Infosys completes 25 years to US listing, here are its hits and misses

Bengaluru: Six years after Infosys Ltd got listed on the BSE (then called Bombay Stock Exchange) in June 1993, the information technology (IT) services company became the first Indian company to list in the US in a bid to win the confidence of western clients. 

On Friday, 21 June 2024, Infosys completed a quarter of a century of being listed on the Nasdaq exchange in the US, according to a filing to stock exchanges.  

“It was an honor to be invited to ring The Opening Bell at this morning. This commemorates Infosys’ 25 years of being listed in the US. We thank all our clients, employees, investors, and other stakeholders who’ve contributed to our continued success,” said Infosys in a post on social media platform X.

“The listing in the United States was not to raise money," T.V. Mohandas Pai, a former human resources head and chief financial officer of the company, said on a phone call with Mint. “It was strategic because 60% of our business came from America and we wanted our clients to know that we are a listed company in their country to instill confidence in them.” 

Infosys was founded in 1981 by seven engineers in Pune, including N.R. Narayana Murthy, Nandan M. Nilekani, S. Gopalakrishnan, S.D. Shibulal, K. Dinesh, N.S. Raghavan, and Ashok Arora, as Infosys Consultants Pvt Ltd. The motive then was to propel a homegrown company into becoming a global giant.

Good weather and a welcoming state government meant the company shifted its headquarters to Bengaluru, then known as Bangalore, two years later. Five of its founders and their family members—save Ashok Arora who left the company early, and N.S. Raghavan—continue to hold shares of the company. 

The IT services company, which had just about $5 million in revenue and fewer than 250 employees, went public in India in 1993. In the same year, it introduced the employee stock option program (ESOP), which allowed its employees to own parts of the company. 

This move allowed almost every third Infosys employee to become rich, with many of its 18,000 employees turning into dollar millionaires. The 1990s was also a time when many engineers applied to Infosys to live the American dream as the company would send its employees onsite to cater to two-third of its business, which was coming from clients in the US. 

Business was on the cusp of an inflection point when revenues were a tad higher than $100 million as of March 1999, making it India’s most visible company. While Infosys may not have been the largest Indian IT services company at the time, a listing in the US would grab eyeballs, not just of the clients, but also of investors wanting a piece of the Infosys pie. 

Tata Consultancy Services Ltd (TCS) and Wipro Ltd were the other two IT outsourcing companies at the time. TCS was listed in 2004 whereas Wipro was listed on Nasdaq only in 2000. 

At the turn of the century, when many Fortune 500 companies did not even have a website, Infosys was trying to sell them the benefits of outsourcing. 

It was also the time of the Y2K movement when tech adoption and the internet bandwagon picked up steam. Infosys was quick to spot growth and in March 1999, became the first Indian company to list in the Nasdaq stock exchange, selling 2,070,000 shares at $34 a piece.

The Infosys formula

The secret sauce of the software services company’s growth was one of many firsts. Infosys became one of the first listed entities to focus on corporate governance and disclosure norms, as it laid out a governance policy, disclosed board members’ attendance and even their qualifications and salaries. 

“Infosys has been a forerunner and set the standard for disclosures and corporate governance practices by Indian companies,” said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research Services.

The company was also the first to report its financials in US GAAP accounting standards, and release a sustainability report. Coupled with the fact that Infosys was reporting growth year after year and became the first to give a yearly revenue growth outlook, it became the apple of the investor’s eye. 

Also read | Infosys chairman Nilekani says GenAI has enormous potential, plays down risks

Infosys at the time did its best to blur the line between senior and junior, bringing about a mindset that all in the company were equal. 

“It changed the way companies looked at employees. Infosys did not have separate canteens or lifts or restrooms for senior management and junior employees," said Pai. 

The company got a revenue of $18.6 billion as of last year, making it the country’s second largest IT services company. 

To reach this level came with its own set of challenges.

The challenges

Analysts concede that one of the bigger drawbacks at Infosys was the company’s stated plan of all its co-founders being chief executive officers (CEO). The company was faring fine until Nandan Nilekani was at the helm of affairs but things began changing after Kris Gopalakrishnan took over in July 2007. 

Infosys started losing market share to rivals Cognizant Technology Services Corp and TCS, both of which added more incremental revenue than Infosys and focused on their digital offerings. By the time co-founder S.D. Shibulal took over as CEO in August 2011, the company had lost ground to Cognizant and TCS despite a listing on the New York Stock Exchange. 

Also read | TCS, Infosys witness dip in younger employees

Infosys took a second hit when it got a professional chairman and CEO. R. Seshasayee took over as non-executive chairman in 2011 and Vishal Sikka took over as CEO in August 2014.

Both stints were cut short because of the co-founders' displeasure with the way Infosys was being run, be it in Sikka’s challenges to appoint business heads or in the way the Infosys board hiked senior leaders’ compensations. Nilekani had to return to rescue the company in 2017.

Nandan Nilekani 2.0

Nilekani stepped into the role of non-executive chairman with a mandate to steer Infosys from choppy waters. His mandates were clear, to find a new CEO, to re-constitute the company’s board, and to stabilise the business. 

Results started to emerge when Infosys became the second IT services company after TCS to cross $100 billion in market cap. 

Nilekani was also responsible in appointing Salil Parekh as the company’s seventh CEO. Parekh’s drive to improve the company’s execution and his chase of large deals led the board to award him another term until the end of March 2027. 

Also read | Infosys McCamish reports first revenue decline in eight years

If an investor would have bought one Infosys share from NASDAQ on 1 June 1999, it would have returned 2,239 times as of 20 June 2024, when it closed at $18.27 apiece. The returns would have been 433 times more in rupees, had the same investor bought one Infosys share in India during the same time period. 

The company is now in the middle of a generative artificial intelligence (Gen AI) revolution and it remains to be seen how its 317,240 employees emerge from this.