Nandan Nilekani may have a longer stint at Infosys; Q1 earnings on Friday

Company to come out with first quarter results today, three days after TCS posted better-than-expected numbers on all fronts

Infosys non-executive chairman Nandan Nilekani is going to helm its board of directors for a longer period than expected, according to multiple sources in the know.

Nilekani, who co-founded Infosys along with six others, returned to the technology services company after eight years to chair the board in August when the Bengaluru-headquartered firm was in desperate need of bringing back stability after the exits of Vishal Sikka, the then chief executive officer (CEO), and chairman R Seshasayee.

Sikka exited the company after issues related to alleged corporate governance such as lack of transparency in acquisition of Skava and Panaya. Also, huge severance package doled out to its former chief financial officer led to a bitter acrimony between the company’s board and some of the founders.

AT A GLANCE

• Q1 earnings to be an acid test for new management
• A longer tenure of Nilekani augurs well for the company as it aspires to accelerate its growth in the next three years
• His presence would ensure smooth relationship of board with founding members
• Company likely to expand the board with induction of two more members

“There is a perception that he (Nilekani) had come to Infosys with a limited mandate, and now with the new CEO firmly in control of the affairs at the company, he may leave handing over the baton to somebody else. However, he’s not going to leave anytime soon, not at least in the next two years for sure, as his plate is quite full,” said highly placed sources.

When Nilekani returned to Infosys last year, there was a sense in the market that he would leave the company after the new CEO, and the team, got through the transition and the trust deficit among founders and the board was restored.

In response to a query by Business Standard in January when Nilekani met the media along with then newly appointed CEO Salil Parekh for the first time, the Infosys chairman had indicated he would be there until the company needed him. “As I have said it before also, I will be here as long as required and not a day longer, so that continues.” 

Another source said: “There are already a few board-level vacancies, which he is filling at the earliest to bring in better transparency in the governance process. And also, the new CEO would require support for some more time to completely settle down in his role.” 

Infosys declined to comment on this matter. “We do not have any comments to offer on this,” a company spokesperson said.

Sources said a longer tenure for Nilekani augured well for the company, which was increasingly facing pressure in the lights of changing business model of global IT industry with more focus on digital space.

In this scenario, the incumbent chairman doesn’t only bring his years of experience in IT industry apart from his ability of executing big-ticket government projects like UIDAI, he is also a person who can build a bridge between the board, founders and other stakeholders. His knack of gelling well with people also put him in good stead as a crisis manager.

 

Infosys is also expected to make at least two board-level appointments soon; one of which will be of an independent director. The Infosys board strength now stands at eight, including two executive directors, one of the lowest in its history. As per the article of association, the company’s board strength can go as high as 16.

After the departure of Sikka, Infosys has seen a spate of board-level exits, including Seshasayee and non-executive directors Jeffrey S Lehman and John W Etchemendy. More recently in May, Ravi Venkatesan stepped down from the Infosys board.

Even though Infosys is slowly returning to a steady state, the company is yet to catch up with larger industry peers in terms of growth. One of its peers, Tata Consultancy Services, reported better-than-expected numbers on all fronts. The first quarter is also going to be an acid test for Infosys’ new management.
 

Analysts are keenly watching the performance of the company’s key business verticals, including BFSI and retail, and its digital business.

According to brokerage firm Phillip Capital, Infosys is likely to maintain its revenue growth guidance at 6-8 per cent constant currency growth for FY19 with a brighter outlook for deal flow. Similarly, Kotak Institutional Equities said it expected EBIT margin to get some support from currency depreciation despite pressure from wage hike and higher visa cost.