Infosys Investigates “Unethical Practices” Shares Drop in the Aftermath

Infosys Investigates “Unethical Practices” Shares Drop in the Aftermath

Infosys Ltd, one of India’s top software service exporters, gave a public statement that they were undergoing an investigation based on a whistleblower’s claims. Said whistleblower alleges that Infosys’ senior two executives acted with “unethical practices” in order to boost their short term profit. This news, of course, sent the shares spiraling. At the time of its writing, Infosys has felt the effects of a six-year worst intraday fall.

These allegations stipulated in a letter dated the 20th of September claimed that both Salil Parikh, CEO, and Nilanjan Roy, CFO, engaged in unethical practices. They allegedly took part in things such as forced revenue recognition, and generally didn’t adhere to their country’s accounting standards.

Nandan Nilekani, Chairman of Infosys, gave a statement on Tuesday about the matter. He stated that Infosys had put the complaints up before the audit committee on the 10th of October. They presented it to the non-executive members of the board on the 11th of October, as well.

Signed by a group called “Ethical Employees” that claimed to be part of Infosys, also alleged irregularities with approval of large deals. They claimed that Roy had instructed individuals within the company to make incorrect assumptions on deals to show better margins. The letter explicitly stated that a number of billion-dollar deals have zero margins, across these past few quarters.

This comes two years after Infosys’ former top boss, Vishal Sikka, left the company and shook the entire firm by the act.

Nilekani stated that these complaints were being handled through an objective lens. He continued that Roy and Parekh are not involved in the investigations, to maintain independence. Nilekani continued, adding that one of the complaints involves mainly with alleged activities related to Parikh’s travels to Mumbai and the US. 

Somewhat expectedly, Parikh refused to comment about the matter. Or rather, he outright ignored requests for it.

Shares Plummet

As is the case with any form of bad news reaching investors, Infosys’ shares dove hard in light of the investigations. The Bengaluru-based company dropped as much as 16%. They’ve only felt worse intraday six years ago, on April 2013. This massive tank in shares shows in the amount of market capitalization lost: 470 billion rupees ($6.63) vanished into nothing, with the 06:50 mark stating it was 2.79 trillion rupees

Deepak Jasani, Head of Retail Research with HDFC Securities, explained the matter. He stated that the stocks would suffer from an overhang until this matter was resolved. He compared Infosys to the so-called blue-eyed boy in terms of its reputation with corporate governance. He stated that there was a chance that two complaints in the same amount of years would shake the confidence of investors.

Infosys has tasked Shardul Amarchand Mangaldas & Co with conducting an independent investigation about the matter. The company stated that its board would take the necessary steps, depending on the investigation’s outcome.

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Ali Raza

A journalist, with experience in web journalism and marketing. Ali holds a master degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications.

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