28 August 2017
Steadfast peace with the arrival of Mr. Nandan Nilekani
Addresses risk of further downside; more to do for gradual valuation re-rating
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
1081 / 862
Infosys (INFO) announced the appointment of Mr. Nandan Nilekani as non-executive
non-independent Chairman of the Board.
It also accepted the resignation of Mr. R. Seshasayee, Professor Jeffrey Lehman and
Professor John Etchemendy with immediate effect.
Dr. Sikka too stepped down as Executive Vice Chairman and as a Director.
With Nandan Nilekani as Chairman, Ravi Venkatesan stepped down as the Co-
Chairman of the Board; he would however continue as an Independent Director.
Financials Snapshot (INR b)
2017 2018E 2019E
684.9 706.5 781.8
186.1 184.6 203.4
143.8 142.2 153.6
EPS Gr. (%)
Div Yield (%)
Shareholding pattern (%)
Jun-17 Mar-17 Jun-16
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
What do the developments mean for Infosys, the stock?
Steadfast return of peace puts downside risks behind
At 14.6x FY18E and 13.6x FY9E earnings, only continued brawl in the open and
prolonged Board and leadership uncertainty presented further downside risk.
But INFOs steadfast actions around the near-dissolution of the Board and
return of Mr. Nandan Nilekani – the consensus choice in the scenario – has
taken care of that risk.
The fact that it took only a week for this to play out, is a positive, as INFO can
now look forward to addressing business issues.
Response to a few tough questions will determine the extent of upside
Who could be INFO’s new CEO?
INFO’s founder team collectively distanced itself from any role in the company
when Dr. Sikka came in, as it was deemed necessary to attract a high caliber
leader. The scenario this time prima-facie appears to be the opposite. Mr. Nilekani
is on the board, and new appointments to the Board may have no less founder
influence. The overpowering thought for any prospect will be the extent of free
hand he / she will enjoy in the business – when it comes to matters such as
employee compensations, strategic acquisitions and valuations thereof, etc. Also, it
remains to be seen whether the current think-tank believes that an internal
candidate may be better suited for the role. INFO’s long term attractiveness will
undoubtedly hinge on the new leader.
Panaya investigation documents – what next here?
Developments on this issue will be interesting, given that it was the latest bone of
contention between Mr. Murthy and the Board. Nandan’s return has received
Murthy’s thumbs-up, but if retracting from this demand will be perceived as
inconsistent pitch for governance, and continued demand could open up multiple
possibilities. One such is that if the documents are made public, and there is clear
instance of wrong-doing, it leads to follow-up course of actions detrimental to
INFO in the near future. Is there a middle path here? This will attract media
interest contrary to Nandan’s wish of getting dull and boring soon.
Ashish Chopra – Research Analyst
(Ashish.Chopra@MotilalOswal.com); +91 22 6129 1530
Sagar Lele – Research Analyst
(Sagar.Lele@MotilalOswal.com); +91 22 6129 1531
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