- Whistleblower’s Complaint Impacts, Shares Fall Six Years Old
- CEO and CFO accusations of exaggerating revenue and profits
- Allegations of sidelining reviews and approvals in big deals
- Infosys is investigating the case, 16 percent share value broken
The company’s stock fell nearly six-and-a-half years low due to allegations of exaggerating revenue and profits on the CEO and CFO of Infosys, the country’s second largest information technology company. Infosys shares weakened by about 16.21 per cent to Rs 643.30. This is the biggest drop in the stock since April 2013. This led to a loss of about 55 thousand crores in the market capital of the company.
Infosys hit a low of Rs 638.30, down nearly 17 per cent during day trading. Infosys chairman Nandan Nilekani said in a statement that the company’s audit committee would conduct an independent investigation on the allegations.
The company has started talks with independent internal auditors EY on this issue. Nilekani said law firm Shardul Amarchand Mangaldas & Co. has been entrusted with the work of independent investigation. This excludes CEO Parekh and CFO Roy. About two years ago, the company was accused of administrative flaws, which led to the resignation of then CEO Vishal Sikka. Only after this, in the year 2018, Parekh took over as CEO.
Deepak Jaisani, head (retail research), HDFC Securities, said, “Infosys has been considered a superior company in terms of corporate governance. Investor confidence has been temporarily shaken by two complaints in two years.
Significantly, a group of whistleblowers who described themselves as ‘ethical employees’ accused Infosys CEO Salil Parekh of sidestepping reviews and approvals in anticipation of loss of profits. This had a negative impact on the company’s stock. Whistleblower wrote a letter to the entire regulator on September 20 and to the US regulator US Securities and Exchange Commission on September 27.
Billions of dollars were not earned in deals
According to the complaint, “the company received no margin in the billions of dollars of deals that have taken place during the last few quarters.” This means that the company did not make any profit from these deals. Along with this, the Bangalore company did not include expenses such as visa costs to account for the exaggerated profits. There was also pressure to not record the withdrawal of $ 50 million in advance payments in a transaction, which is contrary to accounting procedures. There was no response from CEO Salil Parekh on this issue.
4019 crore was profit
The company’s profit was up 5.8 per cent to Rs 4,019 crore in the July-September 2019 quarter. At the same time, the company had raised the guidance to 9-10 per cent for the financial year 2019-20. Earlier it was around 8.5-10 per cent. At the same time, the revenue increased by 7 percent to reach the level of Rs 23,255 crore.