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Someone knew Narayana Murthy is coming back and traded on it

Yesterday, when the Sensex was down 455 points, Infosys an index stock was up 3.32% while TCS and HCL Technologies were flat. On Saturday, Infosys announced that NR Narayana Murthy would come back as the executive chairman. A case of insider trading? We will never know because Infosys is a holy cow and there will be no probe

On Saturday, Infosys has announced that its main founder NR Narayana Murthy who was on a retirement, will be returning to the company as executive chairman of the board and as an additional director for five years beginning from 1 June 2013. It also said that Rohan, his son, will be joining the $7 billion company as his father’s executive assistant. This is strange because Mr Murthy is widely seen as a professional manager, who once headed a corporate governance committee of Securities and Exchange Board of India (SEBI). In addition, Rohan was never known to be interested in running Infosys.

 

More intriguingly, while the press statement by Infosys was released on Saturday, yesterday the BSE Sensex tanked 455 points, or 2.25%, but Infosys, a Sensex stock, actually rose by as much as 3.32% during the day.
 


As a matter of perspective, this was the highest percentage decline in the Sensex in 14 months and the highest rise for Infosys in one and half months, both happening on the same day! Did all software stocks rise yesterday? No. Tata Consultancy Services (TCS) and HCL Technologies were flat. Worse, ever since Infosys crashed by as much as 20% on 12th April, after declaring poor results and muted guidance, there has not been single positive factor that could drive the shares up. The stock has been moving sideways in a narrow band. There was absolutely no reason for the stock to rise yesterday. No material information was released to the public.

 

Clearly, someone knew that Narayana Murthy is coming back and that many investors will see this as a positive development. There is a prima facie suspicion of insider trading.

 

Two block trades did take place on the National Stock Exchange (NSE), according to web portal moneycontrol.com. One block deal took place on NSE at 15:28 hours, or two minutes before market closing. Another block deal took place at 15:18 hours, or 12 minutes before market closing. The value of these deals were Rs5.77 crore and Rs6.25 crore, respectively.

 

While taking over an executive chairman, Narayana Murthy said, “This calling was sudden, unexpected, and most unusual. But, then, Infosys is my middle child. Therefore, I have put aside my plans-in-progress and accepted this responsibility. I am grateful to Mr KV Kamath—the chairman, the board, and every Infoscion for giving me this opportunity. I intend to do my best to add value to the Company in this challenging situation.”

 

Amazingly, just last month, he had denied the possibility of returning to Infosys. When the Mint newspaper had asked him about it, Mr Murthy said, “I think as I said, sitting where I am, looking at the data, I don’t see that happening. I think it’s all speculation.”

 

According to the press release, Mr Murthy will be earning a token salary of Re1 only.

 

Infosys said, “In order to function more effectively Mr Murthy intends to create the chairman’s office to assist him during his tenure and has requested the board to permit him to put together a team for this function. The team will include his son, Dr Rohan Murthy, as Mr Murthy’s executive assistant.”

 

After the company’s March quarter results, Nomura Research had said that in the light of a lower-than expected fourth quarter performance by Infosys, it expects consensus earnings, multiple downgrades, and management’s outlook of pricing and margin pressure in the near term.

 

Infosys reported net profit of Rs2,394 crore for fourth quarter of FY2012-13, registering a marginal 3.4% year-on-year (y-o-y) growth and 1.1% sequentially, as per Indian accounting standard. Its consolidated revenues for the quarter under review, however, rose 18% y-o-y to Rs10,454 crore and flat (0.3%) sequentially.

 

Infosys’ management indicated to Nomura that there were delays in deal ramp-ups and deal closures in 4Q. While 4Q volume growth at 1.8% q-o-q was better than 3Q (1.5% q-o-q), pricing decline of 0.7% q-o-q and cross currency impact of 0.4% q-q impacted revenue growth.

 

On pricing, the management had stated, “There is pricing pressure in the non-discretionary portfolio (63% of revenue) and management expects this to get worse in the near term.”

 

According to Nomura, Infosys’ management expected the environment to be challenging and was finding it difficult to predict margins in the short-term as there are unknowns like pricing, cost of hiring onsite given likelihood of visa shortage and investments required to be made to push growth.

 

Coming back to the appointment of Narayana Murthy, veteran banker KV Kamath would step down from his position as chairman of Infosys and take up the role of lead independent director. In the statement, Mr Kamath said, “The board has taken this step keeping in mind the challenges that the technology industry and the company faces and in the interest of all stakeholders, particularly shareholders large and small, who have asked for strengthening of the executive leadership during this challenging time. Murthy’s entrepreneurial and leadership record and the long experience he has had as a technology pioneer makes him eminently qualified to lead the company and provide strategic direction at this point in time.”

 

S Gopalakrishnan, who was serving as the executive chairman, would be re-designated executive vice chairman and would primarily focus on key client relationships and broader industry issues, the statement said.

   

SD Shibulal would continue to be the managing director and CEO of the company, it said.

   

In August 2011, Kamath was appointed chairman, succeeding Murthy, who was made the chairman emeritus post his retirement. Also, the then CEO and MD S Gopalakrishnan (Kris) was elevated as the executive co-chairman, while COO SD Shibulal filled in Kris' position.

 

It remains to be seen how the market reacts to Mr Murthy’s appointment as an executive chairman. In five out of last eight quarters, analysts have been consistently way off the mark in estimating Infosys's results despite continuous interaction with the management. However, this stunning saga not only shows the quality of analysts but also shows how things have changed at Infosys. (When will analysts be realistic in their expectations about Infosys?)

 

There was a time when Infosys set the standards on corporate reporting in India. It was the first company to start reporting quarterly results much before it became mandatory. Also, for years, Infosys surprised the market with its conservative guidance and superlative actual results. It believed, in the words of founder NR Narayana Murthy, in the principle of under-promise and over-deliver.

 

Now, since Narayana Murthy is back at the helm, it would be interesting to see if he would be able to keep his words again.

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COMMENTS

AUROTTAM KUNDU

2 years ago

Here is a little piece of news that Infosys might not like but is true.This comes from an ex-Infosion.Did Athira Radhakrishnan ,daughter of the then Kerala Home minister (before Chennithala) work for Infosys ? Was she in the HR department? Well she might be deserving but she hardly came to office and enjoyed nice perks of a being the daughter of a powerful daddy.Sorry Athira,nothing personal.

Dekho ji.com

3 years ago

This is a perfect case of insider trading and no MSM media picked up this case. Strange are the ways of our media.

shivkumar

3 years ago

We all were made to believe he is a different Murthy, but like others he also turned out to be a Mitti ki Moorti.

praveenks

3 years ago

Could Money life or anybody else point towards the link/url of the the block deals reported to have been taken place, I've been trying to verify and unable to find the same on moneycontrol.com.

Historical data of NSE website is not showing any data of such kind as reported here.

Jose Koshy

3 years ago

Wow...Look at it..Infy opened 8 % up...so insiders did know about it and would have made a Killing ! Will Moneylife file an investigation with SEBI on this..would be great to show how people play around in India with even a Co. like Infosys that claims to be above board on Corporate governance....Is there a Gurunath Meiyappan / N Srinivasan story here ?

Gool Daruwalla

4 years ago

Isn't it that block deals are suppossed to happen between 9.15am and 9.45am in the first hafl hour of trading at the exchange. Why did this block deal take place at the fag end of the session?

SUNIL KUMAR HEMNANI

4 years ago

We must understand that Mr Murthy is coming back in an attempt to salvage a company in distress.I feel the situation is bad and we will realise just how bad it is when the results are announced this qtr.But what i find intriguing is that Why is Mr Murthy asking for 5 years ??? I would expect that he helps them to find a new younger man with a TRACK record (on MERIT )maybe his son is a good idea really .But why not give him the top job ?? The TERM of 5 years IS DISTURBING REALLY , it should not be so long .Prepare for a high volume trading in the days to come .

Mitranand Financial Services Pvt Ltd

4 years ago

Have you noticed result day movement of Infosys in last 6 quarters? and all has started after Kamat came in...

REPLY

Dayananda Kamath k

In Reply to Mitranand Financial Services Pvt Ltd 3 years ago

on the day kv.kamath became chairman i have told he will destroy infosys. because banking in india is destroyed by his icici bank.

VikashKumar

4 years ago

You hit the nail and none of the MSM will ever raise this issue. You know why? CNN-IBN managed CNBC have first preference when Infosys declare result. So they have to give them back some by not raising such thing on their prime channel. This should not go unchallenged and ugly side of so called ethical Companies should be exposed. This company is the biggest land grabber and in the name of job they give them a job of sweeper or office boy.Visit Infosys campus in Bangalore they have around 30 building with just 2 floor. Can someone ever ask them why it is so???
Nandan left Infosys for Red Bacon light. After they became 1 Billion company their focus completely changed from Employee friendly to BSE friendly that's when Mohan Das Pai took over HR after Hema left. Hema was one of THE BEST HR but these selfish guys made her life miserable. Now this old man care only and only about his stocks which he is holding. One the biggest reason why he has joined. Other is biggest threat from Cognizant. Congnizant was always aspired to took over Infosys. They even implemented some of the HR polices of Infosys.
KV Kamath is other selfish member of this Infosys board.
You must be aware that Infosys employee salary must be ONLY with ICICI bank. Check with other counter parts they give their employee option to have salaried account with any bank of their choice.
Trust me even GOD can not change Infosys fate forget about Murthy. He is old man now and this company needs fresh blood.

I am EX-INFOCIAN who has seen rise and fall of Infosys

Anil Agashe

4 years ago

Murthy is responsible for decline of Infy. Appointing Kamat was huge mistake, making Shibu Lal CEO was a comedy.
Murthy talks about ethics. Said his children will never join Infy. Now what has changed?
Murthy and his co-founders have sold majority of their holdings and made money. Fine no issue they created a over valued company. But to me it was an acknowledgement by them that their business model has no future.
Like politicians he also seems to believe he is the best and so is his son.
Murthy to me was always over rated. I respect him for what he did, but I distrust an entrepreneur who sales his own dream company. if he says he cannot find anyone able to lead the company it is pathetic admission of succession process.
I remember speaking to one founder who I asked is not succession part of strategy for a company and he said no not at all! he was correct! At least for Infy!

PATTABHI

4 years ago

Expecting Miracles from NRN? Dynasty is perfectly acceptable, I suppose, where you have a love and respect for - and confidence in the abilities of - the Monarch..All our good wishes to NRN !

Sohil

4 years ago

STarting from scratch is different think.There is fire in your belly to prove something.Now just because the future line doesn't perform and you make a come back doesn't excite me personally when you are thrown to number 3 company in its space.
Re-entry of Mohandas Pai would had been a better prospect for INFY than NM.

Ravi Shyam

4 years ago

As always ML addresses the questions of what if, with what is.
That we are in world of archives is amply borne out by some brilliant anecdotal references.
ML rewards its readers with an analysis that clearly and deftly demonstrates its knowledge of the company and its impeccable past.
The surgical precision of the questions raised in the present scenario are so pertinent that it would be pity to let go of any wrong doing.
Debashis and Sucheta have the uncanny knack of asking the tough questions, now lets see who has the canny courage to take this head-on and not resort to soft options.

Gopalakrishnan T V

4 years ago

Insider trading is very common in India and many make hell of a money. Only retail investors who invests based on Govt's reforms agenda which is not there actually, expert's comments which are nonsense,and market rumors from rumor mongers who have their own axe to grind by spreading some baseless news to hoodwink the investors suffer in the market and they have no exit options without suffering heavy losses. Whom to believe in this country where cheating, aggressive pricing out of greed without any checks and balances, doing any kind of business without any ethics or principles,rampant corruption is the major question lingering in the minds of middle class and below.

Vinay Isloorkar

4 years ago

1.6

There is every possibility that Narayan Murthy, the demi God,will throw it all away in his second innings. As much as business, in general has got delinked, from politics, large organisations are juggernauts that cannot be veered by individual/s. Nandan Nilekani, the poster boy, has morphed into a punching bag. Murthy and his cub should watch out for the same fate!

Infosys re-appoints Narayana Murthy as executive chairman

The reshuffle also marks the entry of the next generation of Infosys founder with Murthy's son, Rohan, joining the over $7 billion firm as his father’s executive assistant

In a major top management reshuffle, Infosys on Friday said it has re-appointed N R Narayana Murthy as executive chairman and additional director with immediate effect.

   

The decision was taken at a board meeting held earlier in the day; Infosys said in a statement, adding the appointment will be with effect from 1 June 2013.

   

Veteran banker KV Kamath would step down from his position as chairman of the board and take up the role of lead independent director, it added.

   

“The board has taken this step keeping in mind the challenges that the technology industry and the company faces and in the interest of all stakeholders, particularly shareholders large and small, who have asked for strengthening of the executive leadership during this challenging time,” Kamath said.

   

Murthy’s entrepreneurial and leadership record and the long experience he has had as a technology pioneer makes him eminently qualified to lead the company and provide strategic direction at this point in time, he added.

   

S Gopalakrishnan, who was serving as the executive chairman, would be re-designated executive vice chairman and would primarily focus on key client relationships and broader industry issues, the statement said.

   

S D Shibulal would continue to be the managing director and CEO of the company, it said.

   

In August 2011, Kamath was appointed chairman, succeeding Murthy, who was made the chairman emeritus post his retirement. Also, the then CEO and MD S Gopalakrishnan (Kris) was elevated as the executive co-chairman, while COO SD Shibulal filled in Kris' position.

   

The re-shuffle also marks the entry of the next generation of Infosys founder with Murthy's son, Rohan, joining the over $7 billion firm as his father’s executive assistant.

User

COMMENTS

Suiketu Shah

3 years ago

Infosys as a family-led business wl run much better than "professional managed" business it was for last 2 yrs.

OMCs hike petrol price by 75 p, diesel by 50 p; LPG cut by Rs45

The increase in petrol price is the first in three months, the last hike being on 1st March. For diesel, this is the fifth increase in rates this year

The government on Friday raised the price of petrol by 75 paisa per litre and diesel by 50 paisa a litre as the rupee hit 11-month low making oil imports costlier.

 

The increase in rates, which are excluding local sales tax or VAT, are effective from Saturday, Indian Oil Corporation (IOC), the nation's largest oil marketing company, said.

 

Petrol price in Delhi has been hiked by 90 paisa to Rs63.99 a litre from Rs63.09, while diesel will cost Rs50.25 per litre as against Rs 49.69 earlier.

 

Also, the oil marketing companies (OMCs) cut price of cooking gas (LPG) that consumers have to buy beyond their quota of nine subsidised cylinders in a year, by Rs45 per bottle.

 

Non-subsidised domestic LPG in Delhi will now cost Rs802 per 14.2-kg cylinder as against Rs847 currently.

 

The increase in petrol price is the first in three months, the last hike being on 1st March. Since then, petrol prices had been cut four times on falling global oil prices.

 

For diesel, this is the fifth increase in rates this year.

 

State-owned oil firms had been in January authorised to raise diesel prices by up to 50 paisa per litre every month till entire losses on the fuel are wiped out. Diesel price was last hiked by 90 paisa a litre on 11th May after the companies skipped raising rates in April to avoid troubles for the government during the Budget session of Parliament.

 

Petrol in Mumbai will now cost Rs70.68 a litre as against Rs69.73 earlier, while diesel prices have been raised by 62 paisa to Rs56.66.

 

“Prices of petrol were last revised downwards on 1st May by Rs2.50 per litre (excluding state levies). The current increase is required mainly due to depreciation of rupee from Rs54.26 to a dollar to Rs55.32 per dollar,” IOC said.

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