Infosys Founders Are Said to Plot Board Coup to Take Control

A group of Infosys Ltd. founders, led by N R Narayana Murthy, is marshaling support from investors to take back control of the Indian technology company by replacing several board members, according to people familiar with the matter.

The group aims to install co-founder Nandan Nilekani as chairman and engineer the exit of Chairman R Seshasayee along with some other directors, said the people, asking not to be identified because the talks are private. Murthy’s group is pushing for board members to begin stepping aside in the next few days, said one of the people. The discussions are extremely fluid and the plan may not succeed, the people said, noting that Nilekani, 62, has yet to give his assent for the board coup.

Murthy and the founder group have clashed with the board in recent months over the company’s performance, corporate governance and the compensation of former Chief Executive Officer Vishal Sikka. Those tensions ultimately led to Sikka’s exit last week, followed by a $4 billion drop in the company’s market value and downgrades from analysts.

Representatives of Infosys investors including Franklin Templeton and HDFC Asset Management Co. called for Nilekani’s return to the Infosys board on Wednesday. “The recent developments are very concerning to each of us,” the group wrote. They said Nilekani’s return would restore the confidence of stakeholders including customers, investors and employees and also “facilitate the resolution of contentious issues.”

It isn’t clear whether the investor group supports Murthy’s broader aims. Infosys said it would not comment on rumors and speculation; Murthy did not immediately respond.

Infosys shares advanced 2.2 percent in Mumbai on Thursday, the biggest gain in a week. The benchmark S&P BSE Sensex index rose 0.1 percent.

Infosys is struggling with infighting and seismic changes in the industry it helped pioneer. Growth in the technology services business has slowed amid rising competition and automation. Infosys and its peers also get most of their revenue from the U.S., where the Trump administration is changing policies they have used to service clients.

Nilekani, who has perhaps the highest profile among the founders, may be the most effective means for the founders to regain influence. He ran the company as chief executive for five years until 2007 before becoming co-chairman. He left Infosys in 2009 to join the government to lead the rollout of India’s biometric identity program, Aadhaar. He now plays a prominent role in India’s startup scene and has been an active venture investor.

“Besides proven track record as a successful CEO, Nilekani also brings in a neutral image, which will also go well with minority shareholders,” said analyst Sudheer Guntupalli of Ambit Capital Pvt. in a note on Wednesday. He hasn’t “sided with either parties of the battle.”

Nilekani, who couldn’t be reached for comment, may be reluctant for at least two reasons. Infosys faces enormous business challenges, including managing the board, finding a CEO, streamlining management and navigating an increasingly competitive IT services market. In addition, Murthy has come under fierce criticism for reinserting himself into the business after leaving — and Nilekani may be similarly targeted.

The founder group wants the eventual removal of all but three directors on the 11-member board, one of the people said. But the moves will take time since members are required to oversee audit and risk committees, among other responsibilities, the person said.

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