Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,872.1031.65
Stock Analysis, IPO, Mutual Funds, Bonds & More

Infosys tanks 16% on whistleblower blow as investors vote with their feet

This was the 16th time the stock has tanked in double-digit in a single day since January 2000.

, ETMarkets.com|
Updated: Oct 22, 2019, 03.51 PM IST
0Comments
PTI
CITI ON INFOSYS
The whistleblowers said they have emails and voice recordings on these issues, PTI reported.
IT major Infosys on Tuesday registered its biggest fall in over six years on Dalal Street after a letter by anonymous employees surfaced, accusing Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy of unethical practices for several quarters.

The scrip tanked 16.21 per cent to trade at Rs 643.30 trade against the previous close of Rs 767.75. It hit an intra-day low of Rs 638.30. Prior to this fall, the stock had its biggest fall of 21.33 per cent on April 12, 2013. The selloff wiped off Rs 44,000 crore from the stock’s market-capitalisation.

This was the 16th time the stock has tanked in double-digit in a single day since January 2000.

Milan Vaishnav, CMT, MSTA, Consultant Technical Analyst, said: “Traders should exit the stock as short-term money will flow to other better stocks like TCS. However, SIP investors and long-term investors should stay put, as valuations will improve relatively once the knee-jerk reaction gets over.”

Infosys table October 22

“Post Tuesday’s gap-down opening, maximum Call open interest was seen at Rs 700 followed by Rs 740 and Rs 730 levels. This will keep upsides capped in the event of any recovery in the coming days,” he said.

Infy F&O

Source: Gemstone Equity Research and Advisory

The domestic equity market was closed on Monday for Maharashtra state elections. But the company’s American Depository Receipts (ADRs) listed on the New York Stock Exchange fell over 15 per cent in overnight trade.

“We have high respect for all of you and bring to your notice the unethical practices of the CEO in recent quarters. Same measures were taken in the current quarter also to boost short-term revenue and profits,” the letter addressed to the board of directors dated September 20, read.

The whistleblowers said they have emails and voice recordings on these issues, PTI reported.

In a clarification to exchanges, Infosys on Tuesday said the whistleblower complaint has been placed before the audit committee as per the company’s practice, and it would be dealt with in accordance with the company's whistleblower policy.

The audit committee has retained the law firm of Shardul Amarchand Mangaldas & Co. to conduct an independent investigation, and the company’s board will take appropriate steps based on the outcome of the investigation, the company said.

Infosys Chairman Nandan Nilekani, in his statement, said the company was made aware of another letter (dated October 3) that was purportedly written to the office of whistleblower protection program, Washington DC. This letter referred to the September 20, 2019, complaint and to emails and voice recordings in support of the allegations.

“These complaints are being dealt with in an objective manner. The undated whistleblower complaint largely deals with allegations relating to the CEO's international travel to the US and Mumbai," Nilekani pointed out.

“Although we have not been provided with any of the emails or voice recordings, we will ensure that the generalised allegations are investigated to the fullest extent. Additionally, to ensure independence in these investigations, the CEO and CFO have been recused from this matter," Nilekani said.

“We will know only when the investigation happens. If there is some truth in the complaint, then it will weaken the entire IT sector. It’s a glass half-full and half-empty kind of situation right now. The market is also in a mode where people have taken advantage of capitulation and rumour mongering. We have seen that in the case of DHFL and Indiabulls,” said Sanjiv Bhasin, IIFL.

“May be spread down the effect on Infosys, which is a pedigree stock. However, it is something hard to believe. We will be in a situation to comment further on it if and when we see more details from the investigation. The present news is very positive for competitors like Tata Consultancy Services and Wipro,” he said.

Infosys two weeks back reported a 2.2 per cent drop in consolidated profit at Rs 4,019 crore for the July-September quarter. This was against a Rs 4,110 crore profit it had posted for the corresponding quarter last year.

The company's top line increased 9.8 per cent to Rs 22,629 crore from Rs 20,609 crore in the year-ago period. The company also raised the lower-end of its FY2019-20 revenue guidance and the revised forecast now stands at 9-10 per cent growth in constant currency terms.

Commenting of the whistleblower news, Harit Shah, Research Analyst at Reliance Securities, said, “It is very serious news indeed. This equates to a corporate governance issue. The Deputy CFO has quit. This in itself is an indirect admission that something is wrong. It is really disappointing that a company that has long been viewed as a ‘poster boy’ of corporate governance in India has seemingly fallen to such levels.”

“While we await developments on the investigation by the board, given that it is so widely held, it is very likely that some investors will vote with their feet and sell at least some of their holdings. The market is very unforgiving of companies that have corporate governance issues. While it would not be fair to directly jump to conclusions, this issue appears to be quite ugly at least on the surface,” he said.

Reliance Securities has a ‘Hold’ rating on Infosys.
Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service