The Infosys’ stock has been trading between Rs 700 and Rs 800. As the price has not changed, investors might not want excessive dilution of shares
Over 20 percent of Infosys‘ shareholders have voted against changing employment terms of the CEO and MD Salil Parekh, even as promoters have unanimously approved the move, voting results of the recently concluded annual general meeting show.
Close to 21.61 percent of public shareholders voted against changing the terms of employment of Parekh. This includes slashing the vesting period of performance-based shares every year, as opposed to after three years before.
Though the resolution is likely to pass, according to investors, shrinking operating margin, despite rise in revenue and lack of appreciation of Infosys’ share price, could be why some of them voted against the move.
Close to 15 percent of shareholders have voted against approval of stock incentives to Parekh and COO UB Pravin Rao under the expanded stock ownership programme. In May, the company announced that Parekh and Rao would get shares worth Rs 10 crore and Rs 4 crore, respectively, under new employee stock option plan.
Vinay CS, a Bengaluru-based investor, said, “The Infosys’ stock has been trading between Rs 700 and Rs 800.” As the price has not changed, investors might not want excessive dilution of shares.
“Some investors feel that the huge short-term employee stock option plan (ESOP)-based incentive plan could affect the company in the longer term,” Vinay added.
In a BSE filing in May, Infosys said it has delivered strong performance by increased total revenue and digital revenue, organisational stability and stakeholder value. The incentives and amendment proposed by the board are in recognition of the Parekh’s contribution, the company added.
There have been some concerns about the company operating margin as well. While the turnover and profits have increased, operating margin have been shrinking. Vinay said, “Investors have concerns on reduced overall operating margin, even though there has been increase in revenue and profit.”
This might also have led some of the shareholders to vote against the incentives.
However, the company said it had to invest in rising sub-contractor cost due to visa issues and skill shortage in new age technologies. In addition, there are investments that might spill over in the first quarter of FY20, after which the company will see stability in terms of operating margin.
Frequent buybacks are a concern too, another investor said. The company announced its second buyback in January after issuing bonus shares in 2018. It had announced a buyback in 2017 as well. “This is confusing shareholders and an irritant factor,” the investor added.
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