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Fund managers keep a vigil on Infosys

Chandan Kishore Kant / 13 Feb 17 | 05:58 AM
Related to : Infosys Ltd

Domestic mutual funds (MFs) are keeping a close eye on the developments at Infosys, their third-most owned stock with a sizeable exposure. Although fund managers don't see any reason to prune their exposure to the information technology (IT) major, they want the management to address corporate governance issues raised by the founders in a transparent manner. Some fund manager said they planned to grill CEO Vishal Sikka at an investor conference in Mumbai on Monday.

There has been a spat between the founders and the Infosys board over issues such as compensation to CEO, severance pay to former employees and appointment of certain independent directors.

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Infosys is the most-favoured IT stock for equity MFs. At the end of December quarter, over 200 schemes had invested a total of Rs 13,197 crore, and the MF holding in the company was 7.4 per cent.

However, fund managers have not yet pressed the panic button as they are of the view that most allegations are not very serious in nature.

"Most fund managers are taking a neutral view on the stock and see no compelling reason to change it at this stage. In the IT sector, the stock continues to be one of the most preferred," said the chief investment officer of a fund house. Fund managers didn’t want to comment on company-specific issues. However, most were seen supportive of Sikka and expect a resolution.

"The issue is not big and can be easily resolved. The CEO has to be given more time. We had been adding Infosys shares in our portfolios over the last few months and the stock has done well even amid reports of governance lapses. This shows that the market is not too worried," said a fund manager. Fund managers expect the stock to do well going ahead as the Street is expecting a buyback given its cash pile of over $5 billion. Money managers say Infosys has been transparent in its affairs and is seen as one of the better-managed companies.

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