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 Shares in Infosys, the most widely held Indian stock, fell to their
lowest level in nine months on Thursday, the day after it announced
president and board member B.G. Srinivas had resigned.
The departure of Srinivas, the 10th senior executive to exit in the
last year, widens a leadership vacuum at Infosys as it searches for
a new chief executive. It also increases the chance the company will
break with tradition and hire an outsider for the job, analysts
said.
Srinivas was widely seen as a frontrunner for the top job among
internal candidates after Chief Executive S.D. Shibulal, one of
company's seven founders, said in April that he wants to retire by
January 2015 at the latest.
"With his (Srinivas') resignation, the impression is quite clear
that the company is going to get an outsider for the job," RK Gupta,
managing director of Taurus Asset Management, which owns Infosys
shares, told Reuters.
"With a large organization like Infosys you need new blood. Old
guards sometimes have a sense of lethargy."
A decision on the new CEO is likely to be made earlier than
expected, possibly during the July-September quarter, said two
people with knowledge of the matter. The sources declined to be
named as the selection process is confidential.
Infosys did not reply to a Reuters email seeking comment.
The company, which has been losing market shares to its rivals Tata
Consultancy Services Ltd and Cognizant Technology Solutions Corp,
did not give a reason for Srinivas' resignation in a stock exchange
filing.
Srinivas' resignation follows the departure of at least nine senior
executives who left since the company brought founder N.R. Narayana
Murthy back from retirement to help revive its fortunes in June last
year..
INVESTOR CONFIDENCE
Infosys was once a star performer in India's more than $100 billion
outsourcing sector, but the uncertainty at the top and its shrinking
market share have dimmed its status as the employer of choice for
young IT workers, with staff leaving at an unprecedented pace.
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Analysts said the company would benefit from swiftly appointing a
new CEO.
"They should announce the next CEO in one or two months to bring
some stability and boost investor confidence," said Sanjeev Hota,
assistant vice president of institutional equities at brokers
Sharekhan.
Infosys shares were trading down 7.2 percent at 0728 GMT,
underperforming the main Mumbai market index which was down 0.7
percent and the IT sector index, which was trading 2.8 percent
lower. The stock is down nearly 16 percent so far this year.
Some analysts said the stock was likely to remain under pressure
until the new CEO proved themselves capable of turning Infosys
around.
In a research report published on Thursday, Barclays analysts
Bhuvnesh Singh and Hitesh Das said the CEO selection process may
lead to "further management churn".
"We believe that the probability of an external candidate may
indicate that the company's problems are more deep seated than
earlier thought and that an external person is required to bring
significant changes within the organization," they wrote.
(Editing by Miral Fahmy)
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