His resignation could create more uncertainty, hurt the stock

Sikka’s resignation was the result of ongoing bad blood between the Infosys board of directors and the company’s main founder N.R. Narayana Murthy.

According to media reports, Murthy reportedly said that several independent directors at Infosys told him Sikka was more suited to be a chief technology officer than CEO. He had also reportedly raised concerns over corporate governance issues at Infosys related to severance pay for a former executive and the acquisition of an Israeli software company under Sikka.

The Infosys board on Friday put out a comprehensive statement where it blamed Murthy’s “continuous assault” as the key reason for Sikka’s departure. Analysts reckon the ongoing negativity between the founder and the board could generate further bad publicity for the company.

Infosys could also see more departures among senior leaders in the coming months that could further push back its path to growth.

“The resignation of Dr. Sikka is not normal and sets a big historical precedence to be considered by the new candidate,” Sandeep Shah, an analyst at CIMB, said in a note. He added that such a change “brings along transitional issues, which may result in higher attrition amongst senior leaders.” It could also create obstacles in expanding Infosys’ order book and mining for large clients, he said.

Nomura analysts pointed out that many senior leaders who are driving newer initiatives in key growth areas at Infosys were, like Sikka, brought in from German software company SAP. That implies some of them could leave Infosys to potentially join Sikka in a new venture.

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“Infosys has continued to see senior management attrition with nearly 17 senior management exits since Dr. Sikka joined the company with more elevation in senior management attrition being seen over the last 1-1.5 years,” the analysts said.