Infosys is headed for a deeper crisis with news reports suggesting the Securities and Exchange Board of India (Sebi), market regulator, is likely to seek clarification from the IT giant over the complaint.
The Securities and Exchange Board of India (SEBI) may seek clarification from Infosys' management on charges level levelled by the whistle-blower, according to CNBC-TV18.
Sebi may question Infosys about the company not informing the exchanges upon the receipt of whistleblower complaint dated 30 September.
Sebi may also investigate the whistleblowers' action in order to ensure there is no vested interest involved, the report added.
The whistle-blowers in their letter claimed, "Critical information is hidden from the auditors and board. In large contracts like Verizon and Intel, joint ventures in Japan, and ABN Amro acquisition revenue recognition matters are forced, which is not as per the accounting standards."
The letter also mentions about the management putting immense pressure on them to not recognise reversals of Rs 353 crore of upfront payment in the FDR contract, as it would slash profits for the quarter and negatively affect the company's stock price. Not recognising reversals of upfront payment in FDR contract was against fair accounting practice, they stated.
Citing sources, CNBC-TV18 said that Salil Parekh and Nilanjan Roay were questioned about the whistleblower's claims in Infosys' 11 October board meeting. However, both, Parekh and Roy, denied the allegations made by the whistleblower, the channel said.
Sources on Infosys tell CNBC-TV18 that the CEO & CFO were questioned about claims made, in October 11 board meeting; both, CEO & CFO denied the allegations made by the whistleblower#CNBCTV18Excluisve pic.twitter.com/QRcN12yX6j
— CNBC-TV18 (@CNBCTV18Live) October 23, 2019
The shares of the IT services firm on Tuesday plummeted nearly 17 percent, wiping Rs 53,451 crore from its market valuation, on concerns over a whistleblower complaint.
The whistleblower group Ethical Employees, has allegedly written to the US-based office of the Whistleblower Protection Programme alleging wilful mis-statement and material accounting irregularities for the past two quarters (April-September).
A whistleblower letter revealed alleged financial misconduct and “unethical practice” against Infosys Chief Executive Officer Salil Parekh and chief financial officer Nilanjan Roy.
These developments are bound to impact performance, the company’s image with clients, and deal flow as well as employee morale when the sector is facing tumultuous times due to global macro uncertainties, said Madhavan Narayanan in an article in Firstpost.
Infosys chairman Nandan Nilekani said the anonymous whistleblower's complaint into alleged financial misconduct and “unethical practice” is being dealt with by the IT major in an objective manner. In a statement released today, Nilekani said, “will ensure whistleblower allegations are probed to the fullest extent,” he said.
Nilekani said one board member had received two anonymous complaints on 30 September 2019—one dated 20 September 2019, titled “Disturbing unethical practices” and an undated note with the title, “Whistleblower Complaint”, a PTI report said.
He said both had been placed before the audit committee on 10 October 2019, and before the non-executive members of the board the following day.
Updated Date: Oct 23, 2019 09:47:39 IST