Infosys whistleblower case: How does the investigation impact company's clients
E Kumar Sharma January 25, 2020
Infosys recently hit the headlines again over reports that the Securities and Exchange Board of India (SEBI) intended to investigate the happenings in the company following the whistleblower allegations. On Friday, Infosys informed the Bombay Stock Exchange that it had "not received any request from the SEBI to conduct further audits as reported by media." This is, even as the company added, that it had received letters from regulatory authorities seeking information on the anonymous whistleblower investigation. Infosys had said that it will continue to cooperate with regulatory authorities -- the SEC investigation and class action lawsuit in the US on this matter are on-going.
While one has to wait for clarity on what SEBI wants to investigate, if at all, the immediate question is what does it all mean from the perspective of an Infosys client. Infosys' internal audit committee gave a clean chit to the company stating that it found no evidence of financial impropriety or executive misconduct.
Analysts say that typically internal reviews and investigations have limited value from a client perspective and they would clearly favour a third party investigation. Additionally, these are also seen as issues that may not immediately impact Infosys' deliverables as these are mostly compliance- and finance-related issues. The case would then have a bigger impact on clients who are awaiting the outcome of the investigations to decide whether or not to sign new deals with the company.
That the company has to deal with developments at a time when it was showing signs of picking up its business momentum is a bigger concern for analysts. In the third quarter FY20 results, Infosys showed continued strength in large-deal wins despite, what analysts called 'a cautious environment'.
Analysts also point out that part of Infosys large-deal wins has to do with the fact that clients' decisions are not short-term processes since vendor growth plans and finalisation of projects do not happen over a week - it could be over a few months to a couple of quarters.
Over the past few years, Infosys has had to deal with a bumpy ride at regular intervals. It remains to be seen how this current development concludes.