Infosys shares tank nearly 17%, investor wealth worth Rs 53,000 crore wiped out in a day
Stock prices dived a day after the company disclosed that it had received anonymous whistleblower complaints accusing its CEO and CFO of unethical practices.
The shares of Infosys plunged nearly 17% on Tuesday, a day after the company disclosed that it had received anonymous whistleblower complaints accusing its Chief Executive Officer Salil Parekh and Chief Financial Officer Nilanjan Roy of unethical practices. The fall in share price wiped out investors wealth worth nearly Rs 53,000 crore.
At Tuesday’s close, Infosys’ market capitalisation stood at Rs 2.74 lakh crore, compared to Rs 3.27 lakh crore in the previous session. The company’s shares had plunged over 16% in the United States’ NASDAQ stock market on Monday. On Tuesday, Infosys shares closed 16.65% down at Rs 640 on the Nifty 50.
Infosys told the BSE in a statement on Monday that the company “has received anonymous whistleblower complaints alleging certain unethical practices”. They have been placed before the audit committee as per the company’s practice “and will be dealt with in accordance with the company’s whistleblower policy”, the statement added.
The whistleblowers, who called themselves “ethical employees”, told the IT major’s board of directors on September 20 that Parekh and Roy had fudged financials and inflated profits. The whistleblowers added that they had emails and voice recording to prove their allegations.
The letter alleged irregularities in large deal signings. “CEO is bypassing reviews and approvals and instructing sales not to send an email for approvals,” Deccan Herald quoted the letter as saying. “He directs them to make wrong assumptions to show margins.”
Parekh, the whistleblowers alleged, had made derogatory and sexist comments about board members DN Prahlad, D Sundaram and Kiran Mazumdar-Shaw. “No one in the Board understands these things [issued regarding large deals], they are happy as long as share price is up,” the letter quoted Parekh as saying. “Those two Madrasis [Sundaram and Prahalad and Diva [Kiran] make silly points, you just nod and ignore them.” Madrassi is an ethnic slur used for people from the southern parts of India.
The employees wrote to the US-based Office of the Whistleblower Protection Programme on October 3 as they did not receive a response from the board.
Infosys Chairman Nandan Nilekani on Tuesday morning said the audit committee was looking into the two complaints. “Although we have not been provided any of the emails or voice recordings, we will ensure that the generalized allegations are investigated to the fullest extent,” he said in a statement to the BSE. “Additionally, to ensure independence in these investigations the CEO and CFO have been recused from this matter.”
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