Infosys Technologies :: Expansion of the Infosys board on expected lines-- JP Morgan

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Infosys Technologies
Neutral
INFY.BO, INFO IN
Expansion of the Infosys board on expected lines;
handling potential near-term management attrition is
crucial; retain N


 Expansion of the Infosys board on  expected lines: Infosys announced
the appointment of three new executive directors and one non-executive
director  to  its  board  on  Saturday  (June  11).  V.  Balakrishnan  (Chief
Financial  Officer),  Ashok  Vemuri  (head  of  BFSI,  Infosys’  largest
vertical accounting for ~36% of total revenues), and B.G. Srinivas (head
of  manufacturing,  Infosys’  second-largest  vertical  contributing  about
20% of total revenues) will be the new executive directors on the board
of  Infosys.  This  is  a  development  in  line with  our  expectations.  Ann
Fudge, who also sits on the board of Unilever, GE and Novartis, will be
a non-executive (independent) director effective October 1, 2011.
 One  high-level  departure  confirmed: Management  confirmed  that
Subhash Dhar, the head of business innovation (horizontal), has decided
to  leave  the company  after  over  14 years  with  the  company.  Notably,
Subhash  Dhar  and  Chandrashekar  Kakal (the  head  of  business
operations) had been inducted to the executive council (EC), along with
the three newly appointed directors in 2007.
 The  appointment  of  the  Chief  Operating  Officer  (COO)  is  pending
and we watch out for this: This may not be an immediate appointment.
Traditionally,  the  COO  at  Infosys  is  viewed  as  the  CEO  designate and
we would be interested to understand how Infosys positions this role.
 Also, an  expansion  of  the  company’s  executive  council  (EC)  is
imminent: Currently,  the  only  member  on  Infosys  EC  (who  is  not  a
director) is Chandrashekar Kakal. We expect automatic inclusions of the
other  primary  vertical  heads  into  the  executive council  (hence,  Pravin
Rao – head  retail, CPG, logistics & healthcare, and Prasad Thrikutam –
head  energy  &  utilities,  communications  and  services  could  be  strong
candidates  for  inclusion).  There  could  be  added  representations  from
heads  of  business  transformation,  sales  and  marketing,  and  support
functions such as HR.
 Investment  view.  Stay  Neutral  though  valuations  at  <20x  FY12E
provide  downside  support: Restructuring brings in its wake high-level
departures, which  we  believe  are inevitable.  If  prudently  handled,  this
should  not  be  of  much  concern.  How  Infosys  manages  the  likely  nearterm pain is key.