Click here to visit
Davos 2020: CEO Salil Parekh lauds 'strong processes' at Infosys for whistleblower clean chit
January 22, 2020

Davos 2020: CEO Salil Parekh lauds 'strong processes' at Infosys for whistleblower clean chit

Infosys CEO Salil Parekh endured a difficult 2019, having to recuse himself as the IT major probed whistleblower allegations of financial impropriety against him and other company executives. However, he came out unscathed with the audit committee giving him the clean chit.

His performance then received a big boost as Infosys reported a 23.7 percent year-on-year (YoY) jump in consolidated net profit at Rs 4,457 crore for the third quarter ended December 2019.

Parekh in an interview with CNBC-TV18 at the World Economic Forum in Davos, said that the investigation by the audit committee was thorough and its findings vindicate him. He added that Infosys enjoys a deep connection with its clients despite a sequence of uncharitable news coming out of the company in recent times.

Parekh revealed that Infosys has a strong deal pipeline and its digital business has grown considerably. He also talked about the company’s hiring numbers and focus areas for the future. Edited excerpts:

Tell us about the journey of the company through the whistleblower probe.

The way this has worked out, as you saw last week, our audit committee and the board have completed the investigation and essentially have found nothing of merit in those points of views that were put forward.

From my perspective, I had recused myself from the investigation and the bulk of my time was still spent on the work of the company because that was going on. Of course a lot of time in addition was also spent in meeting with many of the people who were investigating, digging through and explaining what the processes is that we put in place and fortunately the processes in the company are very strong and that helped us to make sure that everything that was done was done for the right reason.

I want to pick up on this point that you made that the processes in the company are very strong and Nandan Nilekani has been speaking about this as well but yet from an outsider's perspective, one would wonder if the processes are so strong, why is it that the company seems to be finding itself in a state of flux of uncertainty and disorder every few years? We have just gotten past the Vishal Sikka episode and then this happened.

My sense is the processes that I was referring to are more about how we run the business. Here, it is not clear to me where all this has come from.

When I interact with our employees, there is so much connect, there is so much real focus on moving the business forward. So my own sense is we are driving the business for the changes that are coming about, we are driving the business for the digital future and the processes that we have—how we look at our clients, how we look at things within the company—those are the processes that are robust.

Nandan Nilekani said that this was a distraction and I would imagine that this was much more than that and I go back again to the point that we have seen a state of flux from the time that Mr NR Narayana Murthy came back to the company then brought Vishal Sikka in, then Vishal’s exit, your entry, now this whistleblower allegation. So customers, investors would be wondering as to what is going on and are you having to answer those questions which must be deeply uncomfortable as well?

From a client perspective, what I have noticed is, there is a deep connect that the clients have with the company and they trust Infosys to deliver their word. So I have met with many clients over the last few months, recently in the last week as well and the focus has invariably been on what can we do as we are driving this forward.

The [findings of the] Securities and Exchange Commission (SEC) probe is still pending and that is underway and of course you have the sword of the class action suit to deal with also, so it continues to be an uncertain future at least on these two counts.

From our perspective, the work that is being done in this review has been extremely detailed and thorough about 200,000 odd individual elements that we have looked at, 77 different people that we have interviewed. So the sense that I have, the way that the board has done, the audit committee is extremely detailed.

We are cooperating now fully with all of the regulatory agencies and my sense is as they see that, we will see what sort of conclusions they reach.

I don’t see this is something that is focus of ours in terms of day-to-day [operations]. I am back as I was in the past quarter on the business and that is our focus.

Has there been any update from the SEC or do you have any estimation of how long this could carry own?

Again there the main people to deal with are the board because I have recused myself from that. So from my perspective there is no other update.

Is it back to being cautiously optimistic about what the pipeline looks like or do you consider the fact that the deal pipeline continuous to be strong?

Deal pipeline is extremely strong. You might have seen last week when we announced our [third quarter] results, first our results were very good. 9.5 percent growth, we were above our targets in terms of margins, our attrition is way down, and our large deals are substantial. We in fact increased our guidance. We feel quite confident of what we see for this fiscal year and the pipeline overall, which is a bit longer in duration, still looks strong. This quarter of course we will spend time, look at what our next fiscal year is going to look like and then start to build the estimates.

What is the visibility that you have, I am not asking you specific numbers, but just broadly in light of what you are seeing, what your clients are telling you, what your customers are telling you, what does next year look like?

If you look at our digital, our digital business grew 40 percent year-on-year (YoY) in the past quarter. That business is extremely strong, the investments we made are starting to pay off. My sense is given the state of the global economy that still looks good. You heard about the global economy growth update, slightly better. The US is still looking good, Europe looking in good shape. So from our perspective, we don’t see anything which is giving me thought or pause about what is going on.

Also in terms of the possibility of regulation, especially on the visa side, I know that you have been hiring significantly in the US, are we likely to see you do more off that?

When we met last time, we talked about this, if you look at our statistics now, last 12 months we have done about 1,800 recruits outside India and about 12,000 recruits within India. So both of those are working really well.

The regulations — while there has been no real change in the regulations — we are starting to build a model by recruiting in US universities and other places which helps us to build a local workforce and that is the commitment we have built for those markets and that continues on.

You have done some acquisitions, is there some specific niche that you continue to want to focus on and build on and perhaps could use the merge and acquisition (M&A) route for that?

There again similar to what we have been working on essentially in the digital area. So we are looking at the cloud space, we have done three acquisitions, one of them on cloud and two in what we call our experience business. Experience we won’t do anything more, we will do more on data and more on cloud now and we are looking at things — we think over the next 12 months we will see more of those.

On both cloud as well as data?

We are looking at both, but it depends on what comes.