After Big Coup by Founders, What Nilekani Told Investors

Infosys Ltd’s new chairman, Nandan Nilekani, told investors today that he will focus on finding a chief executive, while reconstituting the board and adjusting future strategy, as he sought to calm investors rattled by the recent shock exit of the firm’s CEO over a prolonged row with the founders. “I want to put this company on the right stable path,” he said. “I plan to be here as long as necessary and work as hard as necessary.”

Nandan Nilekani told investors on a call this morning that he has come in to focus on the future of the company, take the company forward and deal with its challenges, and that he will stay with the IT services company as long as necessary.

Mr Nilekani, one of Infosys’ seven founders and also a former CEO, was named chairman late last night as part of a board shakeup aimed at putting to bed a months-long bitter dispute between key founder Narayana Murthy and the board over alleged corporate governance lapses.

“I am an admirer of N R Narayana Murthy and will ensure that Infosys, Murthy and other founders have a healthy relationship,” said Mr Nilekani, who is 62.

Vishal Sikka, the first non-founder CEO of Infosys, stepped down last week blaming Mr Murthy for creating an “untenable atmosphere”, sparking a sell-off in Infosys shares and wiping billions of dollars off the company’s market value.

 Mr Nilekani, credited for driving up Infosys’ annual revenue six-fold to $3 billion during his 2002-2007 tenure as CEO, will also be a non-independent director with immediate effect, India’s No. 2 IT services firm said in a statement.

Disagreements between founders and the board centred around a rise in Mr Sikka’s pay, the acquisition of Israeli automation firm Panaya for $200 million and a severance package offered to a former finance chief.

Media reports on Mr Nilekani’s likely return had already boosted investor confidence and pushed the stock higher over its last two trading sessions.

Shriram Subramanian of shareholder advocacy group InGovern said Nilekani-led Infosys urgently needed to formally address corporate governance concerns raised by the founders. “Otherwise it would be a complete eyewash,” he said. “Other shareholders will be completely clueless as to why the board succumbed to pressure from founders.”

Mr Nilekani returns to the Bengaluru-headquartered company at a time when Indian outsourcers have been dented by cautious client spends in their biggest market, the United States, and as they brace for changes to a US work visa program they have heavily relied on in the past to fly engineers into the country.

“It’s a good development as the company has got a credible face on the board who will act as a guide, and assure clients and shareholders that critical functions and strategies will continue,” said Harit Shah, IT analyst at Reliance Securities.

Mr Nilekani and his family own about 2.3 percent of Infosys, and according to Forbes, he is worth $1.72 billion.

His return as top boss was engineered by a group of Infosys Ltd. founders, led by Mr Murthy, who gathered support from investors to take back control of the software major and engineered the ouster of several board members. They also forced the exit of Chairman R Seshasayee, who stepped down along with Mr Sikka, who was meant to serve as executive vice chairman till March, and directors Jeffrey Lehman and John Etchemendy.

Mr Nilekani ran the company as chief executive for five years until 2007 before becoming co-chairman.  In 2009, he left Infosys to lead the rollout of the world’s biggest database of biometrics, the Aadhaar identity programme, that now has the fingerprints and iris scans of over a billion Indians.

He also plays a prominent role in India’s startup scene and has been an active venture investor.

“Besides proven track record as a successful CEO, Nilekani also brings in a neutral image, which will also go well with minority shareholders,” said analyst Sudheer Guntupalli of Ambit Capital Pvt. to news agency Bloomberg. He hasn’t “sided with either parties of the battle.”

Link: NDTV – 25 Aug 2017