The return of co-founder Nandan Nilekani to Infosys as chairman is being seen as a big positive for the country's second largest software services exporter, particularly in the wake of the sudden resignation of Vishal Sikka as MD and CEO and the allegations and counter allegations between the board and founder N.R. Narayana Murthy over corporate governance, which had rattled the markets.
On Thursday evening, Infosys named Nilekani, the company's co-founder and former CEO as non-executive chairman effective immediately. R. Seshasayee, chairman of the board, along with Sikka, Jeffrey Lehman and John Etchmendey, all stepped down from the board, while Ravi Venkatesan also stepped down as co-chairman.
Markets, which opened after a long weekend, cheered his appointment; Infosys shares rose near 4 per cent to Rs 945 in intra-day trading on Monday.
Nilekani was CEO of Infosys between 2002 and 2007 and analysts say his return will help the once bellwether rebuild itself.
“This will be a key positive for restoring calm after the storm given Nilekani's neutral, consensus-builder image,” said Sudheer Guntupali, analyst at Ambit Capital.
Not only does he have business acumen, but also his relationship management ability will help Infosys, in the wake of the crisis, say analysts.
“CEO change and subsequent uncertainty in a people-intensive business like IT services negatively impact client relationships and trigger huge senior employee attrition. However, we expect Nilekani's comeback to limit the damage on both these fronts,” added Guntupalli.
Identification of a new CEO, rebuilding an independent and strong board, reviewing technology strategy and effectiveness of initiatives undertaken in the last three years and establishing a structure to take inputs from all shareholders, including founders, and ensuring harmony among all stakeholders will be among Nilekani's key priorities.
While these tasks and priorities will be closely monitored over the coming days and months, his appointment marks the return of the “stabilising force” and assuages concern of potential elevated employee attrition says Kawaljeet Saluja, analyst at Kotak Institutional Equities.
“Nilekani enjoys confidence and respect of employees and investors. Infosys will significantly benefit from his pragmatic approach, ability to keep the team together and depth of technology,” added Saluja.
Despite the quick steps to bring in stability to the organisation, the real challenge for Infosys lies ahead, say analysts.
“Though Nilekani will help with the CEO succession and lay out the initial version of the updated strategy, real challenge for Infosys will be the execution of that strategy once the new CEO formally takes over,” said Kuldeep Koul of ICICI Securities.
Koul feels the business is likely to have continued into the second quarter, but long-term trends will depend on the appointment of the new CEO and constitution of the board.
Saluja of Kotak, meanwhile, believes it will take some time to find the new CEO and for him to settle down and therefore some loss of momentum is inevitable in the near-term.
