Infosys should clarify capital allocation policy: Mohandas Pai tells investors
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"Capital allocation is very important. Institutional investors should raise those questions. They have a duty...institutional investors should raise questions on governance because it concerns the company's reputation,"
Infosys had liquid assets, including cash and cash equivalents and investments worth Rs 35,697 crore (about $5.25 billion) on its books at the end of December 2016.
He asserted that founders, who hold 13% stake in the Bengaluru-based company, had raised these questions like any other investor would.
"The founders are investors like anybody else. They hold 13 per cent stake. They have every right to question the
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"We had raised the issue. We hope that other institutional investors will also raise their voice because the institutional investors have an obligation to protect their investment," he said.
Pai explained that shareholders all over the world ask questions about capital allocation when growth slows down for listed companies, that have too much cash on books.
"All over the world, for listed companies when growth slows down and there is too much cash, shareholders will ask what are they doing with the cash...about capital allocations. Most Boards around the world will respond with a buyback to show confidence in the company and stabilise the stock price," he said.
Pai expressed hope that institutional investors who have a "fiduciary responsibility" to their unit holders, will also ask the same questions, as has been in the case of Cognizant.
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Last week, "Why can't Infosys do something like Cognizant has done. That is very important for shareholders. I hope they ask him that at a time when growth is slowing down," he said.
He said that while reports of the rift would not impact the company's performance but there is "some reputational damage because of this" and pointed out that the board "has to remedy this situation".
Over the last few days, Infosys has come under fire from founders like N R
Infosys, however, has denied the allegations and said that its board is fully aligned with the strategic direction of Sikka and is very "appreciative of the initiatives taken by him in pursuance of this transformation".
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