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Article rank 19 Aug 2017 mint ePaper BY ANIRBAN SEN & VARUN SOOD BENGALURU

With Vishal Sikka gone, what next BUSINESS LOUNGE

at Infosys?
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Firm needs to retain top talent, resolve tensions, hang on to market share
Promoters of Infosys Ltd led by founder and former chairman N.R. Narayana Murthy lost Rs2,871 crore in paper wealth on
Friday after stocks of the software company plunged almost 10% following the exit of chief executive ofcer (CEO) Vishal
Sikkafor which the board of the company blamed Murthy.
Murthy has been engaged in a bitter spat with the Infosys board and the management over what he sees as violations of NEWS
corporate governance and they see as interference.

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20 Overall, shareholders of the technology rm lost Rs22,519.50 crore after the sell-off triggered by Sikkas unexpected 21 19
resignation. The Infosys stock closed 9.6% lower at Rs923.10, its biggest fall since 12 April 2013.
The promoters held 12.74% stake in the rm at the end of June; this is split between ve families.
Sudha Gopalakrishnan, wife of Kris Gopalakrishnan who served as CEO and managing director between 2007 and 2011,
lost about Rs482.2 crore in notional wealth because of Fridays share price fall. She held 2.14%, the most among individual
promoters. She was followed by Rohan Murty, son of Narayana Murthy, who held a 1.38% stake and lost Rs311.79 crore in
Fridays rout. Murthys individual loss in notional wealth: Rs85.49 crore.
If holdings are sectioned in terms of family, then the Murthy family lost Rs774.62 crore, because it held the maximum
stake of 3.44% among the promoters. It was followed by the Gopalakrishnan family, which saw the value of its stake plummet
by Rs717.95 crore. The Nilekani family too lost Rs516.87 crore by virtue of its holding.
As Infosys Ltd searches for a successor to Vishal Sikka, who quit on Friday as its rst non-founder chief executive, the 20
company confronts the risk of more toplevel departures, executives and analysts said.
It is one of the three issues that Infosys needs to address even as its board scours the resumes of internal and external
candidates who could potentially replace Sikka, according to two executives and two analysts.
Infosys may see signicant flux at its Silicon Valley ofce where top executives such as Navin Budhiraja and Abdul
Razack help generate business from new areas of business such as digital, they said.
Now I worry for the California-based executives he (Sikka) brought on boardthis will be a power shift back to Bangalore, View all

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and most of the guys Vishal brought on board will either jump ship or be pushed out very quickly, said Phil Fersht, CEO of US- thumbnails
based HfS Research, an outsourcingresearch rm.
Sikkas departure followed months of friction between the board of Infosys and founders led by N.R. Narayana Murthy, 21
who has alleged corporate governance lapses, including in the $200 million purchase of Israeli automation technology rm
Panaya Ltd.
Thats at the centre of the second issue flagged by the executives and analysts. The tussle between the founders and
board is expected to test the unity of the companys board, where some members still remain loyal to Murthy, raising the
prospect of boardlevel changes.
I expect more changes at the board as misalignment of views will intensify between founders and the board because of
Infosys blaming Murthy (for the departure of Sikka) in the press release, said Shriram Subramanian, founder and managing
director of proxy advisory rm InGovern Research.
Murthy said in a 9 August email to some advisers that at least three Infosys board members had told him Sikka was chief

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technology ofcer and not CEO material, Mint reported on Friday.
THE BRIEFING
Murthys remarks had put Vishal in an awkward position, but this is the right time for changes at the top. Vishal was the
right man to take the helm when he did, when the company needed to shift its culture to one of more out-of-the-box thinking,
and needed to nd its technical roots, said Fersht. 22
However, the changing tide of the industry in recent months had made it increasingly difcult for Vishal to steer the ship
at a time when the company desperately needs to shift its cost base, while investing in growth areas, he said.
In many respects, Vishal was in an impossible position, and he simply wasnt the right man anymore to make the painful
changes Infosys needs to make to stay ahead of the game. He came across as a dead man walking at Confluence (an Infosys
event) in May, and its surprising he lasted this long, said Fersht.
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Third, analysts tracking the rm have warned that in the light of Sikkas resignation, Infosys may lower its revenue
guidance for the current year when it declares its second quarter results, on account of business taking a hit.
We do not believe the event (CEO resigning) brings closure to the (founders) demands. The board now has an uphill task
of addressing (a) founder group concerns, (b) investor concerns about succession planning, nding a culturally t CEO and NEWS
avoiding business disruptions in the interim and (c) not ceding ground (once again) to competition while addressing internal
challenges, Aniruddha Bhosale, an analyst at Deutsche Bank, wrote in a note.
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In our view, these distractions will lead to further attrition in the middle management of Infosys, resulting in the company
ceding market share to competition (as happened in FY11-15), he wrote.
Bhosale warned investors to brace for another round of turbulence.
Dr Sikkas resignation could not have come at a worse time for Infosys. It remains to be seen if the current crisis and
time taken by the new CEO to steady the ship pushes Infosys towards another period of business underperformance versus
peers (as experienced in FY11-FY15).
How well Infosys addresses these three challenges in the near term under interim CEO U.B. Pravin Rao may well
determine whether Indias second largest software services rm continues to be a relevant force at the top of the countrys
over $150 billion IT industry.
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