On August 1st, I landed at Bangalore to meet Vishal Sikka, the new CEO of Infosys for the first time at their sprawling campus. At noon, a select few of us gathered at the hallowed boardroom of Infosys, overwhelmed by its high ceiling, the teak oval table and the leather upholstered revolving chairs.
As I looked around, what particularly drew my attention in that room was a white wall adorned with framed photographs of all those distinguished men and women who were once members of the Infosys Board. There were neatly framed in three rows across ten columns. The top row had a picture of Ashok Arora, one of its elusive founders, who sat alongside the venerable Sushim Datta. Giving them company was HDFC Banker Deepak Satwalekar smiling next to former CEO Nandan Nilekani and the charming Rama Bijapurkar. Then, there was Phaneesh Murthy, once NRN's blue-eyed boy, and Ashok Vemuri, who has now taken Phaneesh's job at iGate. In the third row were the beaming pictures of two gentlemen - V. Balakrishnan and TV Mohandas Pai, both former CFOs who once aspired for Vishal Sikka's job.
I told a former colleague standing next to me, "What a remarkable bench Infosys had". And she said "Yeah, anyone of them could have made the cut". True that.
But to me, there was a little more. To see all of them, irrespective of stature, accomplishments, contribution and burnt bridges, placed on the same pedestal, reflected the company's large-heartedness, decency, culture and spirit of democracy.
Little did I or anyone in that room that afternoon realise that two of those men had already fired a fresh salvo even before Sikka’s assumed office. In a letter dated July 29, Bala and Mohan, two former CFOs (along with former Senior VP, DK Prahalad) proposed to the Infy board to do a Rs 11,200 crore buyback at 52 week high of Rs 3850 per share. They offered 3 reasons:
1. To correct a "dramatic valuation disconnect": To illustrate this point, the letter said TCS trades 22x compared to Infy's 15.6x.
2. To use cash effectively: Infosys is sitting on Rs 30,000 crore of cash and has not done any game changing acquisition so far.
3. To signal a buyback as boost of confidence in the new CEO.
Bala and Mohan are extraordinary professionals and played important roles in building Infosys. As investors they are well within their rights to ask Infosys for a buyback. And, it is up to the board and the new CEO to decide whether it wants to sit on cash or return it to shareholders.
Why Now?
To write a letter of this nature even before Sikka begins his job reveals an indecent haste unbecoming of two former CFOs. It lacks gratitude towards an institution that created them and their wealth. Had this letter been written by institutional investors offering this cold, calculated logic of price and timing, it wouldn’t have struck a wrong chord.
The letter also states and I quote, "The Board of Infosys had been highly conservative in the past and the continuation of such extreme conservatism at the cost of destroying shareholders wealth is not in the best interests of the company"
So these two gentlemen were now accusing the Infosys' board of being 'extremely conservative' and ‘destroying shareholder wealth’. Remember, this is the same board they were members of! Where was this concern for shareholder wealth when they were part of the company?
In the past, both Bala and Mohan (in their days as CFO) had adroitly defended the need for a high cash balance and celebrated Infy’s conservatism as a virtue especially in the context of acquisitions. To say now, that the same conservatism may destroy shareholder wealth, seemed self-serving and reeked of opportunism.
Being opportunistic is not illegal. But it lacks grace, it lacks basic decency and is devoid of the large heartedness that Infosys displayed in treating some of its employees even after they had burnt their bridges.
It is akin to seeking a higher share of the family property from an ailing parent. At least be decent and wait till he recovers before you seek an additional pound of flesh.
This would hurt Mr Murthy!
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