Srini’s exit costs Murthys Rs 647 cr, Nilekanis Rs 475 cr
May 29 2014
Investors lose Rs 14,237 cr as Infy hits 9-month low
The stock crashed reacting to the resignation of Infosys president and board member BG Srinivas a day earlier. Srinivas' is the tenth senior level exit from the management since the return of co-founder Narayana Murthy at the company’s helm a year ago.
Other Infosys co-promoters too suffered severe erosion of wealth, with Nandan Nilekani’s family losing Rs 475 crore, Kris Gopalakrishnan’s family losing Rs 485 crore, K Dinesh’s family losing Rs 357 crore and SD Shibhulal’s losing Rs 313 crore.
Together, the Infosys promoters, who collectively hold 15.9 per cent in the company, lost Rs 2,268 crore worth of wealth in a single day. The Murthys hold 4.5 per cent stake in Infosys, while the Nilekanis hold 3.34 per cent.
BG Srinivas’ resignation, will be effective from June 10, four days ahead of firm’s annual general meeting (AGM) on June 14.
Infosys’s total market capitalisation fell by Rs 14,237 crore, as the stock closed at a 9-month low. Thursday saw Sensex losing 322 points to close at 24,234. Infosys contributed 56 points to Sensex’s fall, though there were other big losers, which contributed 34 points to the drop in Sensex and banking and financial sector shares such as HDFC, HDFC Bank and ICICI Bank, which together contributed to 74 points drop.
Barring few, most brokerages remained neutral to positive on the Infosys stock, but they see near-term weakness in the stock’s valuation.
Amid heavy volumes, the scrip settled Thursday’s trade at Rs 2,924.30 on BSE, down 6.55 per cent. On NSE, it fell 6.57 per cent to Rs 2,924.50. Some weakness was also observed as the stock turned ex-dividend for the final dividend of Rs 43 per share for FY14.
“We view the management exits at Infosys negatively and continue to prefer HCL Technologies, Tech Mahindra and TCS to Infosys among our buy recommendations,” said Ashwin Mehta of Nomura India.
A total of 55.72 lakh shares exchanged hands on both BSE and NSE, the highest since March 13, when then CEO SD Shibulal warned of slow growth in the initial PAT of FY15.
Infosys has been looking for a potential CEO to replace Shibulal next year. Srinivas, a non-promoter, was among those potential candidates.
“The exit indicates nearing closure on selection of a CEO candidate. We expect Infosys’ board to consider a young leader with longer duration in the CEO’s role. The presence of Mr Narayana Murthy will help in seamless transition. Infosys is nearing the end of its restructuring process that started a year ago. Hence, we see near term weakness as a buying opportunity,” said Shashi Bhushan of Prabhudas Lilladher.
Barclays believes that the CEO selection process could lead to further churn within the company, which it feels will weigh on the stock in the near term.
“A speedy decision for selecting the new CEO would be the first positive step to allay investor concerns on succession,” said Bhuvnesh Singh of Barclays.