Why no disclosure, BSE asks Infosys

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Published: October 24, 2019 1:40:54 AM

The company received the whistleblower letter on September 30 and placed it before the audit committee on October 10 and before the non-executive members of the board on October 11.

Moreover, it said changes in the top management could lead to uncertainty on growth.

The Infosys stock on Wednesday bounced back from Tuesday’s battering to close up 1.2% even as the Bombay Stock Exchange (BSE) asked the company why it had not disclosed the receipt of anonymous complaints from insiders about “disturbing unethical practices”.

The disclosure was required under the Listing Obligations and Disclosures Regulation. Meanwhile, reports surfaced the capital markets regulator would investigate the events at the software major but no confirmation of Sebi having taken any action was available till the time of going to press.

On Tuesday, Infosys chairman Nandan Nilekani had said a legal firm would conduct an independent probe into allegations of mismanagement. The whistleblowers allege several large deals were signed at negligible margins, appropriate review and approval processes were bypassed and information relating to the large deals withheld from auditors & board members.

The company received the whistleblower letter on September 30 and placed it before the audit committee on October 10 and before the non-executive members of the board on October 11.

Proxy advisory firm IIAS said the company needed to be given a chance to explain its actions. In a note, IIAS wrote: “What, however, is expected is that the board will have protocols that are triggered once a whistleblower’s letter is received that they will have process and importantly the desire, that will quickly help them find the right answers. We should trust some boards to take the right call and do the right thing; it is those who do not, that need to be disciplined”.

Anil Singhvi, director, IIAS, said chairman Nilekani needed to have specified a timeline for the investigation. Also, the company could have been more forthcoming sooner than it was.

Analysts at Nomura wrote the issues around corporate governance — of selectively highlighting good and incomplete information to the board, auditors and the investor community — are unlikely to be resolved near term until the findings of the audit committee are released, and are likely to remain an overhang on the stock which could lead to some de-rating in terms of multiples. Moreover, it said changes in the top management could lead to uncertainty on growth.

 

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