Infosys net profit up 3.3% at Rs 3,726 cr

Infosys on Tuesday said its net profit grew 3.32 per cent to Rs 3,726 crore during the second quarter of 2017-18, while revenues grew nearly 1.5 per cent to Rs 17,577 crore.

Q2 revenues grew sequentially by 2.9 per cent in terms of dollar, and 2.2 per cent in constant currency terms. During the second quarter, revenues grew 5.4 per cent year-on-year in terms of US dollar.

Operating margins stood at 24.2 per cent compared with 24.1 per cent in Q1FY'18. Q2 net margins improved to 21.2 per cent compared with 20.4 per cent in Q1FY'18. Q2 Basic EPS was $0.25, a sequential growth of 7 per cent and year-on-year growth of 7.3 per cent.

Infosys has informed the BSE that the board of directors of the company at its meeting held on October 23-24, 2017, inter alia, has declared an interim dividend of Rs. 13 per equity share.

Revenue guidance

The company has lowered the guidance for the fiscal year ending March 31, 2018. Revenues are expected to grow 5.5-6.5 per cent in terms of constant currency. In rupee terms, revenues are expected to grow 3.0-4 per cent.

'No merit to allegations of wrongdoings'

Infosys has said that there is no merit to the allegations of wrongdoings, including the Panaya deal, after it reviewed the entire investigations which were set up to probe issues regarding the deal and the severance pay to its former CFO.

The IT major also said that the entire details of the investigations need not be made public because of the confidentiality issues.

In a statement, the IT major said on Tuesday after a “careful consideration led by our Chairman, Nandan Nilekani, the board reaffirms the previous findings of external investigations that there is no merit to the allegations of wrongdoing.”

The review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition of Panaya.

The review also confirmed that the company made appropriate and timely disclosures relating to severance payments to the former CFO at the end of the quarter of his resignation, and subsequently in the Company’s 20-F and Annual Report.

“I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the company and to see it succeed. In light of my review of these matters, I am fully persuaded, as is the entire board, that the conclusions of the independent investigations are correct.” Nilekani said.

Nilekani was appointed as the non-executive chairman of the board in August this year. He took over from the chairman, R Seshasayee, and Ravi Venkatesan who was the co-chairman of the board.

The statement also said the process of identifying the next CEO and shareholder consultation outreach have been initiated and is progressing well.

Infosys also said that because of confidentiality issues, additional details of the investigation are being held over. “After careful reconsideration, the company has concluded that publishing additional details of the investigation would inhibit the company's ability to conduct effective investigations into any matter in the future. Confidentiality is critical to ensuring the candor and cooperation of whistleblowers and other participants in any investigative process. The precedent of releasing the full investigation reports could impair the cooperation of participants should the need for an investigation arise in the future,” the statement said.

The former chairman of the board and co-founder, N R Narayana Murthy, had earlier said that the company should disclose the full details of the investigations.

The review covered a range of matters described below, including the acquisition of Panaya which was completed by the company in February 2015, and the severance payments to the former CFO.

In certain respects, as the board has previously noted, the severance payments to the company’s former CFO could have been better handled, and the company has identified opportunities for improvements in processes and practices, which have been implemented.

While the disclosures in this regard were timely, based on the feedback received, the company has since December 2016 adopted a practice of disclosing the severance payment to key managerial personnel (“KMP”) at the time of their departure, making the disclosures sooner than required.

Additionally, the company has now globally benchmarked its severance pay and revised its senior management employment contracts. As previously noted, these external investigations were comprehensive and robust.

The investigation conducted by Gibson, Dunn & Crutcher and Control Risks, neither of whom had any prior dealings with Infosys, also included a review of the previous two investigations conducted by Cyril Amarchand Mangaldas (“CAM”).

They concluded that CAM’s two previous investigations were thorough and their findings and conclusions were reasonable and credible based on the evidence.

Gibson Dunn’s investigation was led by Charles Stevens and Benjamin Wagner, both Presidentially-appointed former senior prosecutors in the US Department of Justice, each with several decades of experience in investigating and prosecuting fraud and business crimes.

The investigation involved interviews of over 50 witnesses globally, a review of company policies, board minutes, public filings and internal documents, the collection, search and review by Gibson Dunn attorneys of many thousands of internal emails and attachments, the use of forensic accounting experts to analyse technical and financial information, the review of media accounts and public records in multiple countries, the review of the previous investigation reports issued by CAM and supporting documentation, and other investigative measures, the statement said.

It pointed out that no limitations or restrictions were placed on the investigating team from accessing information, and the company and the relevant directors and employees cooperated fully. Among other things, the review reaffirmed the conclusion of the independent investigation that there was no merit to the allegations of wrongdoing with respect to the acquisition of Panaya.

Unlike the practice followed in the past, the company published the summary findings of these investigations, given the attention these matters had received. A copy of Gibson, Dunn & Crutcher's memorandum to the Audit Committee with the summary findings of the investigation is attached as an Annexure.

Nilekani added, “As the company moves forward to a more stable environment I am grateful to all the wellwishers of the Company, including Mr. Narayana Murthy, for their deeply held passion for Infosys.

“I would also like to acknowledge the leadership role Mr. Narayana Murthy has played in building this iconic institution and in corporate governance matters. Going forward, it is our endeavor to build a trusting relationship with Mr. Murthy.”

The board notes that the questions and scrutiny in relation to these matters were fuelled in part by the strong feelings that various stakeholders have for the company and its success. Questions were raised by stakeholders who have a deeply held passion for Infosys. The board responded with equal passion and good faith.

The board also firmly believes that it is time to put these issues to rest. It seeks the support of all stakeholders to look towards the future and to collectively focus on strategy, operations, and growth.

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