Infosys: Finding new CEO a daunting task but co may sustain business momentum, says Jefferies

Bengaluru: The embattled Board of software major Infosys faces a daunting task in finding a suitable Chief Executive Officer (CEO) to succeed technocrat Vishal Sikka who resigned on 18 August, US-based global investment bank Jefferies LLC has said. [caption id=“attachment_3946767” align=“alignleft” width=“380”]  Reuters[/caption] “Given the acrimonious exit (of Sikka), the near-term challenge for the Infosys Board would be to find the right candidate for the CEO post and alleviate issues with the company’s founder (Narayan Murthy),” Jefferies Indian arm said in a statement here. As the company’s strategic direction was not in question, the securities firm said the IT major would sustain business momentum. “Interim challenges will also involve business continuity, especially with large clients, and preventing attrition in senior management and sales,” said Jefferies India equity analyst Vaibhav Dhasmana in the statement. As finding closure to the “founder issues” and maintaining business traction, especially in large accounts, would not be easy, Dhasmana said that, over the long-term, the Board had to create mechanisms to shield the management from external noise as had been the case with Sikka. Though Sikka resigned citing personal attacks, the Board blamed comments from one of the founders (Murthy) as reason for his exit. With the company hinting at a strong second quarter (July-September) and reiterating its annual guidance for fiscal 2017-18, the management is expected to meet its top 100 clients in the next few weeks. The outsourcing firm appointed Chief Operating Officer U.B. Pravin Rao as the interim CEO until a new CEO is found by March 31, 2018, and elevated Sikka as Executive Vice-Chairman to ease the transition. “In the backdrop of industry changes and slowing growth across the sector, the time taken for resolution of these, especially the new CEO appointment, will be key, added Dhasmana. Calling for more active investor engagement by the Board, the analyst said its commentary in Friday’s conference call with investors was hardly decisive, reflecting Sikka’s sudden exit. “We are encouraged by the Board’s endorsement of the strategy with the founders, suggesting little friction,” added the statement. In a related development, the company’s stock of Rs 5 face value, on Monday declined to Rs 893.85 after opening at Rs 929 on the BSE in pre-noon trading even after it had announced on Saturday the decision to buy back 11.3 crore shares at Rs 1,150 each via tender offer soon. The offer price at Rs 1,150 per share is Rs 226.90 more than Rs 923.10 per share closing price on Friday when it plunged 9.6 per cent after Sikka’s resignation spooked investors.