Founding families sell 1% each in Infosys but investors are over-reacting

Infosys today played the spoilsport in the Indian equity market as four founder families sold stake in the company at a discount to Friday’s closing price. The stake sale in large deals set a negative sentiment for the market at the outset today.

The development assumes significance as this is the first such instance after Vishal Sikka, an outsider, took over as the CEO of the country’s second largest software exporter.

[caption id=“attachment_87565” align=“alignleft” width=“380”] Sikka joined Infosys from SAP. Reuters image[/caption]

According to details available with the stock exchanges, the stakes were sold by Nandan Nilekani, Rohini Nilekani, N R Narayana Murthy, Sudha Murty, Akshata Murty, Dinesh K, Asha Dinesh, Deeksha Dinesh, Divya Dinesh and Kumari Shibulal.

They have sold on an aggregate 2.84 percent stake valued at Rs Rs 6,484 crore.

At 1:20 pm, shares of the company were down 4.6 percent at Rs 1,975 while the BSE Sensex was down 0.92 percent.

However, the stock market’s reaction to the stake sale seems to be kneejerk for three reasons.

For one, there is no surprise in the development as the founders have already expressed their intention to move away from the company.

Secondly, according to Reuters, NR Narayana Murthy has said that he sold the minor stake for various activities and also that he has tremendous confidence in future of Infosys and its leaders. This should have allayed any fears about future of the company. Moreover, this is not the first time the promoters are selling their stakes.

Thirdly, Sikka had only last week outlined his strategy for the company at an analysts meet. The market and industry experts had by and large endorsed it and reposed their faith in the company.

The about 4 percent downturn today in the stock after the news of four founders selling minor stakes is clearly an over-reaction from the part of the investors.