US law firm readies class suit against Infosys to recover losses

In mounting troubles for Infosys, US-based Rosen Law Firm has said it is preparing a class action lawsuit to recover losses suffered by investors in the wake of allegations of "unethical practices" at the IT major.

On Monday, NYSE-listed Infosys had said it had received whistleblower complaints alleging "unethical practices" by its top executives to boost short-term revenue and profit. This had led to a sharp fall in Infosys shares during intra-day trading in the US.

In a statement, Rosen Law Firm said it is "investigating potential securities claims on behalf of shareholders of Infosys Ltd resulting from allegations that Infosys may have issued materially misleading business information to the investing public".

"Rosen Law Firm is preparing a class action lawsuit to recover losses suffered by Infosys investors," the statement added.

The Bengaluru-based company's stocks in India have also taken a beating. Infosys' shares plunged over 16 per cent, the most since April 2013, closing at Rs 643.30 on the BSE.

Chairman and co-founder Nandan Nilekani has 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 Parikh as well as Chief Financial Officer 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.

The latest allegations came just two years after Infosys endured an internal turmoil that saw its then CEO Vishal Sikka resigning from the company. Following this, Nilekani was brought in as Chairman to steer the company, and Salil Parekh joined in as the CEO in January last year.