BSE seeks answers from Infosys, Sebi begins probe
NEW DELHI: Leading exchange BSE on Wednesday asked Infosys to explain why it did not make a disclosure about a whistle-blower complaint which alleged that the company’s top executives were f ollowing “unethical practices” to shore up profi t s t hrough i r r egular accounting ways.
Meanwhile, markets regulator Securities and Exchange Board of India (Sebi) has begun its probe into alleged non-disclosure of price-sensitive information by Infosys’ management and also corporate governance lapses. It is also examining possible insider trading in the company’s securities.
People familiar with the matt e r s ai d t he r e gulat or has already asked the stock exchanges to collate trading data of Infosys’ shares as well as about derivative positions, while details are being sought about alleged non-disclosure of key information.
The regulator may also summon the company’s top management and others, while information might be sought from some board committees including those dealing with audit and other financial matters at the company depending on progress in the investigation, the people familiar with the matter said.
On Tuesday, Infosys chairman Nandan Nilekani said the whistle-blower complaint, dated September 20, had been placed before the audit committee on Oct o b e r 1 0 . There was a n undated complaint which has also been placed before the committee.
One of its board members had received the complaints on September 30, according to Nilekani’s statement submitted to the stock exchanges on Tuesday.
Nilekani had said that both the complaints were placed before the company’s non-executive board members on October 11, also the day when Infosys announced its second quarter results.
“Infosys Ltd vide an announcement dated October 22, 2019, titled ‘Statement’, submitted Statement attributable to Nandan Nilekani, Chairman of Infosys Ltd, wherein it is mentioned that Infosys Ltd had received whistle blower complaints. However, it is observed that Infosys Ltd has not made any disclosures under Regulation 30 of Sebi (LODR) Regulations, 2015, w.r.t. (with respect to) receipt of whistle-blower complaint mentioned in the announcement,” the company said in a filing to the bourses on Wednesday.
The exchange has sought clarification from Infosys for “nondisclosure of the information about the whistle-blower complaint”, the filing said.
According to the BSE, a reply from the company is awaited.
Following reports of whistleblower allegations, the information technology (IT) major, on Monday, informed the stock exchanges that it has received anonymous whistle-blower complaints alleging certain unethical practices and that the same have been placed before the audit committee.
Against t he backdrop of Nilekani’s statement on Tuesday and the company’s filing to the bourses a day before, BSE has sought clarification.
Nilekani had also said the audit committee has retained law firm Shardul Amarchand Mangaldas & Co. to conduct an independent investigation into the issue.
In the letter, dated September 2 0 a nd s i g ne d b y ‘ Et hi c a l Employees’, it was alleged that chief executive officer (CEO) Salil Parekh as well as chief financial officer (CFO) Nilanjan Roy engaged in forced revenue recognition from large contracts not adhering to accounting standards.
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.
On Tuesday, shares of Infosys plunged over 16% on Tuesday, wiping out about ₹53,450.92 crore from its market valuation.
The scrip gained over 1% in afternoon trade on BSE and the NSE. Us-based Rosen Law Firm has said it is preparing a class action lawsuit to recover losses suffered by Infosys investors in the US.