Experts advice shareholders to vote against merger proposal by Infosys for lack of information

MUMBAI: A shareholder advisory firm has recommended investors of Infosys to vote against a proposal to merge its core banking product Finacle with its products and platforms subsidiary Edgeverve Systems. SES cited the lack of clear information on valuation for the merger as the reason for the recommendation.

The country’s second largest software exporter wants to integrate its software product assets, which will be held by arm Edgeverve Systems. Infosysm in its notice to shareholders merely states that the estimated consideration for sale is up to Rs 3,400 Crore. If at all Edgevere is listed in future, shareholders should know what deal they got, said the advisory firm.

“On what resolution will the shareholders vote?” said SES’s head J N Gupta, a former Securities and Exchange Board of India executive director. “Infosys has stated that the estimated consideration for sale is up to Rs 3,400 Crore, which means the amount can be anything from NIL up to Rs 3,400 Crore. While seeking shareholders’ approval for such transfer a large company like Infosys should at least indicate the exact consideration. Or alternatively should have provided a range of consideration so as to enable the shareholders to take an informed decision. This does not suit governance practice of a company like Infosys.”

Infosys did not respond to an email query on the issue.

While rules do not require the company to provide valuation report for the proposed transaction, experts said full disclosure of deal would be a good governance practice.

“Since the company is a 100% subsidiary, there would not be grave concerns but fact is that Infosys should have provided more details for the sake of transparency and for shareholders to take informed decision,” said Shriram Subramanian, MD, InGovern, another shareholder advisory firm.