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Business News/ Companies / V. Balakrishnan exits Infosys as executive exodus continues
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V. Balakrishnan exits Infosys as executive exodus continues

This is the eighth top-level exit from Infosys since co-founder Narayana Murthy returned as chairman in June

V. Balakrishnan was the head of Infosys’s business process outsourcing unit and a favourite to become the company’s first non-founder chief executive after co-founder S.D. Shibulal retires in early 2015. Photo: Hemant Mishra/MintPremium
V. Balakrishnan was the head of Infosys’s business process outsourcing unit and a favourite to become the company’s first non-founder chief executive after co-founder S.D. Shibulal retires in early 2015. Photo: Hemant Mishra/Mint

Bangalore: A top management exodus continued at Infosys Ltd on Friday with the resignation of V. Balakrishnan, head of its business process outsourcing (BPO) unit and a favourite to become the first non-founder chief executive officer (CEO) of India’s second largest software services provider.

Balakrishnan will leave the Bangalore-based company on 31 December. The head of Infosys BPO is the eighth top-level executive to exit since co-founder N.R. Narayana Murthy returned from retirement in June to lead an organizational rehaul at the company and reverse a downtrend in its fortunes.

His departure raises concerns over succession planning at Infosys, where Balakrishnan had been seen as the frontrunner to become CEO after S.D. Shibulal, one of the founders, retires in March 2015 after he turns 60.

“This is obviously a very critical departure—Infosys right now is at an inflexion point," said Peter Schumacher, founder of Germany-based consulting firm Value Leadership Group, which advises companies on their European strategy. “All eyes are on Infosys right now. Questions are now being raised among certain clients about the process that Mr Murthy is pursuing—some time has passed since he took over, yet these departures come as a surprise."

Balakrishnan, who will also resign from Infosys’s board, joined the company in 1991 and has previously served as its chief financial officer (CFO). His departure is the most significant top-level exit from Infosys since Ashok Vemuri quit in September to join smaller rival iGate Corp.

“Bala has been an early adopter and a keen anchor builder of Infosys," Murthy said in a statement released by the company. “It is difficult to imagine Infosys without Bala’s passion, commitment and intellect. The board and every Infoscion thank Bala for his wonderful contribution and wish him great success in his future endeavours."

“It was time for me to do something beyond Infosys. I’ve been thinking about this for a while now, almost a year," Balakrishnan said in a telephone interview.

Murthy was not available to comment for this story.

“Bala, during his two decades of association with Infosys, has played a pivotal role in building the finance function and has been a key driver behind all of our achievements in areas of investor relations and corporate governance," Shibulal said.

Infosys on Friday also made two new nominations to its board effectively immediately. Biocon Ltd chairperson and managing director Kiran Mazumdar-Shaw became an independent director and executive council member and consumer vertical head U.B. Pravin Rao a whole-time director.

Balakrishnan’s exit is significant because he was only among a handful of executives who was not a co-founder at Infosys and yet rose prominently through the ranks of the company.

Several other non-founder executives, with the exception of Europe head B.G. Srinivas, have now left Infosys within the span of a few years. They include the likes of former CFO T.V. Mohandas Pai, former global sales heads Vemuri and Subhash Dhar, and former consulting head Stephen Pratt.

Balakrishnan’s exit raises questions on the next set of leaders that Murthy is hand-picking within to take the company forward once the founders retire. In a meeting with analysts recently, Murthy said that the company’s next CEO is likely to be from within the ranks of the company.

“The company believes it will be able to select its future CEO from a large pool of available senior managers," US-based brokerage Cowen and Co. said in a note published on 13 December.

The latest development also raises the slight possibility of the Infosys board considering outside candidates as potential leaders to take over.

In April, Mint reported that the nominations committee of the board headed by Jeffrey Sean Lehman had started a hunt for the company’s next CEO, and some board members had wanted the search to include external candidates. The report cited two people directly familiar with the matter who didn’t want to be named.

Balakrishnan’s departure comes at a time when he has been becoming more active in ventures outside Infosys. He confirmed he would get involved in private equity ventures, including his recent investment in the Unitus Fund, and another fund where he is pooling his resources along with other information technology industry veterans such as former Wipro Ltd CEO Girish Paranjpe and Pai.

Balakrishnan added that he did not plan to start a venture on his own immediately.

The fund that he is starting with Pai and Paranjpe targets funding executives from top companies such as Infosys and Wipro who want to start their own ventures. Recent examples of such executives include Dhar, who started a company called Enterprise Nube.

A few weeks ago, Balakrishnan sold 100,000 Infosys shares worth 33 crore, according to a filing on the stock exchange. He has since used those funds to back the above-mentioned ventures.

“I have enjoyed every moment of my stint at Infosys and it was a great learning experience. While my heart will always be with Infosys, my mind wants to do something beyond Infosys. I thank all my colleagues who supported and encouraged me during my career at Infosys. I wish Infosys all the very best in its future endeavours," Balakrishnan said in a statement.

CLSA Research, in a recent note to clients, had warned that the exits posed a risk to Infosys, Mint reported in November.

“Continuous churn and reallocation of responsibilities at the top do bring along the risk of undermining some of the good work done post Murthy’s return. A change in CEO scheduled in 18 months’ time could continue this top management flux," said analyst Nimish Joshi in the note.

Other experts called the exit a “strange" move.

“This is very interesting and strange at the same time, as Murthy said last week that the next CEO will definitely be from within the organization, and had also confirmed that his son will be moving out of Infosys sooner than expected. Bala was the obvious choice for chief executive officer," said Abhishek Shindadkar, an analyst at ICICI Securities Ltd.

Infosys shares rose 1.1% to 3,552.30 on BSE on Friday. The announcement was made after the close of trading in Mumbai.

Mihir Dalal in Bangalore and Zahra Khan in Mumbai contributed to this story.

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Published: 20 Dec 2013, 05:45 PM IST
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