Oppenheimer Backs Sikka
IT firm is a publicly listed co, no longer the founders’ co, says fund
Jochelle Mendonca & TV Mahalingam
Bengaluru: OppenheimerFunds, Infosys’ third largest institutional investor, which controls about 2.7% of Infosys shareholding, backed CEO Vishal Sikka and said the founders needed to accept that the IT firm was publicly listed and was no longer ‘their’ company.
This is one of the rare times that an institutional shareholder has come on the record to support a professional CEO in India, amidst concerns that the promoters of the company are upset with governance.
“As large, long-term investors in Infosys, we want to express our support for the management team of Dr. Vishal Sikka. There have been loud, cancerous rumours of intervention by non-executive founders in the management team,” Justin Leverenz, portfolio manager at Oppenheimer Developing Markets Fund, said in an open letter to Infosys’ board. Oppenheimer sent ET a copy of the letter.
“The bottom line is that, in our opinion, Dr. Sikka has achieved much in his tenure as the first nonfounder Chief Executive Officer. After many years of internal volatility and competitive underperformance, it is encouraging to see that Vishal has stabilised the core and articulated a clear — and appropriate — long-term strategy to help Infosys thrive amidst industry disruption,” Leverenz said. OppenheimerFunds Inc acts as an investment adviser to certain investment funds and accounts that collectively own about 2.7% of Infosys. The holding is valued at over $900 million.
“We would strongly encourage the Board of Directors to restrain divisions in the firm and contain inappropriate interventions by non-executive founders. Let Vishal do what he was hired to do, without distractions. And appraise him on his efforts,” reads the letter.
ET has reported that Infosys’ founders have been unhappy with the board and what they consider a violation of ‘core Infosys values’. ET has reported that the founders tapped a Mumbai law firm last year to evaluate a potential co-chairman for the board. But the idea fizzled out as non- executive chairman R. Seshasayee stepped down on July 28 as non-executive vice-chairman of Ashok Leyland — a post he had held since 2011 — to focus more on Infosys.
Leverenz also asked the board to clarify the role of the non-executive founders.
“With all deference to their enormous contributions, we also believe that non-executive founders need to come to grips with the reality that this is a public company. It is no longer their firm…. The Board needs to clarify the appropriate role of non-executive founders of the Company,” he added.
As of December 31, 2016, the nonexecutive founders (promoter and promoter group) owned 12.8% of the Company’s outstanding shares. Oppenheimer has been a longterm investor in Infosys, including during the 2012-2014 period when the company suspended its practice of giving guidance and faced a slew of management exits. Sikka was brought in to turn around the IT firm, which had lost its bellwether title to TCS.
“We have been significant investors in Infosys for more than a decade. During this period, we have witnessed patches of unusual turmoil in management and vision at Infosys, with share price performance signalling shareholder exhaustion with internal dissonance, management volatility and internal intrigue,” Leverenz added.