Angel Broking has maintained its “buy” rating on shares of Infosys ltd with a target price of Rs 1,249 after the company provided clarifications on the ongoing concerns over corporate governance on the board.
“The board has given a clear message that the standards of governance and transparency will continue to be upheld at Infosys, admitting to certain lapses that have happened,” Angel Broking said in a note. “We strongly believe that the company should continue to deliver industry lead performance, driven on ethical ground,” the brokerage and research firm added.
Infosys shares were trading firm, up 0.7% at Rs 994 on BSE. The benchmark BSE Sensex was marginally down, falling 0.15% to 28,296 points.
Earlier this week, Infosys board and management made frantic efforts to calm the nerves of the investors and the public yesterday over corporate governance concerns by laying threadbare its responses to all the issues recently raised by the founders, including CEO Vishal Sikka’s compensation, former CFO Rajiv Bansal’s severance pay, appointment of independent directors, and allocation of capital.
Non-executive Chairman R Seshasayee, in the first press conference since the news of the rift between the founders and the company management and board broke, tried to dispel all the allegations of misgovernance, saying that CEO Vishal Sikka’s compensation was fixed on the basis of the global benchmarks. However, the company, for the first time in the ongoing tussle, admitted that it might have erred in awarding a high severance package to ex-CFO Rajiv Bansal.
You may also like to watch:
Infosys board responds to differences. Details here. pic.twitter.com/QnZQQFYtCj
— CNBC-TV18 News (@CNBCTV18News) February 15, 2017
“The board has… admitted that the severance package was arbitrary and that was unlikely to repeat (it) as requisite processes and checks were in place on the subject,” Angel Broking said.
As for the issue of allocation of funds amid calls for a share buyback to utilise the idle cash, Angel Broking seemed to support Infosys’ current position. “Traditionally, Infosys has never been too aggressive on dividend payouts or buybacks as they were typical signs of a company not having enough investment and growth avenues,” it said, adding, “Both Seshasayee and Sikka have confirmed that the primary focus of the company continues to be growth and transformation and that will drive the decision to use up the cash pile in the books.”