Infosys Investors Lose Confidence In Murthy After Exodus Of Top Executives

A year ago, when Infosys brought back iconic co-founder NR Narayana Murthy as executive chairman, about two years after his retirement, in a bid to revive the sagging fortunes of the $8.2-billion IT behemoth, the decision was welcomed with much fanfare.

Investors, who showed confidence when Murthy announced a three-year turnaround plan, are worried today. In the months following Murthy's return, Infosys saw exits of some of its top executives. Among others, the company saw resignations of board members Ashok Vemuri, V Balakrishnan and, more recently, BG Srinivas.

The three were once seen as top contenders to become the CEO of Infosys after incumbent SD Shibulal’s retirement by January next year. These exits, analysts believe, affected Infosys’ business. SD Shibulal, the chief executive officer and managing director of Infosys, will step down by January next year.

Anil Singhvi, a Shareholder activist, said BG Srinivas' exit had jolted investors. Srinivas, the latest to exit, was president of the company and a man who many saw as the leading contender for the CEO position.

"Whatever Murthy may say in his letters (assuring employees and investors), there is much to be desired in Infosys. In the last three to four months, the company's stock price has dropped from the Rs 3,500 levels to Rs 2,900. The way the markets have been reacting to the Modi factor, one should have seen the Infosys stock price at the Rs 4,000 level," Singhvi said.

He said the genesis of what's happening now is the re-entry of Murthy. "Bringing his son along with him was Murthy's biggest mistake. Many investors at that time were apprehensive but didn't speak out. People in the management who were in the company for 10 to 15 years have quit. At the end of the day, what is the difference between the Gandhi family and the promoters of Infosys? How long do the promoters want to sit at the helm of the company?" he asked.

Shriram Subramanian, founder and MD of independent proxy advisory and governance research firm InGovern, said the departure of several top executives, especially during the CEO selection process, was a concern.

Investors are worried about leadership development and succession planning, he said, and added that several FIIs and one large Indian institutional investor, who he declined to name, had raised concerns about the CEO selection process.

Subramanian also said the promoters should opt out of executive and non-executive roles and should not even be on the board. Such a step will at least make the company a truly widely-held company with no promoter on its board, he added.

Infosys is one of the few, if not the only Indian listed company, where FIIs hold a 42.1% stake and domestic institutional investors hold 13.66% stake. The promoter group holds only 15.94% and retail investors hold 28.3%.
The Annual General Meeting of Infosys, which is scheduled to be held on June 14, will reveal whether the management will say anything about these concerns of the investors.