Investors want former CEO Nandan Nilekani to return to Infosys board

MUMBAI (Reuters) - A group of 12 major institutional investors in Infosys Ltd has asked the Indian IT services company to bring former CEO Nandan Nilekani back on to its board to try to resolve a feud with the company's founders.

The Infosys board has been locked in a public dispute since February with the founders, led by former chair Narayana Murthy, who have accused the directors of governance lapses.

The differences prompted its Chief Executive Vishal Sikka to resign on Friday, sparking a sell-off that has wiped over $4.5 billion from Infosys' market capitalization over the last four trading sessions.

"The recent developments are very concerning to each one of us," the investors, comprising large mutual funds and insurance companies, said in their letter, adding Infosys should consider inviting Nilekani to the board in a "suitable capacity."

Nilekani, one of the company's co-founders, who served as its CEO from 2002 to 2007, could not be reached for comment.

The investors, which include HDFC Asset Management, ICICI Prudential Asset Management and Birla SunLife Asset Management, among others, added that Nilekani's return would be welcomed as he enjoys the confidence of clients, shareholders and employees.

"Given his credentials, we feel, that his joining the board at this stage, will restore confidence of stakeholders in the company and also facilitate resolution of the contentious issues that Infosys is facing presently," said the funds in a letter, the contents of which were reviewed by Reuters.

The group of institutions, who have signed the letter to the Infosys board, together own roughly 10 percent of the company's shares, according to Thomson Reuters data.

Separately, local business news channel CNBC TV18 citing unnamed sources, reported on Wednesday that Nilekani was set to return to Infosys, without providing specific details.

Shares in Infosys which had fallen nearly 15 percent in the first two days following Sikka's exit rallied 2 percent on Wednesday following news that Nilekani may return -- a move that could well bring the acrimonious dispute to a close.

The retired founder executives and their families together own about 12.75 percent of Infosys' shares.

On an investor call last week, Infosys repeatedly assured shareholders and analysts that it would work to end the dispute soon and ensure that its new permanent CEO, when named, would not be distracted by the issue.

"It cannot continue in this fashion. I'm always an optimist, and I believe that in the coming weeks we'll have to find ways to put this decisively to bed," said Infosys Co-chairman Ravi Venkatesan on Friday's call.

(Reporting by Savio Shetty and Abhirup Roy; Editing by Keith Weir)