No prima facie evidence to corroborate whistleblower allegations: Infosys

No prima facie evidence to corroborate whistleblower allegations: Infosys
Photo Credit: Reuters
4 Nov, 2019

Bengaluru-headquarterd information technology services firm Infosys said there was no prima facie evidence to corroborate recent allegations by a whistleblower, it said in a statement to the National Stock Exchange (NSE).

The clarification issued in the first half of the day saw the company's share price gain 6% during the day and close with a gain of 3%.

The statement has not been released as part of any conclusion of any inquiries by company. It is only a clarification given by the company to the stock exchange when asked for its response on why the company did not disclose the whistleblower allegations to the exchanges or regulators.

The Bengaluru-based blue-chip firm has received support from multiple investors and market watchers last week, who have said that the data of the company does not show any inconsistency.

"With respect to the anonymous complaints, there is no prima facie evidence that the company has received until the date to corroborate any of the allegations made. In any event, the audit committee retained the services of the law firm, Shardul Amarchand Mangaldas & Co to investigate the matter," the company statement said.

The country's second largest software exporter added that even before the appointment of the independent investigator, the audit committee had begun consultations with independent internal auditors Ernst & Young to verify the allegations."The independent internal auditors were given the mandate to review certain processes on the basis of the allegation in the Anonymous Complaints," the statement said.

Infosys is expected to complete the investigations into the whistleblower complaints soon to repair the damage the allegations have done to the company's brand image as well as its share price.

Several analysts that TechCircle spoke with recently said that the company could have been more forthcoming with the disclosures to prevent damage to the stock. The whistleblower allegations led to Indian and US regulators seeking explanations, apart from a class-action suit in the US by a few organisations that suffered losses because of the fall in the company’s share price. 

The shares had fallen by as much as 16% when the whistleblower letter was made public. The shares have since reversed some of the losses.

In its response to regulators and exchanges, the company has maintained that it was not bound to disclose all whistleblower complaints according to the present regulations. The firm had added that before the conclusion of the investigation of the generalised allegations in the whistleblower complaints, a disclosure under Regulation 30 of SEBI"s LODR Regulations, 2015, was not required and was hence not provided.

A fortnight ago, news reports said that a whistleblower group that called itself ‘ethical employees’, had complained against Infosys, alleging that it was taking unethical steps to boost its short term revenue and profit numbers. While the whistleblower complaints happened during the second half of September, the company did not disclose the details while announcing its quarterly earnings for the second quarter of the financial year 2019-2020 on October 11. 

At the press conference to announce the earnings, the senior management did not speak about the whistleblower complaints and nor was there any mention of the complaints in the company's statements to the BSE or media outlets.