CHENNAI: The pace of developments at IT major Infosys acquired considerable momentum on Sunday, a day before CEO Vishal Sikka is to meet institutional investors in Mumbai, with former board member T V Mohandas Pai and former chief financial officer V Balakrishnan making fresh statements.
Sikka’s meeting with investors and the Infosys board’s decision to address the media on Monday evening in Mumbai, along with reports saying the markets regulator, the Securities and Exchange Board of India (Sebi), is closely watching the developments at the company, created a buzz that Infosys might make some important announcements on Monday.
While sources say the meeting with investors was organised by Kotak Institutional Equities much before the feud between the company’s founders and the current management came out in the open, under the current circumstances, Sikka is likely to face questions and demands for clarification.
On Sunday, Balakrishnan told PTI that Infosys should appoint an interim chairman to “engage effectively with the founders” and that the current chairman Ramaswami Seshasayee must step down forthwith, to defuse tension. “If required, re-constitute the board and move on,” he said adding that this kind of a “public spat” is always a distraction for any company that affects the morale of employees and client sentiments.
Meanwhile, Pai exhorted institutional investors to raise questions about the huge cash pile on the company’s books as well as governance issues. He said that institutional investors have a responsibility to protect their investment and that they should not hesitate to question the Infy board if they found something that could erode shareholders’ value.
“Capital allocation is important. Institutional investors should raise questions on governance because it concerns the company’s reputation,” he said. These comments come in the wake reports saying Infosys might be mulling a massive share buyback programme to pare its cash pile.
Pai explained that it’s a global practice for listed companies to buy back shares to show confidence in the company and stabilise the stock price. “All over the world, when growth slows down for listed companies and there is too much cash, shareholders will ask what are they doing with the cash... about capital allocations.”
Defending the Infosys’ capital allocation policy, the company’s independent director Roopa Kudva said in an interview to Moneycontrol that the board reviews capital allocation policy and the principles behind the same. “There is a strategic direction that has been set and acquisitions would be part of the transformation agenda. The move is to acquire strategic companies that are value-accretive that can help new and existing businesses,” she was quoted as saying.
As of end-December 2016, the worth of Infosys’ liquid assets including cash, cash equivalents and investments was `35,697 crore.
Infosys co-founders N R Narayana Murthy, Nandan Nilekani and others together own 13 per cent of the company. In the past few days, the co-founders have publicly aired concerns about Sikka’s $11-million pay and expensive severance packages offered to former executives Rajiv Bansal (CFO) and David Kennedy (general counsel).
“The founders are investors like anybody else. They hold 13 per cent stake. They have every right to question the Board... Since the largest shareholder has sought clarification, they must also seek detailed clarification,” Pai noted.
There have also been reports of Infosys changing the severance pay rule of its management team. This comes in the aftermath of Murthy criticising the Infosys board over giving excessive pay to a departing executive.