely before fiscal year 2020.

Further, competition in the sector is intensifying with the nation's largest software exporter Tata Consultancy Services bagging $5.6 billion in contracts in just six months. Last week, smaller rival Wipro said it won its largest-ever contract worth $1.5 billion from U.S.-based Alight Solutions for digital services. This came after it agreed to buy Alight's India operations for $117 million earlier this year.

Meanwhile, large foreign software outsourcing companies such as Accenture, International Business Machines and Cap Gemini are chipping away at the dominance of their Indian rivals that are saddled with enormous proportions of rudimentary traditional software businesses.

According to brokerage Nomura, the current fiscal year is likely to be a weaker one for most Indian outsourcing companies, barring TCS. Most of these companies are struggling to make a mark in the high-margin new Internet-based technologies such as cloud computing, artificial intelligence and automation.

Indian software companies, after progressively showing lower market share gains over the past three years, have lost ground to foreign outsourcers such as Accenture and Cap Gemini in the last 12 months, Nomura said in a report Friday.

The slower pace of organic growth for companies such as Infosys, HCL Technologies and Cognizant Technology Solutions are in sharp contrast to the likes of Accenture and new challengers like Europe's Luxoft Holding, which predicted more than 20% growth for this year, Nomura said.

The brokerage expects Infosys to grow near the lower end of its forecast this fiscal year.

Shares of Infosys gained 0.7% in Mumbai trading, while the benchmark S&P BSE Sensex is up 0.2%.

--Dhanya Ann Thoppil

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