Infosys Founder Murthy Back as Chairman Amid Investor Pressure
Stock Chart for Infosys Ltd (INFO)
Infosys Ltd. (INFO), the Indian information technology company, will return control of its board of directors to billionaire founder N. R. Narayana Murthy after forecasting annual sales growth below analyst estimates.
The company’s shares have slumped 15 percent since May 2011 when Kundapur Vaman Kamath took over from Murthy as chairman of the board and S.D. Shibulal was named chief executive officer. Murthy will replace Kamath, assuming the role of executive chairman of the board effective immediately.
Infosys, which competes with Tata Consultancy Services Ltd. (TCS) and HCL Technologies Ltd. (HCLT) in India, is battling to win business from customers who are “less confident in committing long-term investments” amid economic uncertainty, Shibulal said on May 22 in an interview. Under Murthy’s 19-year tenure as CEO until 2002, Infosys became the first Indian company to sell shares on the Nasdaq and grew to become a 234 billion rupee ($4.1 billion) enterprise, according to data compiled by Bloomberg.
“Infosys’s fourth quarter is probably the straw that broke the camel’s back, and after all the criticism the company’s been facing, Murthy seems to have made a decision that he’s seen enough,” Harit Shah, an analyst with Mumbai-based Nirmal Bang Equities Ltd., said by phone. “It won’t happen overnight, but investors will certainly have more confidence in Murthy to whip the company back into shape while facing aggressive competition.”
The Bangalore-based company expects revenue to rise 6 percent to 10 percent in the year ending March 2014, it said when releasing its fourth-quarter results on April 12, less than the industry group NASCOMM’s estimate of 10 to 14 percent. To compete with industry rivals, the company must shed its “conservative tack” as it competes for about $18 billion in outsourcing contracts in the next two years, Walter Rossini, a Milan-based fund manager for Aletti Gestielle SGR Spa, said in an interview on May 22.
“Infosys management has not been clear about the direction of the company, while their competitors have made it very clear they will be aggressive,” said Rossini, whose fund holds 11,000 shares of Infosys. “The next two years will define the next decade for Infosys and the industry and my fear is they won’t be able to change rapidly.”
This time around, Murthy will bring his son Rohan Murthy, into Infosys as his executive assistant, according to the statement.
“This calling was sudden, unexpected and most unusual,” the chairman said in an e-mailed statement.“But, then, Infosys is my middle child. Therefore, I have put aside my plans and accepted this responsibility.”
Murthy has accepted a five-year term as chairman, over which period he will earn a salary of one-rupee per year, according to the statement. Shareholders will vote on his appointment as an additional director at the company’s annual general meeting on June 15.
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