Wednesday, November 13, 2019

Posted at: Oct 23, 2019, 7:35 AM; last updated: Oct 23, 2019, 7:46 AM (IST)

Infosys begins probe into alleged ‘unethical practices’

Shares tank nearly 17%, market cap dips by Rs 53,000 crore
Infosys begins probe into alleged ‘unethical practices’

Delhi/Bengaluru, Oct 22

IT bellwether Infosys today said it was investigating allegations of “unethical practices” by chief executive officer Salil Parekh after receiving whisteblower complaints last month, sending its shares into a tailspin.

Shares fell nearly 17% on Tuesday, its biggest intra-day percentage drop since April 2013. The fall wiped out $6.6 billion (Rs 53,000 crore) in market capitalisation.

One of the complaints “largely deals with allegations relating to the CEO’s international travel to the US and Mumbai,” Infosys chairman Nandan Nilekani said in a statement.

Chief executive Salil Parekh, who took charge in 2018, has bypassed reviews and approvals for large deals for fear of reduced profits having a negative impact on its shares, the letter signed by “ethical employees” said.

“Several billion dollar deals of past few quarters have nil margin,” said the September 20 letter, which implies the company did not actually profit from the deals.

“CEO is bypassing reviews and approvals and instructing sales (team) not to send mails for approval. He directs them to make wrong assumptions to show margins,” the letter said, adding that CFO Nilanjan Roy prevents employees from highlighting issues around large deals in presentations to the company’s Board.

Reuters could not independently verify claims made in the letter. Parekh did not respond to request for a comment. Infosys chairman Nandan Nilekani said today the complaints were placed before the audit committee and the non-executive members of the Board. — Reuters

The case file

While the whistleblowers accused CEO Salil Parekh of leading an effort to shore up profits through irregular accounting, Infosys said one of the complaints dealt largely with allegations relating to his international travel to the US

The firm also did not take into account expenses such as visa costs to boost profit, while it was pressurised not to recognise reversals of a $50-million upfront payment in a contract, which is against accounting practices

CEO Salil Parekh and CFO Nilanjan Roy have been recused from the matter to ensure an independent investigation, said company’s chairman Nandan Nilekani


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