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Infosys US listed shares plunge 16% after whistleblower complaints

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The complaints follow a strong quarterly show by Infosys, which raised the lower end of its annual revenue forecast on upbeat demand for its digital services from Western clients. The whistleblower group accuses Infosys CEO of ‘unethical practices’ to boost numbers.

 

US-listed shares of Infosys fell nearly 16% in premarket trading on Monday after the Indian software services exporter said it had received whistleblower complaints alleging “unethical practices” by the company’s executives.

 

It alleges that several billion-dollar deals in the last few quarters had a nil margin and asked the company to get deal proposals, margins, undisclosed up-front commitments and revenue recognition checked by auditors. The company issued a statement after The Economic Times reported that an anonymous group sent letters to Infosys’ board and the US Securities and Exchange Commission alleging that the company was taking “unethical” steps to boost short-term revenue and profit.

 

The group alleged that Chief Executive Officer Salil Parekh was bypassing reviews and approvals for large deals, the ET report said. “In large contracts like Verizon, Intel, JVs in Japan, ABN AMRO acquisition, revenue recognition matters are forced, which are not as per accounting standards,” the report said, citing cited the letters.

 

Reuters was not able to independently review the letters. The complaints follow a strong quarterly show by Infosys, which raised the lower end of its annual revenue forecast on upbeat demand for its digital services from Western clients.

 

Infosys  said it has not received complaints through the whistleblower mechanism which allegedly raised certain issues related to the company. The whistleblower has written to market regulator SEBI complaining against Infosys and raised questions around the company signing agreements for mutual release of claims with three of its former three directors, including ex-Chairman R Seshasayee.

 

“(The complaints) have been placed before the audit committee as per the company’s practice and will be dealt with in accordance with the company’s whistleblower policy,” Infosys said in a filing to Indian stock exchanges. It has seen, ADRs of Infosys were down 15.7% at $8.91 in premarket trading on the New York Stock Exchange.

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