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Infosys Getting Large Deals Despite Whistle-Blower ‘Distraction’

Ari Altstedter and Nupur Acharya
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Infosys Getting Large Deals Despite Whistle-Blower ‘Distraction’

(Bloomberg) -- Infosys Ltd., the Indian software maker that’s battling whistle-blower allegations about its finances, sought to assure investors that the accusations have had little impact on the company’s ability to win contracts.

Anonymous whistle-blowers last month alleged that Chief Executive Officer Salil Parekh used “unethical practices” to boost revenue and profit in recent quarters. The whistle-blowers also said recent big deal wins may have come with negligible margins. They asked the board of the Indian company to investigate and take action, offering to provide emails and voice recordings to support their allegations.

“Customers are supportive, we have proactively reached out” to clients, Chairman Nandan Nilekani said on a call with analysts on Wednesday. Despite the “distraction” the company has complete focus on the business, he said, adding that Parekh informed him about a “large deal” recently.

The second whistle-blower attack in as many years dented investor confidence in Asia’s second-most valuable software exporter, and sent a gauge of 30-day historical volatility for its shares soaring to the highest since 2013. A previous complaint triggered the exit of then CEO Vishal Sikka after a confrontation with co-founder Narayana Murthy.

“As an investor, I won’t like to see such issues come up often,” said Sameer Kalra, founder of Target Investing in Mumbai. “We would prefer the management to complete the investigation and put out a report. We have a sell on Infosys right now.”

The company’s shares rose 2.3% to 712.30 rupees, the highest close since Oct. 18, in Mumbai. Gains in the stock helped the benchmark S&P BSE Sensex reverse losses of as much as 0.5%.

Little evidence of wrong-doing has emerged publicly so far. Infosys pledged a full investigation last month and Nilekani on Wednesday refused to say when the probe will be completed.

“We stuck with our buy call on Infosys even when the whistle-blower complaint came to light,” said Gaurang Shah, senior vice president at Geojit Financial Services Ltd. “We don’t expect this to have any material impact on its working capabilities. The transformation happening with the group is for the good.”

Still, the number of such complaints surged during Sikka’s and Parekh’s reigns, covering a plethora of topics. Moneycontrol.com in a report alleged that a founder was behind the latest complaints. Infosys in a filing to exchanges said that anonymous sources are making “mischievous insinuations” against the company’s co-founders and former executives.

(Adds stock volatility in fourth paragraph)

--With assistance from Ravil Shirodkar.

To contact the reporters on this story: Ari Altstedter in Mumbai at aaltstedter@bloomberg.net;Nupur Acharya in MUMBAI at nacharya7@bloomberg.net

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Bhuma Shrivastava, Ravil Shirodkar

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