Infosys Price Plummets As Company Says It's Investigating CEO's 'Unethical Practices'

India’s second-largest IT services provider Infosys INFY saw its shares drop by more than 12% on the New York Stock Exchange and 16% on the National Stock Exchange of India between Monday and Tuesday.

This is the worst intraday drop Infosys has seen in six years, according to Reuters. 

What Happened

The drop follows the company’s disclosure of two whistleblower reports it received over the last month alleging "unethical practices" on the part of CEO Salil Parekh.

In a letter addressed to the stock exchanges NYSE, NSE and Bombay Stock Exchange on Tuesday, Infosys Chairman Nandan Nilekani said the company has instituted an inquiry against the CEO.

Nilekani refrained from providing further details on the reports, citing the pending investigation, but said the complaints are mostly regarding Parekh’s business travels to the U.S. and Mumbai.

Parekh did not respond to Reuters' request for comment, the newswire said. 

The Economic Times claims to have accessed these letters and published copies on its website.

"CEO is bypassing reviews and approvals and instructing sales not to send emails for approval. He directs them to make wrong assumptions to show margins," one of the letters accessed by ET alleges.

“CFO is compliant, and he prevents us from showing in board presentations large deal issues.”

What’s Next

The company’s internal auditor Ernst & Young, along with an Indian law firm Shardul Amarchand Mangaldas & Co., will be assisting the Infosys audit committee in the investigation, according to the letter Nilekani sent to the stock exchanges. 

The whistleblowers sent a copy to the U.S. Securities and Exchange Commission in addition to the Infosys board.

Investigations in the U.S. are being carried out by the law firm Kahn Swick & Foti.

The stock was down 2.63% at $8.94 midday Tuesday. 

Photo by PrasanthR via Wikimedia.