Infosys shares look up as bloody boardroom battle ends

Let's hope Lord Ganesha, the remover of all obstacles, casts his benevolent gaze on Infosys' board room!

Make no mistake about it: Infosys Technologies Ltd., India's second largest software services exporter, is in deep, deep trouble. The tech giant parachuted its former Chief Executive Officer Nandan Nilekani as the Non-Executive Chairman on Thursday evening in a bid to suture a gaping corporate governance wound, assure angry investors and edgy staff that all will be well at the Bangalore-based bellwether stock.

"I want to put this company on the right path", Nilekani, 62, told investors in a conference call. "I plan to be here as long as necessary and work as hard as necessary",he added.

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Nilekani, widely respected across the corporate and political spectrum and known as India's tech czar, has his task cut out. Over the past two years, Infosys' creative juices have been sapped by a bitter and intensely public battle between its independent board and the founder N R Narayana Murthy on several pin pricks.

Murthy, who started Infosys in 1981 along with 6 others, including Nilekani, accused the board of a sharp drop in corporate governance, allegedly overpaying for an acquisition and, generally, deviating from 'Infosysculture and values'. Though, the board denied all allegations publicly and vociferously.

The public spat resulted in the Infosys stock under performing its peers, the main indices and the broader market over the past 24 months. This attrition also prompted Chief Executive Officer Vishal Sikka to resign last week, citing 'continuous distractions' as his reason for quitting. The embattled Chairman of the board, R. Seshasayee, and two other independent directors also put in their papers.

Nilekani's first task is to find a CEO for Infosys. It is a tough task in an environment when several founders together executed a coup on a competent board adorned with accomplished and seasoned professionals.

Infosys is also facingmanyheadwinds. Its top line is near stagnant. The main market for its services, the United States, is head over heals in love with automation. All Indian software companies, including Infosys, are also battling a hostile work environment in the US, where a large section of the political class accuses them of employing low-cost Indian tech workers instead of local professionals.

Nilekani has to also alter a widely held perception that some founders, all of them above 55 at least, refuse to let go of Infosys and that they continue to engage in backseat driving at a time when the tech world is undergoing a massive shift. Cast a cursory eye across global tech companies and you will see 30-year-olds occupying the corner office. Decisions are taken at the spur of a moment, rivals are bought in seconds and business models are shed without batting an eyelid.

Now, contrast this with Infosys, where 71-year-old Murthy is alleged to have pushed the board to do his bidding under the threat of media attacks. Murthy denies all charges.

The other issue that Nilekani faces is that Infosys is no longer the market's darling. It's long reign as India's finest stock ended somewhere in the middle of the previous decade. In fact, seasoned investors have mostly ignored the boardroom tussle to an extent that 8-12 per cent drop in the stock's price refuses to attract sustained buying support.

As a consequence, Infosys has had to resort to a costly buyback to retain its sheen as a bellwether stock. And, only those fund managers who are mostly obliged to purchase Infosys due to its heavy weighting in several indices wrote to the board to get Nilekani back on the saddle.

Is Nilekani up to these mountainous tasks? Can he get Infosys' top customers to pay more? Can he convince investors to line up to buy the stock? Certainly, he can. The IIT-Bombay graduate ensured Infosysturnover grew sixfold to $3 billion during his 5-year stint as the CEO between 2002-07. Here's wishing him all the luck that Ganesha brings on this Chaturthi!