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A whistleblower has written to the Securities and Exchange Commission (SEC) and SEBI accusing Infosys of not making adequate financial disclosures and remaining silent in the role of a former board member in the Panaya acquisition.
In a letter, a copy of which is available with BusinessLine , the whistleblower has said that Form 20F document, which needs to be filed every year, has not been done, yet. On June 23, Infosys concluded its 37th AGM and, as per the rules, the American Depository Receipt (ADR) shareholders were made to vote on the financial statements without getting the full information, the letter mentions.
Form 20F is a document mandated by the SEC for companies listed in the US and gives details of key risks and the effectiveness of internal controls, which are relevant for ADR shareholders to approve the financials. This document has to be filed within six months of the end of the company’s fiscal year. Infosys has till September to file this document but in the past it has been doing so in May/June before its AGM.
The whistleblower has alleged that this year no document has been filed and the AGM is over. “Typically, a company delays its annual filing with SEC only when there is an ongoing investigation by SEC,” the note said.
Questions raised
The note also raises a question of a possible link between the former co-chairman Ravi Venkatesan, who resigned from the board recently, and an ongoing investigation of Infosys. “Is there any ongoing investigation by SEC and is there any connection to Venkatesan leaving the company and any investigation,” the note asks.
When contacted, an Infosys spokesperson said: “The company will file Form 20F within the stipulated time and has sufficient time to do so. Speculation that Form 20F is not filed in time or there is an ongoing SEC investigation is baseless and incorrect.”
The investigation, which the note refers to, is regarding the acquisition of an Israeli company Panaya, which set off a bitter feud between Infosys co-founder Narayana Murthy and some former members of the board such as Vishal Sikka and R Seshasayee over the valuation and propriety of the deal. A few months ago, the whistleblower had sent an email seeking answers to what changed Panaya from a “strategic acquisition to a completely value less one”.
Subsequently, in April, after Sikka and Seshasayee left and Nandan Nilekani took over as Chairman, the new CEO, Salil Parekh, along with the current board members decided on an impairment loss of ₹118 crore ($18 million) in respect of Panaya and Skava. Both the companies’ assets amounted to ₹2,060 crore ($316 million) and liabilities to ₹324 crore ($50 million) and have been reclassified and presented as ‘held for sale’.
Venkatesan was on the board when this decision was taken. “I request you to require the company to inform the shareholders on the exact reasoning for the delay as well as confirm whether any ongoing investigation with SEC is pending,” the note concluded.
Mohan R Lavi, a Chartered Accountant, said that, technically, Infosys still has time to file its Form 20F and may be close to taking a decision on disposing of Panaya.
Parekh, on the sidelines of the AGM, told reporters that the company would be careful in its due diligence process in future acquisitions.
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