Infosys shares rise as co-founder Nilekani returns as chairman

MUMBAI (Reuters) - Infosys Ltd shares rose more than 3 percent on Monday, their first day of trading since co-founder Nandan Nilekani returned to the company as chairman, on hopes a months-long row between the board and the founders would be resolved.

Nilekani, also a former Infosys CEO, was named chairman on Thursday in a victory for the founders, who led by Narayana Murthy have waged an acrimonious battle with the board for months over alleged corporate governance lapses.

Separately, Infosys said in a regulatory filing late on Monday some of its founders had communicated to the company their intention to participate in an up to 130 billion rupees stock buyback programme announced earlier this month.

Analysts said Nilekani's return would provide some much needed stability to India's No.2 IT services exporter that has been reeling since Vishal Sikka resigned as its CEO on Aug. 18, blaming Murthy for creating an "untenable atmosphere".

The new chairman of Infosys told investors on Friday his priorities were to find a CEO, reconstitute the board and shape future strategy.

Nilekani's "return to Infosys gives it the best start in six years in regaining leadership stability, strategic relevance and resolving cultural battles", CLSA wrote in a note to clients.

The brokerage raised its rating on Infosys to "buy" from "underperform".

Brokerage Jefferies said the appointment would likely lay to rest any issues with founders, helping client and employee retention at the firm.

Nilekani, who served as Infosys' CEO during 2002-2007, is credited with increasing the firm's annual revenue to $2 billion from $500 million over the period.

Infosys shares closed 3.2 percent higher at 941 rupees, their highest closing level since Sikka resigned. The stock slumped to a more than three-year low last Monday following his resignation, but had recouped some losses on expectations of Nilekani's return.

($1 = 63.8900 Indian rupees)

(Reporting by Sankalp Phartiyal; Editing by Rafael Nam and Himani Sarkar)