MUMBAI (Reuters) - Indian IT services firm Infosys named Nandan Nilekani, one of its founders and former heads, as chairman on Thursday in a bid to end a lengthy feud between the board and the company’s founders.

FILE PHOTO - Co-Chairman of the Board of Directors of Infosys Technologies Ltd. Nandan M. Nilekani speaks after a news conference on the outskirts of New Delhi September 21, 2008. REUTERS/B Mathur/File Photo

The move is likely to reassure employees and clients, and quell shareholder concerns after the shock resignation of its Chief Executive Vishal Sikka last week spooked investors and wiped billions of dollars from the company’s market value.

Nilekani, credited for driving up Infosys’ annual revenue four-fold to $2 billion during his 2002-2007 tenure as CEO, will take over as the non-executive chairman and as a non-independent director with immediate effect, India’s No. 2 IT services firm said in a statement.

Chairman R Seshasayee, Sikka, who was serving as executive vice-chairman after exit as CEO, and two other directors also resigned as part of the board shake-up.

Ravi Venkatesan stepped down as co-chair, but will continue as an independent director on the board, Infosys said.

The Infosys board will try to engage with all shareholders as a matter of priority, Nilekani said in the statement.

Following Sikka’s exit, Nilekani, the architect of India’s ambitious biometric identity program, was widely expected to return to Infosys, whose board has been tangled in a protracted public spat with founder Narayana Murthy, who accused the board of corporate governance lapses.

Disagreements between founders and the board centered around a rise in Sikka’s pay, the acquisition of Israeli automation firm Panaya for $200 million and a severance package offered to a former finance chief.

STOCK RISES

Indian media reports on Nilekani’s likely return had already boosted investor confidence and pushed the stock higher over its last two trading sessions.

Shriram Subramanian of shareholder advocacy group InGovern said Nilekani-led Infosys urgently needed to formally address corporate governance concerns raised by the founders.

“Otherwise it would be a complete eyewash,” he said. “Other shareholders will be completely clueless as to why the board succumbed to pressure from founders.”

Nilekani returns to the Bengaluru-headquartered company at a time when Indian outsourcers have been dented by cautious client spends in their biggest market, the United States, and as they brace for changes to a U.S. work visa program they have heavily relied on in the past to fly engineers into the country.

The incoming chairman will also be tasked with leading the company’s efforts to find a replacement for Sikka, widely known as an innovator in the global software industry.

“It’s a good development as the company has got a credible face on the board who will act as a guide, and assure clients and shareholders that critical functions and strategies will continue,” said Harit Shah, IT analyst at Reliance Securities.

Reuters reported earlier this week that a group of 12 major institutional investors in Infosys had called on the company to bring Nilekani back onto the board to help end the feud with the company’s founders.

Nilekani and his family own about 2.3 percent of Infosys, and according to Forbes, he is worth $1.72 billion.