Bengaluru: Infosys Ltd said it hasn’t received any evidence to support allegations, including that of inflating profit, made by anonymous whistleblowers against top company officials, including chief executive Salil Parekh.
“An anonymous letter with certain allegations and no supporting evidence cannot be regarded as being credible or concrete. Therefore, the company is not in a position to determine the concreteness, credibility and materiality of the anonymous complaints," Infosys said in a stock exchange filing. The statement sent the company’s stock soaring as much as 6.47% in intra-day trading on Monday.
An anonymous group called Ethical Employees accused Parekh and the company’s chief financial officer of unethical accounting practices in a bid to boost short-term revenue and profit. Infosys has since hired law firm Shardul Amarchand Mangaldas and Co. to look into the allegations.
A former Infosys board member said he believes that there are no malpractices on the accounting front but that the company has mismanaged how the whistleblowers’ complaint was handled.
“The casual manner in which they handled this, how they didn’t respond to the media and investors is what upsets me. The board has to step in and ensure that such issues are handled properly… also the board and management have to work in tandem," he said.
The company has been criticized in some quarters for failing to proactively disclose the information to investors and waiting for the allegations to emerge in the public domain before responding to them. In their letter dated 20 September, the whistleblowers accused Infosys’s top executives of inflating revenue and profit, withholding information from the board and abusing travel privileges, among other issues.
“We had posited that the allegations do not pose any major threat to the business and the charges involve subjectivity," brokerage Edelweiss Securities said in a note on Monday. “For example, most large deals involve upfront cost and low margins, which normalize over the tenure of the deal. The company remains on a strong footing fundamentally and is firmly on track to deliver industry-leading growth."
Infosys’s troubles may not be over yet as it still faces class action lawsuits in the US, and both the US and Indian regulators have initiated separate investigations into the allegations.
Infosys’s shares rose 3.05% to close at ₹709 on BSE, while the benchmark Sensex gained 0.34% on Monday.