India’s second largest software firm Infosys said on Sunday that its board has reappointed Salil Parekh as managing director and chief executive officer for five more years starting July, reposing trust in a leader who has turned around the company ever since he took over in January 2018.
In a filing to exchanges on May 22, the company said, “The board in a meeting on May 21 approved the reappointment of Parekh subject to the approval of shareholders.”
ESOPs to retain top talent
The company has also rolled out performance-linked stock units to nearly 100 top executives amid rising attrition.
The board has approved a grant of 104,000 shares to six key management personnel and another 375,760 shares to 88 other senior executives in a bid to retain leadership amid a war for tech talent. These performance stock units will be granted under the Infosys Expanded Stock Ownership Plan 2019, and will vest over three years on achievement of milestones, in line with the plan approved by shareholders.
Infosys under Parekh
When Parekh took charge in January 2018, co-founder and chairman Nandan Nilekani described him as the right person to lead Infosys.
Four years on, it appears Nilekani’s faith has paid off, as Parekh restored stability, growth and confidence in a company that was badly bruised due to conflicts between co-founder NR Narayana Murthy and then CEO Vishal Sikka. The latter was under fire from the former over issues related to corporate governance and profligacy.
Personality-wise, Sikka was a tech visionary who often dazzled stakeholders with his futuristic ideas while Parekh is more understated, prefers to keep his head down, win deals and execute.
Earlier, Parekh, 58, was a member of the group executive board at Capgemini, where he held several leadership posts for 25 years.
The Nilekani-Parekh combo
Unlike Sikka, what also helped Parekh was the complete backing of Nilekani, who continues to serve on the board as chairman and is learnt to take an active interest in the business. Nilekani has also publicly praised Parekh in the past, complimenting him for “doing a terrific job” of reinventing Infosys and making it resilient.
In his first meeting with analysts after taking charge, Parekh said he needed three years to transform Infosys. The first year of fiscal 2019 will be to stabilise, the second to build momentum and the third to accelerate.
The Covid crisis helped the company as it pivoted to a delivery model where a majority of its employees started working from home and benefited from clients migrating to the cloud and stepping up digital investments.
During this period, Infosys outperformed peers for many quarters, share of revenues from digital more than doubled and won large deals from companies such as Vanguard, Daimler and Rolls-Royce. The Infosys stock has risen over 183 percent since he took charge.
The firm clocked a growth rate of 19.7 percent in fiscal year 2021-22, highest in a decade as it saw robust demand for its services. This is also the third year in a row that it grew faster than larger rival TCS.
“As we look ahead, we have given a growth guidance of 13-15 percent which is very strong as we start the year. We see our pipeline in good shape, a very good demand environment and we have recruited in the fourth quarter 22,000 net new employees. And that, among other things, gives us very strong confidence for the future,” Parekh had said in an interview to Moneycontrol last month.
While the Nilekani-Parekh combination has worked very well for Infosys in the last four years, the coming year is fraught with risks in the light of the continuing Ukraine-Russia war and fears of a recession in the US, which is Infosys’ largest market.
Brokerage JP Morgan recently downgraded the Indian IT sector to 'underweight' and cut the target price of multiples by 10-20 percent.
It said Infosys is its top pick among IT firms: “We would BUY the stock on weakness for its structural strengths and see limited earnings risk from this level given its guidance track record. It stays the sector bellwether and the best way to play the current tech spending super-cycle, in our view.”