MUMBAI (NewsRise) -- Infosys said its audit committee "prime facie" found no evidence to prove the allegations in a recent whistleblower complaint, as India's second-largest software exporter seeks to fend off accusations of corporate governance lapses.
The audit committee's initial clean chit comes as the company is recovering from a management turmoil that led to the exit of its then chief executive about two years ago amid similar allegations. The recurring allegations have cast a shadow over the software exporter, once a poster boy of corporate governance standards in India. In recent times, several Indian companies -- including Sun Pharmaceutical Industries, the nation's top drug maker, and private lender Yes Bank -- have come under the radar over governance issues.
Last month, Bengaluru-based Infosys had launched a probe after anonymous complaints and a whistleblower letter said the software company's top two executives used "unethical business practices" to bulk up its revenue and profit. The disclosure led to a 16% crash in Infosys shares, its biggest intraday drop in six and a half years, on Oct. 21, wiping off $6.6 billion in market capitalization.
"There is no supporting evidence that has been received by the company along with these anonymous complaints to substantiate the allegations," Infosys said in a statement on Monday. The company said it has retained the services of law firm Shardul Amarchand Mangaldas to further investigate the matter.
Given that there is no evidence and the complaints are still under investigation, the company is not in a position to determine "the concreteness, credibility, and materiality" of the anonymous complaints, it said.
The two whistleblower complaints had alleged that the company's Chief Executive Salil Parekh bypassed reviews and approvals for large deals, fearing a backlash on its growth targets, while Chief Financial Officer Nilanjan Roy allegedly abetted hiding issues around such deals.
Infosys's disclosures about the complaints came barely a week after it reported its financial results on Oct. 14. The delay in disclosing the anonymous complaints dated Sept. 30 and the whistle blower letter on Oct. 16, raised investor hackles about the lack of transparency. Some accused the company of hiding information, especially since its board was aware of the complaints when it met to discuss the second-quarter earnings.
Infosys on Monday said the anonymous complaints do not fall within the purview of "deemed material events," as prescribed by the capital markets regulator, and hence the company did not make any disclosures immediately.
Infosys shares gained as much as 6.5% in Mumbai trading on Monday before closing up 3.1%. The benchmark S&P BSE Sensex rose 0.3%.
The company is already being probed by the capital markets regulator Securities and Exchange Board of India, as well as the National Financial Reporting Authority. It is also being investigated by the U.S. Securities Exchange Commission, while a class action lawsuit has been filed against it in the U.S.
In 2017, Infosys was stung by allegations of corporate governance lapses leading to months-long discord between the board and the founders and the eventual exit of its then Chief Executive Vishal Sikka, the first CEO from outside the company to take charge at Infosys. Infosys founder N.R. Narayana Murthy questioned Sikka's spending style, his pay rise, and the rationale behind a bloated severance pay to a former CFO, saying "the company is using such payments as hush money to hide something."
It took the re-entry of Nandan Nilekani, a co-founder and former CEO, as chairman to broker peace between the board and founders. Soon after, Infosys appointed Parekh as the chief executive, a move that was welcomed by Murthy.
Since taking charge, Parekh has stabilized Infosys' performance, bringing the company back on the growth path. In the just-ended September quarter, Infosys raised its annual revenue growth outlook, outperforming larger rival Tata Consultancy Services that raised doubts about sustaining its growth momentum for the year.
--Dhanya Ann Thoppil