Brokerage houses worried over Infy’s top-level exits, Murthy’s comments

A spate of recent top management exits, coupled with co-founder NR Narayana Murthy’s unhappiness over the running of the business has brokerage houses worried as they watch continuous volatility in the company’s performance.

An analyst from a multinational brokerage firm told BusinessLine that the unexpected top management exits “worry” him. “The larger issue we are worried about is whether this is a “tightly run ship”, said another analyst. Both analysts declined to be named.

India’s second-largest software exporter has seen two top management exits in the last month or so. Sandeep Dadlani, the head of America business who was in charge of around $3.5 billion, for the software major, quit a month back unexpectedly. This was followed yesterday by Ritika Suri, former Mergers and Acquisitions (M&A) head.

Suri joined Infosys from SAP, as a senior vice-president in September 2014 to head M&A and its $500-million innovation fund. She made three acquisitions including Panaya and made investments in start-ups.

On hearing these developments, Infosys shares closed flat at ₹985. Sources within the company told BusinessLine that Suri’s exit was because of the Panaya deal. Infosys had acquired Panaya, an automation technology provider for $200 million, which came under scrutiny for the high valuations and the association of Panaya with Hasso Plattner, co-founder of tech giant SAP, Sikka’s former employer.

This issue was raked up by two anonymous emails sent by a whistleblower to SEBI, alleging wrongdoing in the deal, which profited Sikka and Suri. Subsequently, Infosys ordered an investigation by a US-based law firm gave Infosys a clean chit and did not find any wrongdoing in Infosys’ management’s decision to buy Panaya and Skava.

In its 2016-17 annual report, Panaya has clocked ₹245 crore in revenues but has reported ₹124 crore of reduced profits, a sign that the acquisition is not yet paying off. Similarly, Noah Consulting, another company that Infosys acquired, has shown a turnover of ₹188 crore but has seen its profits go down by ₹116 crore.

While some analysts expressed concern over top management exits impacting the daily functioning of the company, others are not worried.

According to Urmil Shah, AVP Research Analyst, Institutional Equities, IDBI Capital, said that these exits can be managed.

When contacted an Infosys spokesperson said: “We do not comment on speculation related to appointments or exits of executives other than key management personnel.”