Tech bellwether Infosys on Monday said it would voluntarily delist its American depositary shares (ADS) from Euronext Paris and Euronext London exchanges.
However, the company will remain listed on the New York Stock Exchange (NYSE).
The primary reason, said the company in a communiqué, for seeking the delisting is the low average daily trading volume of Infosys ADS on these exchanges, which is not commensurate with the related administrative requirements.
During fiscal 2013, the company delisted its ADS from Nasdaq and moved them to the New York Stock Exchange (NYSE), Euronext London and Euronext Paris markets. “The delisting and listing was made to leverage the Euronext partnership, since both the US and Europe are home to many of our investors, clients and employees,” the company then said.
Infosys on Monday said, during the five years post-listing on Euronext Paris and Euronext London, the average daily trading volume of the ADS was significantly lower than that on the NYSE.
When asked to comment on the rationale behind the delisting, a senior executive at Infosys said, “Poor investor participation for Infosys on Euronext was an issue. Also, handling investor relations in multiple geographies is a tough and expensive proposition. Therefore, the company has decided to focus on bourses in its home market and key customer market, ie; India and the US.’’
The proposed delisting is subject to approval from Euronext Paris SA and Euronext London Limited. There will be no change to the Infosys share/ADS count, capital structure and float post-listing, the company said.
Speaking to FC, Peter Bendor-Samuel (in pic) CEO of Dallas-based consultant and research firm Everest Group, said: “Infosys is finally taking some steps to uncomplicate their business. Delisting on the European exchanges is a no-brainer. Most of Infosys' investors are in India and New York and this will allow Infosys to focus on these key investors. The key to successful analyst relations is to understand the pyramid of influence and focus on the key investors. The market watches these key investors and takes its cues from them.
“By uncomplicating its listing structure, Infosys is making a sensible start on progressing down this path. Other benefits from this are some modest savings in overhead stemming from marginally reduced compliance cost. However, the key is that the analyst relations and senior management will be able to focus on the investors which matter. This increase in focus takes on more importance once one considers the increasingly complicated task of keeping investors aligned with the transition from a labour arbitrage-based business to a digital business. I do not anticipate that the delisting will have any material effect on Infosys clients’ expectations. If anything, clients will welcome the move.
“However, this is a non-event for the vast majority of the Infosys client base. As for employee morale, I don’t see this having a material effect, the employees are focused on market success and a full pay out on bonus. Many employees felt that previous management has kept margins high at the expense of employee variable compensation. When you have industry leading margins but don’t pay out on bonus, you discourage employee morale, the rest of the issues are just window dressing.’’