• Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney master your money
Moneycontrol

Home » News » Business

Feb 15, 2017, 09.48 PM | Source: Moneycontrol.com

Analysts back Sikka: 'Founders must accept Infosys not their co'

Prominent investors and broking firms have chosen to side with the Infosys board in the ongoing tug-of-war between the company’s founders and the board.

Like this story, share it with millions of investors on M3

Analysts back Sikka: Founders must accept Infosys not their co

Prominent investors and broking firms have chosen to side with the Infosys board in the ongoing tug-of-war between the company’s founders and the board.

Post Your Comments

Share Cancel

| 3 Comments
Malini Bhuptha
Moneycontrol

Prominent investors and broking firms have chosen to side with the Infosys board in the ongoing tug-of-war between the company’s founders and the board. That is welcome support for CEO Vishal Sikka and his team as they try to navigate a turbulent business environment for the IT industry in general.

Some analysts have termed the recent developments at Infosys as “perils of a glasshouse”, in a reference to the constant scrutiny the board has been subject to from the founders and members of the core team.

“We are heartened by Infosys board, which stood up to strong pressure exerted by a section of its shareholders, the firm’s promoters,” broking firm Elara Capital wrote in a note to clients.

Interestingly, while the promoters had requested to be classified as ordinary shareholders in 2014, the change in categorization is yet to take place.

Analysts are questioning the concerns raised by founders after they voluntarily gave up all executive positions. In fact, some feel that the discordance with founders on strategic issues need not be resolved.

In its note after yesterday’s conference call, Motilal Oswal Securities said: “In principle, Infosys does not have to worry about any intervention by non-executive founders, and any discordance with them on strategic choices and judgments need not be painstakingly resolved.”

The widely held view among analysts is that the company is on track as far as the transformation of its business model and achieving revenue targets are concerned.

“We do not perceive any structural issues with Infosys. The call only makes us more confident and clears the air about corporate governance anomalies in Infosys,” Edelweiss Securities said in a note to its clients.

Kotak Institutional Equities too has a positive view on the stock even as the war of words between the founders and board shows no signs of abating.

“We like Infosys given it is gaining share in large deals and wallets of large clients, and is positioned well to capture discretionary spends,” said the Kotak note dated February 14, adding that the company was “making right investments in automation and digital for sustained profitable growth.”

This is not the first time that Sikka and team have been heckled by former top management officials.

In 2014, ex-CFOs Mohandas Pai and V Balakrishnan, and ex-senior vice-president DN Prahlad wrote to the Infosys board urging a buyback of shares at a 52 week-high price, on the grounds that the board had not clearly spelt out its strategy to deploy cash. The same demand has cropped up again in the last few days. The same demand has cropped up once again.

Maybe the founders could do well to read the last paragraph of the open letter by Justin Leverenz, Portfolio Manager of Oppenheimer Developing Markets Fund, an investor in Infosys.

Excerpts from the letter:

“With all deference to their enormous contributions, we also believe that non-executive founders need to come to grips with the reality that this is a public company. It is no longer their firm. As of December 31, 2016, the non-executive founders (promoter and promoter group) owned 12.8% of the Company’s outstanding shares. Furthermore, it was reported that they sold 7.5 million shares in March 2016. The Board needs to clarify the appropriate role of non-executive founders of the Company.”
Buy, Hold, Sell ? Hear it first on M3
Analysts back Sikka: Founders must accept Infosys not their co

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login