The timing of the letter recommending a buyback of shares worth ₹11,200 crore sent to the Infosys board by two former Infosys CFOs V Balakrishnan and TV Mohandas Pai, reeks of personal motives and amounts to pressure tactics, say analysts.

With first employees’ nod

The recommendation, which was reportedly meant to reinstate losing investor confidence, was also signed by DN Prahlad, one of the first employees of Infosys.

Rumours of a buyback first surfaced before Infosys announced the appointment of Vishal Sikka, two days before the company’s AGM on June 14.

“We were inundated with calls by media asking us about the buyback. And not surprisingly, the timing of this letter to the board happened on July 29, just one day before the EGM on July 30 where Vishal Sikka’s appointment was formalised,” said an Infosys spokesperson.

She further added that a long-term investor who always attends the company’s AGMs and EGMs, this time around pointedly told the board members during the EGM that they should consider buyback of shares.

While Pai could not be reached as he was out of the country, Balakrishnan said he did not want to comment on why he had made such a recommendation to the board.

Not driven by noble cause

“Why didn’t either Bala or Pai suggest buybacks when they were CFOs of the company, when they could have easily done it. Their motivations today are clearly not driven by the noble cause of adding to shareholder value,” said Sundararaman Vishwanathan, Manager Consulting, Zinnov, an advisory firm for global businesses. Large institutional investors such as UBS, Fidelity and Temasek are certainly not in a hurry to sell out, as they are invested in Infosys for the long term, he elaborated.

A corporate governance advisory firm in which former Infosys CFO Mohandas Pai is an investor said the IT major should not give any special consideration to the letter written by the former finance heads of the company. “I think Infosys should treat the letter written by former CFOs of the company as a request from investors than for the positions they held there,” Sriram Subramanian, Founder and Managing Director of InGovern Research Services said.

Failed to articulate strategy 

Subramanian pointed out that it was unusual for a company which has no debt to sit on such a huge cash pile.

He said one might question the timing of the letter but the fact was that Infosys had failed to articulate a strategy in this regard.

The whole premise of former Infosys CFOs writing a letter to the board asking for a buyback of shares to boost investor confidence is flawed and led by personal motives and emotions, observed Sanchit Vir Gogia, Chief Analyst & CEO, Grey Research.

Daljeet S Kohli, Head of Research, IndiaNivesh Securities, feels this is a case of pressure tactics to force Infosys to do something about the cash pile it has been sitting on for the last four years.

“A company would resort to buyback as the last resort only when it has exhausted every other option to grow,” he added.

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