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Look who took the biggest hit in Infosys selloff! LIC, FPIs and top mutual funds

Amidst knee-jerk reactions, Infosys’ m-cap declined by over Rs 40,000 crore in early trade.

Updated: Oct 23, 2019, 08.56 AM IST
The stock sank to an intraday low of Rs 645 before paring some loss to trade at Rs 655.
The country’s biggest institutional investors Life Insurance Corporation (LIC), foreign portfolio investors (FPI) and top mutual fund houses took a big knock as investors dumped shares of Infosys following a whistleblower complaint that raised possibility of corporate governance lapses at the IT major.

The stock sank to an intraday low of Rs 638.30. BSE Sensex closed 334.54 points, or 0.85 per cent, down at 38,963.84. Infosys has a 7.42 per cent weightage in the index.

Amid the knee-jerk reaction, Infosys’ market-capitalisation declined by over Rs 40,000 crore in early trade.

The stock came under pressure after a letter by anonymous employees surfaced, accusing its CEO Salil Parekh and CFO Nilanjan Roy of unethical practices for several quarters.

Latest shareholding data showed LIC held 25.81 crore shares, or 6.06 per cent, stake in Infosys as of September 2019. Private life insurer ICICI Prudential Life Insurance Company held a 1.32 per cent stake.

Among top fund houses, HDFC Mutual Fund, SBI Mutual Fund, ICICI Prudential Mutual Fund and UTI Mutual Fund held over 1 per cent stake in the company as of September 30. Mutual funds together held nearly 55 crore, or 12.92 per cent, share in the company, according to BSE data.

FPIs held 33.51 stake. Government of Singapore, Vanguard, Abu Dhabi and Government Pension Fund Global were among the major FPI shareholders in the company.

Individual investors held nearly 10 per cent stake in the company as of September 30, 2019. “Investors and traders must stay away from catching this falling knife,” said Ashish Nanda, EVP & Business Head - PCG, Commodities and Currency Business, Kotak Securities.

The whistleblower complaint accused the company top executives of aggressive accounting of revenue and cost in addition to taking up large deals with almost nil profitability, aggressive management of treasury operations to drive other income and lapses in internal processes for sales and information shared with auditors and the board.

Global brokerage firm Morgan Stanley said the whistleblower news could put the stock under pressure. “It comes as a setback for the company and could de-rate multiples until clarity emerges. The stock has been volatile over the last six years due to idiosyncratic issues,” it said. The brokerage has ‘equal weight’ rating on the stock with a price target of Rs 805.

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