The co-founders of Infosys are exploring the option to sell their entire 12.75% stake in the company worth about £2.80 billion. people familiar with the development said. This move, people familiar with the development said, have been triggered by the promoters' unhappiness over the manner in which the company has been run since their exit three years ago. Instead of a war of attrition with the company's board and management, the promoters appear to have veered around to the view that it might be better to make a complete break from the company they founded in 1981 and took public in 1993.
The Infy promoter group, led by N R Narayana Murthy and Nandan Nilekani, have long been seen as the original flagbearers of a new breed of engineer-entrepreneurs who decided to start a business, which helped spread the story of Indian software around the world. Any stake sale is most likely to take place through stock market block deals, and in tranches. A single, block deal is thought to be unlikely. “Large private equity or sovereign wealth funds (SWFs) won't be enthused to write $4-5 billion cheques to be minority investors without any rights,” said a top banker.
When contacted, Narayana Murthy denied there was any move to sell the promoter holding in the company. “It is not true at all,” he said. His family and he are the largest promoter shareholders with a stake of 3.44 %. Nandan Nilekani, who took over the reins of the company from Murthy before going on to launch Aadhaar said, “I do not comment on Infosys.”
Infosys co-founders - Murthy, Nilekani, Kris Gopalakrishnan, S D Shibulal and K Dinesh - hold neither executive nor non-executive roles in the company anymore. Still, their exit moves, coming at a time when the sector is facing business uncertainties, could act as an deterrent on the stock price. The deal is unlikely to be a rushed affair given the implications it could have on the price the promoters would get and also for the stock in general. Large blocks of shares are usually offloaded at a discount. Sources said chances are that the founders and the management would work on a joint narrative to stave off deep discounts. “In fact, there will be investors who may see the exit of founders as a positive for the company, as this removes the conflict factor,” said another banker.
The spat between Infosys CEO Vishal Sikka and Narayana Murthy played out very publicly in February this year with Murthy raising serious concerns over corporate governance and the changing cultural ethos of the company. He was particularly upset at the high compensation packages drawn by Sikka and other senior Infosys executives, the outsized severance package offered to former CFO Rajiv Bansal, and by Infosys's acquisition strategies. He believed the board led by R Seshasayee had failed in its duty to guide the management in the right direction.
When asked whether it was his unhappiness at Sikka's style of functioning that was making him want to exit the company he co-founded 36 years ago, Murthy said, “Whatever I had to say about Sikka and Infosys I have said some months back. I have nothing to add to that.”