Clean chit for Infosys from US SEC on whistleblower case, stocks gain 16%

In an exchange filing, the company said that the US regulator has concluded the investigation

Infosys, the country’s second-largest software services exporter, has been fully cleared by the US Securities and Exchange Commission (SEC) on the so-called ‘whistle-blower’ charge of last year that had alleged wrongdoing by the top management.

“The company received a notification that the SEC has concluded its investigation and the company does not anticipate any further action by the SEC on this matter,” it told the stock exchanges. “The firm has also responded to all the inqires received from the Indian regulatory authorities and will continue to cooperate (on) any additional requests.”

In late October 2019, a ‘whistle-blower’ letter went public. It alleged the company’s chief executive and finance head were guilty of inflating the growth numbers through accounting irregularities. Infosys' audit committee had the charge investigated and concluded this January that the allegations had no factual basis.

“We are comfortable that we have had a very thorough and comprehensive investigation, which will put us in good stead when we engage with them (SEC),” Chairman Nandan Nilekani had said after the internal investigation found no wrongdoing. After the SEC okay, the shares of Infosys surged 14 per cent to close at Rs 600 at the National Stock Exchange.

“Definitely, there was an overhang over the stock, which is now gone with the SEC clean chit. So, apart from the near-term concerns over coronavirus, the company will post industry-leading growth numbers once this issue settles down,” said Sanjeev Hota, head of research at Mumbai-based brokerage Sharekhan.

He, however, said that as with its peers, the Bengaluru-headquartered firm is likely to see delays in signings of large deals. Apart from fall in discretionary spending by clients, owing to the global virus spread.

The information technology industry is staring at a demand slowdown. Many developed countries, including America, have started to see establishments shutting down, to ensure social distancing to fight the virus’ spread. As a result, reports suggest, deal signings worth $3-4 billion have been deferred in this month alone.