Nandan Nilekani’s return to Infosys as chairman and co-founder NR Narayana Murthy exerting his power could amount to a change in control under Sebi regulations, requiring promoters to make an open offer, shareholder advisory firm SES has said.
The Bengaluru-based firm has been in the eye of the storm over the past few months, with the two sides —promoters and the earlier board of the company — clashing over issues such as corporate governance lapses and alleged irregularities in the acquisition of Panaya.
This resulted in Infosys’ CEO Vishal Sikka quitting on August 18 and chairman R Seshasayee and three other board members stepping down in the following week. Nilekani, also a co-founder, was then named the new non-executive chairman. “...It was accepted fact that founders/ promoters had relinquished control. Now with Nandan Nilekani back in saddle at helm of affairs as chairman and making changes (which is described as work in progress by NRN) would amount to control in terms of Sebi SAST Regulations?” SES said in a report.
It added that this may “amount to change in control and may require promoters to make an open offer”. Emails sent to Murthy and Infosys remained unanswered. SES explained that Murthy was able to get “his people” appointed on the board, forcing exit of other directors. “In SES’ opinion, this amounts to the right to appoint majority of the directors in any other manner. Whether it would be really a change of control will have to be decided by SEBI, which has all the powers to get to bottom of the matter and exercise its powers (duties),” the advisory firm said.
Besides, SES said the probe report on whistle-blower complaints of alleged irregularities in Infosys' $200 million-Panaya deal needs to be made public to ensure that Murthy does not lose credibility.
In June, Infosys said that an independent probe had cleared Infosys of any wrongdoing but Murthy insisted that the company make public the full report.
Infosys, under Seshasayee, had declined to make the report public. However, Nilekani has said he will study the issue to take an appropriate call. “SES is of the view that if the report is not made public in full, NRN will lose his credibility and prove that he was firing wrong shots ostensibly to hurt individuals he disliked and which undeniably caused irreparable damage to the baby he gave birth to,” SES said.
It added that making the probe report public “remains the pivotal point on which more than the board, NRN’s sincerity is on test”. SES pointed out that three of the board members — Seshasayee, Professor Lehman and Ravi Venkatesan —were present even when Murthy was on board.
“Should we agree with him and conclude that in his own (NRN) period board had people who were not competent, persons of doubtful integrity and lacked character or is it a case that these gentlemen were extremely good under NRN and after his departure they have lost all their virtues? A difficult call to make,” SES said. SES, in its report, highlighted that there was evidence that the decision to appoint Nilekani was taken outside the board meeting.
The strongly-worded report said Nilekani now faces the biggest test.