Murthy sells part Infy stake to start VC fund

Murthy sells part Infy stake to start VC fund

Mumbai: Infosys Technologies Ltd chairman and chief mentor N.R. Narayana Murthy sold one-fourth of his holding in the company, India’s second largest software services provider, to set up a venture capital fund?that?will support young and promising entrepreneurs.

Murthy held nearly 3.18 million shares in the firm prior to the sale of 800,000 shares on Thursday. The sale raised Rs174.3 crore that would be used to set up the venture capital fund, according to a filing Infosys made to the National Stock Exchange.

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“The venture capital fund will encourage and support young entrepreneurs having brilliant business ideas. The fund will primarily invest in India and may on a case-to-case basis consider investing overseas," according to the filing.

Murthy and his family together hold a nearly 5% stake in the company, with his wife Sudha N. Murthy holding 9.3 million shares, or 1.6%, his daughter Akshata Murthy 8.1 million shares, or 1.4%, and his son Rohan Murthy owning 7.95 million shares, or 1.4%. Murthy himself held a 0.56% stake that has now dropped to 0.42%.

“Narayana Murthy is currently travelling abroad and will elaborate on his plans once he returns," a company spokesperson said in response to queries on the planned venture capital fund and who will manage it.

In seeking to use his personal wealth to fund promising enterprises, Murthy is following the example of Azim Premji, chairman of India’s third largest software services provider Wipro Ltd. Premji in 2006 started a similar fund, called PremjiInvest, which has a corpus of around $1 billion.

In 2000, N.S. Raghavan—a co-founder and former joint managing director of Infosys—retired from the company to start Nadathur Holdings and Investments Pvt. Ltd, which currently has an investment portfolio of 17 companies in various domains, including technology.

Industry observers say that there is immense opportunity for funds targeted at technology entrepreneurs; there is no dearth of companies that require not only funding but mentoring from industry veterans.

“Prospects are really tremendous. There are a whole lot of entrepreneurs running companies in the Rs100 crore to Rs400 crore range that have the potential to grow but lack funding and mentoring from those who have done it before," said Vikram Utamsingh, executive director and head of the private equity group at audit and consultancy firm KPMG India Pvt. Ltd.

Analysts expect Murthy’s new fund to focus primarily on companies in the technology domain.

“A person like Murthy can offer unparalleled mentorship to companies working in technology sector," Uttamsingh said. “He is the kind of mentor who can answer entrepreneur questions like how do you grow from being stuck as a Rs100 crore company."

While this would be Murthy’s first full-time experiment in funding entrepreneurs, Infosys has incubated and spun off at least one enterprise in the past.

OnMobile, one of the largest mobile value-added services firms in the Indian market, is a listed company with market capitalization of Rs2,526 crore, and annual revenue of Rs406 crore for the year ended 31 March.

Infosys shares rose 2.13% to close at Rs2,211 on Thursday on the Bombay Stock Exchange.

The exchange’s sensitive index fell 1.29% to close at 16,789.74 on the same day.

The Infosys filing to the exchanges on Murthy’s sale of shares in the company was made after the close of trading.

Graphics by Yogesh Kumar / Mint