Mohandas Pai, Dinesh quit Infosys; Q4 net up 17%

In a surprise development, T V Mohandas Pai on Friday resigned from Infosys and its board of directors, ending a 17-year association with the company, which inducted former Microsoft India chairman Ravi Venkatesan into the board.

"T V Mohandas Pai, has decided to relinquish the  position of member of the board and has requested the board to relieve him of the responsibilities after the company's annual general meeting on June 11, 2011," Infosys said in a filing to the Bombay Stock Exchange.

The announcement comes on a day when Infosys reported a lower-than-expected consolidated net profit of Rs 1,818 crore (Rs 18.18 billion) for the fourth quarter ended March 2011, a nearly 14 per cent jump from the same period last year (For more on Infosys results, check the last slide).

Pai is the second top executive in Infosys to leave the organisation in two years after Nandan Nilekani, one of its founders, quit to join government to implement the ambitious project that will give identification number to each citizen.

The company also announced that K Dinesh, member of its board and a co-founder, would retire by rotation at the annual general meeting to be held on June 11. Dinesh would not seek reappointment, it said.

The Infosys stock price on Friday plunged by 9.59% to Rs 2,988.80.

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N R Narayana Murthy, chief mentor of India's second largest IT firm, who himself retires in August this year said Pai's resignation has been accepted.

"Mohan has been an early adopter and key anchor builder of Infosys. We know he is taking the painful decision since he has much bigger projects on the horizon -- nation building," he said in a statement.

The 52-year-old Pai, who joined Infosys in 1994, said he was demitting office to provide an opportunity to a new set of people to lead the firm and bring it amongst the top three global players.

"I stepped down in 2006 from the CFO position and now I handled this (HR Director). I handled a large portfolio and now I think it's time for others to come up," he said.

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The Infosys board will meet on April 30 to finalise its leadership succession plans, it said.

"The board of directors will meet on April 30, 2011 to finalise plans for the company's leadership succession, post NR Narayana Murthy's retirement as chairman of the board in August 2011," the filing said.

Infosys has also formed a nominations committee, comprising Professor Jeffery S Lehman, Deepak M Satwalekar (former MD and CEO of HDFC Standard Life Insurance) and KV Kamath (non-executive chairman of the board of directors of ICICI Bank).

The committee is responsible for succession planning for the roles of chairman, CEO, COO and CFO of the company.

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Pai joined Infosys in 1994 and has served as a member of the board since May 2000. He was its chief financial officer from 1994 to 2006.

As CFO, he is said to have played a strategic role in transforming Infosys into one of the world's most respected and widely known software services companies.

He also played a key role in branding the firm among the investor community and enhancing transparency and disclosure levels.

"People in the system have to understand that they too will get a shot at being leaders when they are still energetic and still passionate about the business and so I think it was the right time for me to step down, so others can come up."

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In 2006, Pai voluntarily demitted the office of CFO to lead efforts in the areas of Human Resources and Education and Research.

Asked if there were other reasons for his exit, Pai said: "I have no unfulfilled ambition because being the CEO of this company was not my aspiration.

"My aspiration was to participate in the management and help build a company which sets standards for everybody to follow and which is widely accepted."

Talking about his future plans, Pai said, "I'm sad because for 17 years, this (Infosys) has been my life. I will go back to being a shareholder. I will ask questions on everyone's behalf."

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"About 30-35 per cent of the time I will spend in the corporate world. I will probably join 2-3 boards which are systematically important for this country", Pai said.

"I will spend 30-35 per cent of the time on education. I want to help reform the higher education system and also spend time with family," he added.

Infosys, which has been facing stiff competition from domestic rival Tata Consultancy and newer firms like Cognizant has been undergoing restructuring for the last few years.

Earlier, reports had suggested that Infosys COO SD Shibulal was likely to take over as the CEO as the current chief Kris Gopalakrishnan was likely to become the chairman after Murthy's retirement. There was also speculation about Pai becoming the COO.

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Results below expectations

Infosys -- India's second largest software services exports firm -- posted a net profit rise of 17.1% y-o-y to Rs 1,818 crore (Rs 18.18 billion) in its net profit for the fourth quarter ended March 31, 2011 as compared to Rs 1,600 crore (Rs 16 billion) in the corresponding quarter a year ago.

The net profit increased marginally by 2.19% from Rs 1,779 crore (Rs 17.79 billion) in the previous quarter ended in December, 2010.

Infosys Q4 revenues grew by nearly 22% to Rs 7,250 crore (Rs 72.50 billion); revenues for FY11 rose to Rs 27,501 crore (Rs 275.01 billion), up about 21%. EBIT margins at 29% as compared to 30.2% q-o-q.

Q1FY12 guidance: For the first quarter of the fiscal, the company said income will grow between 18% and 19.1%, resulting in figures between Rs 7,311 crore (Rs 73.11 billion) and Rs 7,382 crore (Rs 73.82 billion).

FY12 guidance: For the entire fiscal, income is expected to grow between 15.4% and 17.3% or between Rs 31,727 crore (Rs 317.27 billion) and Rs 32,270 crore (Rs 322.70 billion). The EPS is stated at Rs 119.41 vs Rs 109.

"Earnings per share (EPS) for the quarter ending June 30, 2011 is expected to be in the range of Rs 27.59 and Rs 28.02; YoY growth of 5.9% - 7.5% and for the year ending March 31, 2012 is expected to be in the range of Rs 126.05 and Rs 128.21; YoY growth of 5.5% - 7.3%," the company said.

At the end of March 31, the company had 130,820 employees, which includes a net addition of 3,041 staff during the fourth quarter.

The company has announced a dividend of Rs 20 per share.