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Infosys stock to take a beating

Analysts feel a major recovery is unlikely, even in the short run, till further clarity

By Our Special Correspondent in Mumbai

  • Published 22.10.19, 12:38 AM
  • Updated 22.10.19, 12:38 AM
The impact of the development was already felt in the US markets with the Infosys ADR trading almost 13 per cent lower at $9.23 in Nasdaq.
The impact of the development was already felt in the US markets with the Infosys ADR trading almost 13 per cent lower at $9.23 in Nasdaq. (Shutterstock)

The Infosys stock is likely to come under pressure when trading resumes on Tuesday as investors are expected to react negatively to the news of a group of employees making damaging accusations against CEO Salil Parekh and chief financial officer Nilanjan Roy.

The impact of the development was already felt in the US markets with the Infosys ADR trading almost 13 per cent lower at $9.23 in Nasdaq. Analysts feel a major recovery is unlikely, even in the short run, till further clarity.

The development has raised questions on why the Bangalore-based firm did not disclose that a whistleblower complaint was sent to its board nearly a month ago.

In a communication to the stock exchanges on Monday, Infosys said it had received a complaint alleging certain unethical practices that had been placed before the audit committee. According to Infosys, it will be dealt according to the company’s whistleblower policy. The firm did not disclose as to when this matter was referred to the audit committee.

The news of the whistleblower complaint comes just days after Infosys executive vice-president and deputy CFO Jayesh Sanghrajka resigned. He had spent more than 14 years in the Bangalore-based IT major.

“Very serious news indeed. This equates to a corporate governance issue. The deputy CFO has also quit. This in itself is an indirect admission that something is rotten. The stock will now languish 10-15 per cent lower in the near term,” said Harit Shah, research analyst at Reliance Securities.

He added that questions would now be raised about the board-level processes at Infosys, which was very disappointing given that when founder Nandan Nilekani was brought back, his specific focus was to ensure high corporate governance standards after the Vishal Sikka fiasco.

Shriram Subramanian, founder and managing director of proxy advisory firm InGovern, told The Telegraph that the allegations were very serious and specific in nature.

“The employees have said they have the evidence of email and voice conversations. The audit committee needs to take urgent action in terms of investigation and presenting a true picture to the investors. As the complaint was made in September to the board, they should have investigated and disclosed the findings by now,” he added. 

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