Ashok Vemuri quits Infosys: Why investors should be worried

The exodus of top management is continuing at Infosys with board member and head of Americas Ashok Vemuri quitting the company yesterday. The development, at a time when the company is not clearly out of woods, has once again brought the country’s second largest software firm in a tight spot.

Vemuri, who is also the global head of manufacturing and engineering services, has been with Infosys for 15 years and was also a contender for the CEO post once it falls vacant. North American manufacturing head Sanjay Jalona will fill in Vemuri’s slot on 12 September.

Vemuri’s resignation comes within moths of co-founder and chairmanNR Narayana Murthy’s return to Infosys.

There is enough speculation that Vemuri might become the CEO of iGate, a post which was earlier held by Phaneesh Murthy, another Infosys veteran.

This is the third high-profile exit in less than a month from Infosys and is not being taken in positive stride by brokerages as it raises questions on the company’s leadership planning.

According to CLSA, exit of two key managers spiked Murthy’s turnaround efforts as Infosys is already challenged on multiple counts.The brokerage house, which has set target price for the stock at Rs 3,550 a share with a buy rating, says, “Valuations are unlikely to rerate till stability is back at the top.”

Deutsche Bank echoes the opinion. It says the exit of Vemuri has potential to affect Infosys’ business and the management should look for concrete steps to stem talent loss.

JP Morgan says that some top management may not be too happy with Rohan Murty as the vice-president, and have also raised questions regarding the decision. It says Vemuri’s exit raises questions on the senior management’s stability.

Rohan Murty, son of Infosys chairman NR Narayana Murthy who joined the company as an executive assistant to his father, is soon going to be designated as vice-president. Earlier, the company had said that Rohan Murty’s appointment at Infosys is yet to be approved by the Ministry of Corporate Affairs.

Last week, Infosys vice-president and financial services head for the Americas Sudhir Chaturvedi hadput in his papers. He has joined smaller rival NIIT Technologies as the Chief Operating Officer.

In July, former global sales head of Infosys, Basab Pradhan, announced his decision to resign.

The recent resignations also mean that apart from the COO’s post, now the crucial posts of the head of sales as well as that of a board member lie vacant.It remains to be seen whom will Murthy turn to to fill up these posts as he goes through one of the most difficult times in the company he founded with six others in 1981.