IIT-Kanpur missed out on Rs 2,000 crore worth of Infosys shares because of archaic rules, says NR Narayana Murthy

Infosys founder NR Narayana Murthy (left) and MD Ranganath, managing director of Catamaran Ventures (right).

Infosys founder NR Narayana Murthy, over two decades ago, made an offer to IIT Kanpur for a donation of Rs 8 crore in Infosys shares to help one of India’s top engineering institutions with long-term capital. But the plan hit regulatory hurdles in the form of a refusal from the central government to allow educational institutions to accept equity-based donations.

The bonus shares issued by Infosys since that time have multiplied his original offer by 256 times for IIT-Kanpur, according to Murthy. In the case of the Indian Institute of Science (IISc), which faced a similar fate, the shares would have multiplied 768 times.

“If they had accepted the shares and simply held on to them, today they would be worth Rs 2,000 crore,” Murthy told Moneycontrol in a recent exclusive interview. “Even the dividends alone would have brought them Rs 500 crore over the past eight years.”

Nevertheless, as Indian educational institutions face restrictions on investing in any instrument other than fixed deposits, Murthy’s family investment office, Catamaran, has come up with a unique externally managed way to support students.

Catamaran has launched a scholarship at IIM Ahmedabad, which uses a mix of equity index and fixed income investments to fund an inflation-protected scholarship for the MBA topper every year for 20 years.

The scholarship is structured to be merit-based, awarded purely to the top-ranking first-year MBA student with no consideration of financial background.

“Let us ensure that for the next 20 years, the top-ranking student from IIM Ahmedabad gets all his or her expenses covered — including tuition fee, hostel fee, mess charges, books, everything,” Murthy further added.

Read the full interview here.

Meanwhile, another offer from Murthy’s wife, who is an IISc alumnus, was blocked on similar grounds that government-run educational institutions cannot hold or manage equity assets.

The Lost Capital

Murthy pointed out that these were not isolated cases. Had gifts in the form of equity been accepted and not liquidated, their cumulative value today would be Rs 15,000–16,000 crore, according to his estimates.

Also read: Narayana Murthy urges overhaul in archaic rules on donating shares to education institutions

And that doesn’t even account for the potential annual returns. “Just the dividend yield on those shares would have given Rs 110-120 crore to IISc every year for the last 5-8 years,” Murthy added.

While the West has embraced endowments and equity gifts to higher education funding and receives billions of dollars in grants every year, India’s regulatory framework continues to tie its institutions to low-yield deposits and fixed instruments.

Also read: Fear that AI will take away jobs not right, very positive about IT industry: Infosys founder NR Narayana Murthy