Bangalore: Infosys' former directors T V Mohandas Pai, V Balakrishnan and D N Prahlad have asked the nation's second-biggest software firm to buy back shares worth Rs 11,200 crore to boost stock's value.
The former executives are seeking Rs 3,850 a share, which is a premium of 7.7 percent over the company's closing price of Rs 3,574 on the BSE on Wednesday.
Balakrishnan, who resigned from the company's board in December, Pai, who left the board in 2011, and Prahlad, a former senior vice president, on July 29 wrote to Infosys Board saying the share buyback will help check the "asymmetry of information" between management and investors.
"There is a dramatic valuation disconnect in the market place and this needs to be corrected," the three wrote.
When contacted, an Infosys spokesperson said: "The Infosys board and management receive requests on a variety of subjects from shareholders and investors on an on-going basis. "These are addressed by the board and the management in due course. In this particular case, we have received this request only from three retail investors."
The company, the spokesperson said, will immediately inform the regulatory bodies and shareholders if there is any development that will impact its shareholders.
The demand for a share buyback comes at a time when Infosys is in the middle of the biggest leadership transition in its history. The letter was written just two ahead of former SAP AG executive Vishal Sikka taking charge as the first non-founder CEO at the company.
All founders, led by N R Narayana Murthy have either retired or have taken up non-executive roles with the board.
In a letter to Infosys Board, the three former executives said there is a need "to announce a large and consistent buyback programme to show confidence in the management and the business model".
They proposed Infosys should announce an ongoing buyback program of as much as 40 percent of the previous year's profit "on a consistent basis."
Balakrishnan was the chief financial officer at Infosys for six years until October 2012. He later was chairman Lodestone Holding AG, a consultancy based in Switzerland. Pai was the head of human resources development before he left in June 2011. He had earlier also served as CFO.
It could not be immediately ascertained whether the three former executives continue to hold stakes in Infosys.
"Infosys should immediately buy back its shares to the tune of Rs 11,200 crore (which is roughly 40 percent of the existing cash and cash equivalents)," the letter said.
When contacted Balakrishnan confirmed writing the letter, but refused to disclose the contents.
Pai declined to comment while Prahlad could not be contacted.
Infosys shares jumped as much as three percent in Mumbai trading today before closing at Rs 3,574.70, up Rs 70.45 or 2.01 percent over pervious day.
The trio want the buyback at the 52-week high price of Rs 3,850 per share. They also want Infosys announcing an ongoing buyback programme to the extent of 40 percent of the previous year's net profits on a consistent basis.
The letter said Infosys believed in increasing shareholders' wealth but in the past three years its stock has heavily underperformed and it has "resulted in a wealth destruction".
"Now, with the management exuding confidence and the Infosys' share price still depressed, there is a need for the Board to announce a large and consistent buyback programme to show confidence in the management and the business model, going forward," it added.
After a series of top level exits, Infosys top management has undergone a change recently, with Vishal Sikka assuming charge of its CEO and MD replacing S D Shibulal who retired. Sikka is the first non-founder to head the company.
