Activist shareholders a risk factor, says Infosys

Over the past few months, the country's second largest software services firm has been battling allegations by co- founder N R Narayana Murthy and other former senior executives of falling corporate governance standards.

Infosys CEO Vishal Sikka announces the third quarter (October-December) results of fiscal 2016-17 in Bengaluru. Photo: IANS

Infosys has flagged actions by "activist shareholders" as a risk factor, which could potentially require the company to incur significant legal fees and public relations costs.

In its annual filing to the US Securities and Exchange Commission, Infosys said such activities could interfere with the company's ability to execute its strategic plan.

Over the past few months, the country's second largest software services firm has been battling allegations by co- founder N R Narayana Murthy and other former senior executives of falling corporate governance standards.

"Responding to actions by activist shareholders can divert the attention of our board of directors, management and our employees and disrupt our operations," Infosys said in the filing.

The company, however, did not name any such shareholder.

"This may also require us to incur significant legal fees and public relations costs. The perceived uncertainties as to our future direction could affect client and investor sentiment, resulting in volatility in the price of our securities," it warned.

The Bengaluru-based firm also highlighted that negative media coverage and public scrutiny may divert the time and attention of its board and management and adversely affect the prices of its equity shares and ADS.

ADS or American depositary share is a US dollar- denominated equity share of a foreign-based company available for purchase on an American stock exchange.

Besides, the company has stated that any restrictions on immigration may affect its ability to compete for and provide services to clients in locations like the US and Europe.

The filing noted that the issue of organisations outsourcing work to Indian IT firms has become a topic of political discussion in the US, Europe, Asia Pacific, Australia and other regions.

"Our reliance on work visas for a significant number of technology professionals makes us particularly vulnerable to such changes and variations," Infosys said.

It added that many of these changes are making it more difficult to obtain timely visas and resulting in increased expenses.

"These changes could negatively affect our ability to utilise current employees to fulfil existing or new projects and could also result in higher operating expenses," the filing said.

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