Shares of Infosys Ltd. plunged 9.56 percent on Friday, the most in over four years, after Vishal Sikka resigned as the managing director and chief executive officer of the country's second-largest software services company. The company has wiped out more than Rs 22,400 crore in market value, according to Bloomberg data.
Pravin Rao, currently chief operating officer, will be the interim CEO and Sikka will take over as executive vice chairman until a permanent replacement is hired, the Bengaluru-based Infosys said in a statement to the exchanges.
Market experts that BloombergQuint spoke to described the development as a strategic loss for Infosys. The company’s board was scheduled to meet on Saturday to finalise a long awaited buy-back, which some had hoped would help support the Infosys stock.
Losing Vishal Sikka is strategically a big loss, a fund manager at a domestic insurance firm which holds Infosys stock told BloombergQuint speaking on the condition of anonymity. But from a stock perspective, this is a ‘neutral event’ because Vishal Sikka's tenure didn’t lead the company to great highs either, this fund manager added.
Broking firm IDBI Capital said the development is negative for the outsourcing major.
We are reviewing our buy recommendation.IDBI Capital Research Note
The company now looks like a driverless car and needs a strong hand to stay the course, said a fund manager at an asset management company, also requesting anonymity. If one of the old promoters like Nandan Nilekani takes over, it will restore faith, this person said.
Sikka took over as MD and CEO of Infosys on August 1, 2014. Under Sikka, Infosys’ revenues have risen to Rs 68,484 crore and profit rose to Rs 14,353 crore. Infosys shares have gained 22 percent over Sikka’s tenure, outperforming the S&P BSE Information Technology Index, which has risen 6.3 percent during the period.
Infosys will find it difficult to attract external talent to replace Sikka, broking firm Batlivala & Karani Securities said in a note. It said Nilekeni’s comeback may provide the stock temporary respite but it may not necessarily lead to operational outperformance.
If dividend + buyback amount is not raised in tomorrow’s board meeting, then stock may correct further.”Batlivala & Karani Securities Note
On Friday, the stock's trading volume was 23.3 times its 20-day average as of 10:20 a.m. It has fallen 4.1 percent so far this year, compared to an 18.58 percent gain in the benchmark S&P BSE Sensex.