Following concerns over corporate governance lapses in the IT bellwether, the stock was in a freefall mode on Wednesday. The market value of the company on the bourses declined by Rs 53,131 crore on Wednesday as the stock its largest single-day fall in six-and-a-half years. The scrip ended at Rs 643, which was close to its 52-week low of Rs 600.
On Tuesday, a whistleblower letter by a set of Infosys employees alleged that books of accounts of the company were getting window-dressed to hide the real picture of the financials.
The letter alleged that the company's chief executive officer Salil Parekh and chief financial officer Nilanjan Roy had directed the finance team to follow the alleged 'unethical' practices.
Among other investors, Life Insurance Corporation of India held 6.7 per cent stake in Infosys as of September 3. Following the share price decline, the value of insurers' holding in the company has slipped by over Rs 3,500 crore. As of September 3, FPIs
held 33.45 per cent stake in the company.
According to foreign brokerage firm Jefferies, the multiple allegations were particularly related to large deals and the letter alleged that many of them had negligible margins.
The brokerage added that every 100 basis point lower margin impacts FY20/21 earnings per share estimates by 4.3 per cent, hence the price-to-earning de-rating could be the bigger risk for the stock.
On Wednesday, Infosys chairman Nandan Nilekani said the company's audit committee was looking into the whistleblower complaints against the top executives. Further, both the CEO and CFO were recused from these investigations to ensure independence.
This is not the first time the IT giant has found itself caught in allegations of corporate governance issues. Two-three years back, tensions escalated between the company's founding promoters and erstwhile management over alleged corporate governance lapses. These differences eventually culminated into exit of former CEO Vishal Sikka.