Foreign institutional investors' stake in Infosys hits a new high after Vishal Sikka takes charge

MUMBAI: Foreign institutional investors have increased their holding in Infosys to its highest-ever level of 42.67 per cent in the September quarter (Q2 FY15), according Capitaline and ETIG data.

Overseas investors are once again taking keen interest in the stock after the company appointed Vishal Sikka as its new CEO and MD in June this year. They believe that Sikka will bring Infosys back on track, and have placed aggressive price targets on the company.

“We have revised Infosys’ price target upwards to Rs 5,000 while rating the stock as 'overweight'. We expect FY16 revenue growth to be higher than FY15 as the management has re-affirmed that revenue growth should return to industry levels by FY17 and would adopt inorganic strategy to acquire technologies and capabilities,” said Bhuvnesh Singh, India head of research, at Barclays Capital. FIIs have increased their stake in Infosys by 2.7 per cent to 42.6 per cent in the September quarter from 39.9 per cent over the past one year, while among key FII investors Op penheimer Fund holds 2.8 per cent, Abu Dhabi Investment Authority 2.5 per cent, Government of Singapore 2.05 per cent, and Vanguard 1.52 per cent.

There's been a revival of interest as well as a turnaround in the Infosys stock ever since Sikka took charge of affairs at the Bangalore-based company. Shares of Infosys have rallied about 40 per cent, and have outperformed its peers such as TCS, Wipro and HCL Tech, and the BSE IT Index which gained 28 per cent in this period. The stock sprang back to life after being an underperformer, down 15 per cent, since the beginning of the year till May-end, hit by a flight of top talent.

Domestic investors have found confidence in the new Infosys' management as brokerages have raised price target and stock ratings. “We have raised our price target on Infosys to Rs 4,500 from Rs 3,500, and have also upgraded its ratings to 'buy' from 'hold'. “We believe the company now deserves to fetch premium valuations as the new management has impressed the markets with its strategic vision for growth,” said Pankaj Pandey, head of research at ICICI Direct.

Meanwhile, the Infosys stock can see further increase in its institutional holding as five founders of the company -- Narayana Murthy, Nandan Nilekani, SD Shibulal, S Gopalakrishnan and K Dinesh -- who together hold 15.94 per cent, have written to the Infosys board to re-classify their holdings from 'promoter' currently, to 'normal' shareholding.

Analysts say this will increase the free float of the stock and its corresponding weightage in major indices, MSCI, which is the benchmark for global portfolio investors.