American Depository Receipts of Infosys Ltd. closed 1 percent higher on the New York Stock Exchange on Thursday after Nandan Nilekani, co-founder and former chief executive officer returned to the company as non-executive chairman of the board.
Brokerage houses view the comeback as a positive development.
We believe this brings immediate stability to the board and stems the crisis unfolding over the past six months that reached a fever pitch last week with the board's belligerent letter to the founder and the CEO's departure.CLSA Research
Uncertainties linger with respect to the next chief executive officer, consequent retention and change in the company's current strategy and if there was any wrongdoing by the previous board, CLSA pointed out. But the appointment of Nilekani brings credibility for clients, investors and employees and will, therefore, ease the process of addressing these issues, the brokerage house said.
According to Kotak Institutional Equities, Nilekani's appointment reduces the risk of more top management exits.
This development assuages concern of potential elevated employee attrition; exits will continue, though not at the same intensity as feared earlier thanks to the stabilizing impact of the new Chairman.Kotak Institutional Equites Report
Nilekani is likely to solely represent the founders' interests and this is likely to prevent any “overbearing influence” of founders on the management, Kotak said. The report further notes that the board needs to ensure the new CEO has sufficient independence.
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