Infosys co-founder and company Chairman Nandan Nilekani has once again emerged as the man of the moment even as the firm he leads grapples with another crisis-like situation and an erosion of more than Rs 53,000 crore in market cap following allegations of unethical practices.
As soon as the markets opened on Tuesday after a holiday, Nilekani swung into action by informing the exchanges that the company was conducting an investigation into the complaints of a whistle-blower.
Sources in the know said he attended an audit committee meeting at the Infosys campus on Tuesday. D Sundaram, Punita Kumar-Sinha, and Roopa Kudva are members of the committee.
“The chairman is in control of the situation and is engaged with all stakeholders to assuage the concerns of investors,” said a person familiar with the development.
The company is also learnt to be looking into the circumstances in which confidential financial information was recorded and stored as claimed in the whistle-blower’s letter. However, this hardly helped the situation with the company’s share prices plunging 16.21 per cent to settle at Rs 643.30 on the BSE. This is the sharpest intra-day fall in Infosys shares in more than six years. It erased the IT major’s market cap by Rs 53,131 crore and dragged it below Rs 3 trillion.
The sharp fall on the Indian bourses came a day after Infosys’ ADR dipped 12.11 per cent to settle at $9.29 on the NYSE on Monday. On Tuesday, the ADR was down 2.31 per cent at $8.97 as of 2300 IST.
Finance ministry officials said the government was keeping a close watch on developments at the IT firm.
In its filing with the exchanges, Infosys said its internal auditor EY and law firm Shardul Amarchand Mangaldas & Co would conduct an independent probe while its statutory auditor Deloitte had been informed about the investigation.
The statement attributed to Nilekani also said Chief Executive Officer Salil Parekh and Chief Financial Officer Nilanjan Roy had recused themselves from this matter to ensure fairness in the probe.
However, the company didn’t give a timeline as to when the investigation would be over. “At the appropriate time, we will provide a summary of the investigation results. The board is committed to upholding the highest standards of corporate governance and protecting the interests of all stakeholders,” Nilekani was quoted in the exchange filing.
Giving details of the timeline of the whistleblower letters, the IT firm said two anonymous complaints dated September 20, and received on September 30 by one of its board members, were placed before the audit committee on October 10 for examination. An anonymous group, calling itself ‘Ethical Employees’, in a letter dated September 20, alleged that Infosys’ management was taking “unethical” steps to raise short-term revenue and profit.
“(The) CEO and CFO are asking us to show more profits in treasury by taking up risks and make changes to policies. This will provide short-term profits,” the letter had said. “They ask us not to make key disclosures in (Form) 20F (a format required by the Securities and Exchange Commission for specified information) and annual report, and to share only good and incomplete information with investors and analysts.”
As the company’s stocks took a beating, individual investors with an aggregate holding of 10 per cent and financial institutions like Life Insurance Corporation, which holds over 6 per cent, witnessed the biggest erosion in their portfolio value.
ICICI Prudential Life Insurance Company, with a holding of another 1.32 per cent, was another major loser.