Infosys will have to answer tough questions from market regulators — like a suspicious bearish bet

BCCL

  • The Securities Exchange Board of India and the Bombay Stock Exchange is looking for further clarification from Infosys.
  • Nandan Nilekani's statement filed with the Securities Exchange Commission (SEC) does not include any disclosures as per Regulation 30.
  • Infosys is also under threat of class action lawsuits from US law firms.
Infosys filed a statement with the Securities Exchange Commission (SEC) yesterday too soothe its investors. But the Indian regulatory authorities aren't satisfied.

The Securities Exchange Board of India (SEBI) and the Bombay Stock Exchange (BSE) are looking for further clarification.

"Infosys vide an announcement date October 22, 2019, titled "Statement", submitted statement attributable to Nandan Nilekani, Chairman of Infosys, wherein it is mentioned that Infosys had received whistleblower complaints," said SEBI in a statement.

"However, it is observed that Infosys Ltd has not made any disclosures under Regulation 30 of SEBI (LODR) Regulations, 2015, w.r.t. receipt of whistleblower complaint mentioned in the announcement," it added.

While the news of whistleblower complaints became public, day before yesterday on 21 October 2019, these complaints had been filed on September 30. The regulators believe that they should have been notified of such stock sensitive information beforehand.

It does not help Infosys' case in this matter that a large bet on a possible fall of stock price as early as October 18. As many as 1.8 million shares were involved in the put option in the futures and options market, which is basically when investors make bets that either a stock would gain or lose in the future.

The timing of this put option is so close to the news break, is suspicious. As investors lose billions yesterday, this individual or group could have made million using the insider information which Infosys had failed to disclose in a timely manner.

A little better but a little worse

Yesterday, Infosys saw its value crash by ₹53,000 crore— its largest ever cap erosion in a single day — closing 16.21% lower at ₹643.30 on BSE.

But, the Indian tech giant managed to erase early losses on Wednesday and is currently trading 1.18% up at ₹ 651.15 per share.

In addition to addressing the whistleblower complaint, Infosys is also under threat of a class action with two US law firms looking to file a class action lawsuit against the company.

Infosys has been in hot water since Monday with a group of whistleblowers accusing the company's CEO and CFO of concealing information from the board.
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