Unfazed by Infosys founders led by NR Narayana Murthy publicly raising corporate governance issues, investors continue to pump money in the firm. In fact, domestic mutual funds and insurance companies took it as an opportunity to further enhance their shareholding.
On an aggregate, the mutual funds and insurance companies increased their shareholding in the company from 18.68 per cent in December 2016 to 20.13 per cent in March 2017.
While foreign portfolio investors reduced their holding from 39.02 per cent at the end of December 2016 to 38.31 per cent in March 2017, Oppenheimer Funds (the largest FPIs in the company) that backed Vishal Sikka and the Infosys Board (when founders raised their concerns) increased its holding during the March quarter to 2.36 per cent from 2.13 per cent at the end of the previous quarter.
LIC, the largest institutional investor in the company, also raised its holding to 7.03 per cent at the end of March quarter from 6.6 per cent held in December.
Mutual Funds, that have been continuously raising their holding since the appointment of Vishal Sikka as the CEO in June 2014, continued with the same and increased their holding to 8.33 per cent at the end of March 2017, up from 7.42 per cent in December 2016. Over the last three years, MFs have nearly doubled their stake in Infosys from 4.58 per cent in March 2014 to 8.33 per cent in March 2017, thereby reinstating their faith in the current management.
The head of a leading mutual fund that has invested in the company said: “Institutional investors feel that Sikka is doing a good job and he enjoys their confidence. While the founders are questioning Sikka on the issue of severance package and high salary, we feel that it is not such a big issue and it was approved by the board…”
In February 2017, Murthy had raised concern over “the drop in corporate governance standards” at Infosys. Further in an interview to The Economic Times, he cited two specific issues — the Rs 17.38 crore severance package to Bansal, after he quit in October 2015; and the $11 million
(Rs 73 crore) compensation for Sikka for 2017. Some other founders also hinted that the $5.25 billion (Rs 36,500 crore) cash, lying idle with the company, may be used for higher dividend payout or to buy back shares.