Infosys quits Russia, ending UK political and tax scandal … maybe
Founder's daughter is married to top UK politician, holds billion dollar stake that was maxed for tax efficiency
Indian IT services giant Infosys has announced it will quit Russia, after finding itself at the center of a political storm in the UK.
Infosys is one of few major global tech companies that had not revealed its intentions regarding Russia, but on yesterday's Q4 2022 earnings call CEO Salil Parekh stated the company will pull out. Parekh told investors Infosys has around 100 employees in the nation, all working for global clients. Infosys has no engagements with Russian entities, the CEO added.
But in recognition of Vladimir Putin's illegal invasion of Ukraine, Parekh said Infosys has decided to move the work performed by staff in Russia to other unspecified locations. The fate of those staff was not discussed. Infosys has also donated $1 million towards Ukrainian relief efforts and is "launching a program to digitally re-skill up to 25,000 individuals."
That decision comes after the company's Russian entanglements became a hot topic in the United Kingdom, the residence of Akshata Murthy – a woman with three claims to fame.
One is that she's quite a successful entrepreneur and fashion designer – but that's incidental to this story
Another is that she's the daughter of N. R. Narayana Murthy, the founder of Infosys. Akshata Murthy currently owns almost one per cent of the services giant – a stake worth around $1 billion.
The third is that she's married to Rishi Sunak, the UK's chancellor of the exchequer – a cabinet post equivalent to US treasury secretary, or treasurer in other parliamentary democracies.
Those second and third claims to fame became pertinent in early March, when businesses of all sorts started to quit Russia. Infosys's failure to join the exodus – and Akshata Murthy's stake in the company – caught the eye of British media, which started to ponder whether it was appropriate for the chancellor to benefit from Infosys's ongoing activities in Russia.
Spoiler alert: most thought the connection was inappropriate in a "Caesar's wife must be above suspicion" kind of way.
Then the scandal deepened. It emerged that Akshata Murthy's tax affairs had been arranged so that while she resides in the UK, she was officially domiciled in India and therefore did not pay UK taxes on income earned in other countries. Doing so was legal, but lowered her tax bills in the UK – a practice that the UK's opposition Labour Party promised to ban ahead of the 2015 election (which it lost).
With the chancellor's remit covering administration of the UK's tax system, debate erupted over the fairness and appropriateness of Akshata Murthy's arrangements.
- Infosys awarded contract to replace East Sussex County Council's ageing ERP system
- Infosys and Wipro employees charged with insider trading
- Infosys admits it still hasn't fully fixed Indian tax portal
- India tweaks telecoms laws to make itself an even more attractive offshoring destination
Spoiler alert: lots of Brits were pretty angry about her tax arrangements.
Last week, Murthy revealed she had re-arranged her affairs to pay more tax in the UK.
As of yesterday's decision by Infosys to exit Russia, her income is harder to link to that heavily sanctioned pariah state.
Which may just about quench the scandal and mean Infosys's name isn't splashed about in the British press rather more regularly than is usually the case for the rather workaday business of technology services.
But Infosys probably deserves to keep its presence on the business pages, because its Q4 and full-year results were strong. Quarterly revenue was $4.28 billion, up 18.5 per cent year on year. Full year revenue of $16.3 billion was up 20 per cent year on year. Operating profit jumped $430 million. Customers increasingly came to Infosys for its digital expertise – a pleasing outcome as that's a growth business for the company.
Execs forecast 13 to 15 per cent revenue growth for FY 22/23, with increased numbers of multi-year deals topping $100 million giving the company confidence to offer that prediction. ®