Infosys orders independent probe, stock crashes 16%
WHISTLEBLOWER COMPLAINT Infosys lost over $6 bn in m-cap on Tuesday
NEW DELHI: Information technology (IT) services company Infosys Ltd on Tuesday said it is investigating claims by anonymous whistleblowers accusing chief executive officer (CEO) Salil Parekh of “unethical practices” to shore up profits through irregular accounting, sending its shares to their worst intraday fall in over six years.
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 Parekh as well as chief financial officer (CFO) Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards.
Infosys shares plunged over 16%, the most since April 2013. They closed at ₹639.85 on BSE, down ₹127.90 over the previous trading day close.
The fall wiped out ₹47,000 crore ($6.6 billion) in market capitalisation (m-cap), which was at ₹2.8 crore as of 12:20pm.
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.
I n a s t a t e ment t o s t o c k 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 (EY) 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.
Infosys on Monday had 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.
Nilekani, in his statement, said the company was made aware of another letter (dated October 3) that was purportedly written to the Office of Whistleblower protection programme, Washington DC. This letter referred to the September 20, 2019, complaint, and to emails and voice recordings in support of the allegations.
“These complaints are being dealt with in an objective manner. The undated whistleblower complaint largely deals with allegations relating to the CEO’S international travel to the US and Mumbai,” Nilekani pointed out.
“Although we have not been provided any of the emails or voice recordings, we will ensure that the generalised allegations are investigated to the fullest extent. Additionally, to ensure independence in these investigations, the CEO and CFO have been recused from this matter,” Nilekani added.
BENGALURU: Kotak Mahindra Bank Ltd reported a bigger-than-expected 51% jump in its secondquarter net profit on Tuesday, boosted by higher interest income and lower tax expenses.
Kotak’s stellar results come at a time when Indian banks, already saddled with nearly $150 billion in bad loans, are struggling to grow their lending activity as a slowdown in domestic consumption weighs on demand for credit.
Credit growth at Indian banks dropped to the lowest level in nearly two years, latest Reserve Bank of India (RBI) data showed.
Kotak’s loan growth during the quarter slowed to 15%, versus a growth of 18% last quarter and 21% in the same period last year.
For the three months to September 30, net profit surged 51.1% to ₹1,724 crore—its highest in at least 17 years—versus ₹1,142 crore last year, the Mumbaibased private-sector lender said in a filing to the exchanges.
Thirteen analysts, on average, had expected a profit of ₹1,523 crore, according to Refinitiv data.
Interest earned during the period rose 16.6% to ₹6,762 crore, while tax expenses dropped 37.3% to ₹376 crore.
Net interest margin, a key indicator of a bank’s profitability, rose to 4.61% from 4.19% last year.
Meanwhile, gross bad loans as a percentage of total loans, a measure of asset quality, ticked up to 2.32% by the end of September quarter against 2.19% in the previous quarter. This was 2.15% during the same period a year ago.
CASA (current account savings account) ratio as on September 30 stood at 53.6% compared to 50.2% as on September 30 last year.