These Infosys co-founders lost their billionaire tag, courtesy Vishal Sikka's resignation

25 August, 2017, 01:52 | Author: Brenda Erickson
  • Cyrus Mistry was once a favourite with Ratan Tata

Mumbai: The share-buyback plan approved by Infosys failed to cheer up the investors' sentiment as the stock extended its fall by 5 per cent on Monday amidst concerns that the class action suit being planned by several law firms in USA could jeopardise the buyback plan.

"Unless, the governance issues are fixed with appropriate balance in the board, getting a CEO to run the company looks extremely hard", he said.

Calling for more active investor engagement by the Board, the analyst said its commentary in Friday's conference call with investors was hardly decisive, reflecting Sikka's sudden exit.

Adding to the worries of the company's board, experts are raising uncomfortable questions over the timing of the share buyback announcement.

Now that CEO Vishal Sikka has resigned sighting public and personal attacks all fingers are pointing towards Narayana Murthy.

Murthy, three people familiar with the matter, said on the condition of anonymity, was taken aback by the tone of the board's letter following CEO Vishal Sikka's resignation.

On the day of Sikka's resignation itself, Infosys lost Rs 17,000 crore from the market capitalisation.

Venkatesan is believed to have briefed Jaitley about the developments at Infosys and assured the minister of no let-up in corporate governance standards at the company, contrary to the allegations labelled by Murthy. The company has named its long-time empolyee U B Pravin Rao as the interim CEO and MD. The boyish-looking Ranga, 55, who worked closely with Murthy during his second stint as Infosys chairman, may also be able to navigate the tensions between the board and co-founders.

Vijay Mallya was accused of diverting funds to Kingfisher Airlines
Vijay Mallya was accused of diverting funds to Kingfisher Airlines

He also contested the claim that the halo around Murthy is disappearing.

The Board said Murthy repeatedly made "inappropriate" demands inconsistent with his stated desire for stronger governance, and his "campaign" intensified over time.

ICICI Securities said, "Though shareholder value creation through a buyback is a step in the right direction, we would be closely watching the company's revenue growth guidance of 6.5-8.5% (in constant currency terms) for FY18E in the midst of recent developments".

These allegations, he said, have been repeatedly proven false by multiple independent investigations.

On Friday the stock had plummeted by about 10%.

Troubles only mounted for Infosys when an anonymous letter was sent to the market regulators in February this year, alleging that Panaya acquisition was overvalued and that some Infosys executives may have benefited from the deal. Mohandas Pai, the company's former chief financial officer identified as part of Murthy's cohort, called the board dysfunctional.

"Beyond the loss suffered due to Sikka's resignation, the way the board handled the issue was even more damaging", said Sudheer Guntupalli, an analyst at Ambit Capital Pvt. Infosys has so far refused to make public the probe report.

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