Change in management: Infy needs to make an open offer, says JN Gupta

Infosys promoters may be required to make an open offer according to SEBI Substantial Acquisition of Shares and Takeovers (SAST) Regulations.

Former SEBI Executive Director JN Gupta told BusinessLine that as Infosys co-founder Nandan Nilekani is back at the helm as Chairman and is making changes to the board, it can be interpreted as taking control.

“I believe that it may amount to change in control and may require the promoters to make an open offer as per SEBI SAST Regulations,” Gupta wrote in a note for shareholder proxy firm Stakeholders Empowerment Services (SES).

The note was titled ‘Infosys Ltd: Founders as super shareholders and art of performing a brilliant coup’.

‘Control’ is defined as the right to appoint a majority of directors or have control over management or policy decisions by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner, opined Gupta. He added that the appointment to get (founder NR Narayana) “Murthy’s people” on board amounts to right to appoint.

This effort to cleanse the board was reiterated in a conference call last week with investors where Murthy mentioned that the rejuvenation of the board has already begun with the resignation of R Seshasayee and a few other board members.

However, industry watchers felt that it was for SEBI to determine whether this action amounts to control. “It is not Murthy’s men but people who are best suited to take over and more importantly understand Infosys culture. It is incidental that it is Nilekani,” said a former CFO.

This development also comes in the backdrop of a buyback announcement. Infosys co-founders — including Narayana Murthy and Nandan Nilekani but excluding SD Shibulal and their family members — have offered to tender shares worth ₹2,038 crore as part of the company’s first-ever ₹13,000-crore buyback of shares. The last date for receipt of the postal ballot is October 7.

For six months now, the Infosys management and co-founders have been having a public spat over corporate governance standards and other issues. This eventually resulted in Vishal Sikka resigning as CEO, followed by board members Seshasayee, Jeff Lehman and John Etchemendy.

Additionally, R Venkatesan, who was brought in as Co-Chairman a few months back, is now an independent director.