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The controversial Panaya subsidiary, which led to the fall of Vishal Sikka, has now been put up for sale along with another subsidiary Skava.
Infosys also announced a timeline for the sale stating it expects to sell both of them within March 2019. “The announcement of a timeline is quite surprising. One usually sells off a company and then makes an announcement. I am unable to understand the reason for declaring a timeline,” said Shriram Subramaniam of InGovern, a proxy advisory firm.
The Israeli firm Panaya was bought by Infosys in 2015 for $200 million but a couple of years later, it ran into controversy after a whistleblower alleged to the management certain wrongdoings while acquiring the company. Later this turned out to be a bone of contention between the founders and then CEO Vishal Sikka, along with the Infosys board.
Subsequently, an internal audit committee set up by Infosys found no evidence supporting the whistleblower’s allegations.
However, Infosys founder NR Narayana Murthy had demanded that the full report by Gibson, Dunn and Crutcher on these whistleblower’s allegations be made public. After Sikka resigned, the Infosys board — under its new Chairman Nandan Nilekani — gave a clean chit to the acquisition, and dismissed allegations of wrongdoing.
A strategic review
At the fourth-quarter results’ announcement, CEO Salil Parekh, after a strategic review meeting, said the acquisitions of Panaya and Skava were not in line with the new strategy. The company expects the sale to be completed by March 2019. Infosys has around 40 subsidiaries.
Infosys said upon reclassification, an impairment loss of ₹118 crore ($18 million) in respect of Panaya has been recognised in the consolidated profit and loss for the quarter and year ended March 31, 2018. Accordingly, assets amounting to ₹2,060 crore ($316 million) and liabilities amounting to ₹324 crore ($50 million) in respect of the disposal group have been reclassified and presented as ‘held for sale’,” Infosys said.
The corresponding write-down in the investment value of Panaya in the standalone financial statements of Infosys is ₹589 crore ($90 million), it added.
When asked whether this would impact future acquisitions, Chief Financial Officer MD Ranganath pointed out that the company will always look at strategic fits whenever it’s looking at an acquisition.
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