Shares of Infosys Ltd, India's No.2 software services exporter, suffered a bloodbath on Tuesday, tumbling a staggering 16 percent. The massive share sell-off, which wiped out as much as 470 billion Indian rupees ($6.6 billion) in market capitalisation, was triggered by a whistleblower complaint that alleged accounting irregularities at the company.
The complaint lodged by 'ethical employees', said top two Infosys executives engaged in "unethical practices" to boost short-term revenue and profit. Chief Executive Salil Parekh bypassed reviews and approvals for large deals in order to avoid reduced profits hitting the company shares, the complaint said, Reuters reported.
"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, according to the report. It also says that Chief Financial Officer Nilanjan Roy prevented employees from bringing to light issues around large deals.
Use of ethnic slur
Meanwhile, Infosys Chairman Nandan Nilekani said the company will investigate the issue and that the audit committee and the non-executive members of the board are looking into the complaint. "The whistleblower complaint has been placed before the Audit Committee as per the Company's practice and will be dealt with in accordance with the Company's whistleblowers policy," Infosys said in a statement.
Infosys was rocked by a public squabble between then CEO Vishal Sikka and the founders of the company. Industry observers feel that two scandals in the space of two years will affect the standing of Infosys as the IT bellwether in India. "Infosys is the blue-eyed boy as far as corporate governance is concerned... two complaints in two years could shake investor confidence, at least temporarily," Deepak Jasani, head of retail research at HDFC Securities., told Reuters.
The 'ethical employees' say in the letter that CEO Parekh made misogynist comments against a woman board member. He also allegedly used an ethnic slur to refer to two of the board members who are from South India. "We have high respect for all of you and bring to your notice unethical practices of CEO in the recent quarters... In the last quarter, we were asked not to fully recognise the costs like visa costs," the letter says, according to the Deccan Herald.
