Shares of IT services firm Infosys on Tuesday plummeted nearly 17 per cent, wiping Rs 53,451 crore from its market valuation, on concerns over a whistleblower complaint which alleged that two top executives of the company were indulging in unethical practices to increase short-term revenue and profits. The scrip tanked 16.21 per cent to close at Rs 643.30 on the BSE. During the day, it tumbled 16.86 per cent to Rs 638.30, the most since April 2013.
On the National Stock Exchange (NSE), it plunged 16.65 per cent to close at Rs 640. The sharp fall in the scrip wiped out Rs 53,450.92 crore from the company’s market valuation which now stands at Rs 2,76,300.08 crore. It was the worst-hit among the frontline companies on both Sensex and Nifty. In terms of traded volume, 117.70 lakh shares of the company were traded on the BSE and over 9 crore shares on the NSE. According to reports, a complaint by a group that calls itself ‘Ethical Employees’ has alleged CEO Salil Parekh and CFO Nilanjan Roy were indulging in “unethical practices” to boost short-term revenue and profits.
Infosys on Monday said the whistleblower complaint has been placed before the audit committee as per the company’s practice, and that it will be dealt with in accordance with the company’s whistleblower policy.
Meanwhile, Infosys Ltd on Tuesday said it is investigating claims by anonymous whistleblowers. Chairman and co-founder Nandan Nilekani pledged a full probe, saying the complaint had been placed before the audit committee on October 10 and before the non-executive members of the board the next day.
A September 20 letter, signed by “Ethical Employees”, had alleged that Parikh as well as Chief Financial Officer Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards.
The letter addressed to the board claimed that recent big deal wins carried negligible margins and that Roy directed certain people to make wrong assumptions to show margins.
The latest allegations came just two years after Infosys endured an internal turmoil that saw its then head Vishal Sikka resigning from the company. In a statement to stock exchanges, Nilekani said the audit committee has begun consultation with independent internal auditors EY and has retained law firm Shardul Amarchand Mangaldas & Co to conduct an independent investigation. He said one board member had received two anonymous complaints on September 30, 2019 - one dated September 20, 2019, titled “Disturbing unethical practices” and an undated note with the title “Whistleblower Complaint”.
He said both had been placed before the audit committee on October 10, 2019, and before the non-executive members of the board the following day. “Post the board meeting of October 11, 2019, the audit committee began consultation with the independent internal auditors (Ernst & Young) on terms of reference for their prima facie investigation. The audit committee has now retained the law firm of Shardul Amarchand Mangaldas & Co (October 21, 2019) to conduct an independent investigation,” Nilekani noted in his statement.
The board, in consultation with the audit committee, will take such steps as may be appropriate based on the outcome of the investigation, he added. The whistleblower complaint by a group that calls itself “ethical employees” had alleged CEO Salil Parekh and CFO Nilanjan Roy were indulging in “unethical practices” to boost short-term revenue and profits.
