Infosys shares cut losses on company’s denial of founders’ stake sale report but still deep in red

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Updated: Jun 09, 2017 1:18 PM

Infosys has denied the news report of the founders planning to sell their entire 12.75% stake in the company over displeasure with the current management, and has said it has no further information in this regard.

Infosys has denied the news report of the founders planning to sell their stake, and has said it has no further information in this regard. (Image: Reuters)

Infosys Ltd’s shares partially recovered from the day’s lows but were still among the top losers on the BSE Sensex after the company denied the news report that the original founders are planning to sell their entire 12.75% equity stake and sever their all ties with the firm after a bitter feud with the current management over corporate governance.

“Infosys would like clarify reports in the media speculating on plans of stake sale by the promoters. This speculation has already been categorically denied by the promoters. The company further reiterates that it has no information on any such development,” the company said in a statement issued on Friday morning to quell investor fears. However, there was no word yet from any of the founders themselves.

Infosys shares were trading down 1.7% at Rs 940 on BSE, after falling as much as 3.5% to the day’s low of Rs 923.05 in the morning trade. Infosys was the second largest contributor to the losses on the benchmark BSE Sensex after ITC.

The Times of India reported that founders N R Narayana Murthy, Kris Gopalakrishnan, Nandan Nilekani, S D Shibulal and K Dinesh are planning to cut all their ties with the company they founded back in 1981, which went on to become the flag-bearer of Indian IT success story, as they are unhappy with the way the management led by CEO Vishal Sikka and the board led by Chairman R Seshasayee have operated Infosys after the founder exited three years ago. The report did not mention about the other two of the seven original founders N S Raghavan and Ashok Arora.

Stock call

Infosys shares, which have vastly underperformed the benchmark indices in the last 1-2 years, more so in the face of the recent challenges being faced by the Indian IT industry in the form of visa restrictions in the US and other nations, shrinking IT spends by clients and narrowing margins, have been rated at ‘buy’ by several brokerages. While the BSE Sensex has returned 17.86% in the last two years and 15.51% in the last one year, Infosys shares have lost 4.38% in two years and 22.77% in the last one year alone.

HDFC Institutional Research put a target price of Rs 1,130 on Infosys shares in a report dated 13 April 2017 on the back of steady operational performance; automation-led cost optimisation; acceleration in large deal wins going ahead; moderation in attrition; and sub-vertical strategy in place.

Motilal Oswal has a target price of Rs 1,200 on Infosys shares, implying about 29% upside, despite its recovery taking a pause because of unexpected blips through the year; lower deal wins in FY17; and low confidence on an immediate broad-based recovery due to multiple issues. Angel Broking too recommended to buy Infosys shares, saying that the valuations are attractive for long term investors.

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