Infosys shares fall after whistleblower episode, worst dip since 2013
India's second-largest IT firm, Infosys, has been hit by major turbulence that had a direct impact on its shares. On Tuesday, its shares dipped nearly 16% in early morning trade. This development came after anonymous employees of Infosys wrote a letter to the board alleging irregularities by the CEO and CFO. Meanwhile, chairman Nandan Nilekani released a statement promising a thorough investigation. Here's more.
The shares of Infosys opened 10% lower at the Bombay Stock Exchange this morning at Rs. 645.35 apiece. In fact, the stock fell by nearly 16% on the National Stock Exchange (NSE). This is the worst dip which the company experienced since 2013. As per reports, the plunge wiped off Rs. 44,000 crore from markets. To note, stock markets remained closed on Monday.
Infosys was hit by a sensational crisis after a group of "ethical employees" shot off a letter to the company's board, accusing the company's CEO Salil Parekh and CFO Nilanjan Roy of malpractices. In the letter, dated September 20, they said Parekh violated standard accounting practices to show more profit. In this process, he got the support of Roy, they alleged.
They claimed irregularities in large deals like Verizon, ABN Amro and a joint venture in Japan. In the letter, they wrote, "CEO is bypassing reviews and approvals and instructing sales not to send mails for approval... Several billion-dollar deals of the last few quarters have nil margins." They even claimed Parekh insulted board members, referring to them as Madrasis who don't know much.
"This is a regulatory issue. We have email and voice recordings and will share them during the investigation. Whoever disagrees is sidelined ...In a large finance team, important employees have left due to pressure to make the deal look good," the explosive letter read.
With the whistleblowers' words spelling trouble for the company, Nilekani, in a statement to stock exchanges, said the allegations are being looked into. "Pursuant to our whistleblower practice we have placed both Complaints before the Audit Committee on October 10, 2019, and before the non-executive members of the Board on October 11, 2019. These Complaints are being dealt with in an objective manner," he said.
He disclosed that after the board meeting on October 11, 2019, the audit committee began consulting with internal auditors Ernst &Young. The law firm of Shardul Amarchand Mangaldas & Co. has been retained to conduct a fair investigation, and statutory auditors, Deloitte, have been kept in the loop too. The head honcho said no comments will be released to ensure the probe remains fair.
"At the appropriate time, we will provide a summary of the results of the investigations. The Board is committed to uphold the highest standard of corporate governance and protect the interests of all stakeholders," Nilekani's statement concluded.
