In­fosys De­nies Ex­ecs Gained from Panaya

Co says in­sin­u­a­tions mis­lead­ing and slan­der­ous; Sikka too sends email to staff

The Economic Times - - Front Page -

Jochelle Men­donca & Neha Alawadhi

Ben­galuru | Delhi: In­fosys de­nied the al­le­ga­tions made in the anony­mous let­ter to the stock mar­ket reg­u­la­tors last week and stated that no mem­ber of the In­fosys man­age­ment team was in­volved in prior in­vest­ments in Panaya.

The be­lea­guered Ben­galu­ru­head­quar­tered IT firm also said that in­sin­u­a­tions that peo­ple in the man­age­ment team at In­fosys ben­e­fit­ted from the trans­ac­tion was mis­lead­ing and slan­der­ous.

ET had re­ported that the ac­qui­si­tion of Panaya was at the heart of the com­pany’s cor­po­rate gov­er­nance trou­bles. For­mer CFO Ra­jiv Bansal, who re­ceived an out­sized sev­er­ance pay­ment, was not in favour of the trans­ac­tion, four sources had told ET. On Sun­day, a com­plainant sent a let­ter to the reg­u­la­tors at the Se­cu­ri­ties and Ex­change Board of In­dia and the US Se­cu­ri­ties and Ex­change Com­mis­sion al­leg­ing that the Panaya ac­qui­si­tion was over­val­ued and that it was pos­si­ble that some In­fosys ex­ec­u­tives had ben­e­fit­ted from the deal.

The let­ter, a copy of which was sent to ET and other me­dia houses, also al­leged that In­fosys

that man­age­ment ben­e­fit­ted from deal is mis­lead­ing and slan­der­ous


Panaya deal, val­u­a­tion of in­vest­ment in pre­ferred stock vs 100% strate­gic ac­qui­si­tion can­not and should not be com­pared had al­lowed Panaya in­vestors to strip the com­pany of its cash and had given Panaya short­term loans to make the com­pany vi­able.

In­fosys re­futed the al­le­ga­tions made in the com­plaint but said that it would pur­sue the nor­mal course of ac­tion and in­ves­ti­gate the charges made.

“The let­ter al­leges that In­fosys ac­quired Panaya at a 25% mar­gin to the val­u­a­tion of Se­ries E in­vestor that came in on Jan­uary 8, 2015. It should be noted that the Se­ries E in­vestor was a mi­nor­ity share­holder (less than 15%) and was to­wards pre­ferred stock, whereas In­fosys’ ac­qui­si­tion in Panaya is for 100% stake,” the com­pany said in a state­ment.

“The val­u­a­tion of in­vest­ment in pre­ferred stock vs 100% strate­gic ac­qui­si­tion can­not and should not be com­pared. In ad­di­tion, there is a pre­mium for ac­quir­ing a con­trol­ling stake,” it added.

In­fosys also said no loans were given to Panaya and that it was un­true that $20 mil­lion in­vested in the com­pany was then dis­trib­uted to share­hold­ers. The com­pany said all pro­cesses had been fol­lowed in the Panaya ac­qui­si­tion. “The val­u­a­tion was done by Deutsche Bank, the fi­nan­cial and tax due dili­gence was done by one of the Big Four firms and le­gal dili­gence was done by a lead­ing law firm – Kirk­land & El­lis. The man­age­ment pre­sented the ra­tio­nale be­hind the ac­qui­si­tion — in­clud­ing syn­er­gies and busi­ness po­ten­tial — to the board, along with nec­es­sary re­ports and find­ings,” the state­ment said. “The board de­lib­er­ated the ac­qui­si­tion, and unan­i­mously ap­proved the in­vest­ment which was well within the val­u­a­tion range de­ter­mined by the eval­u­a­tor.”

Sep­a­rately CEO Vishal Sikka also sent an email to em­ploy­ees ad­dress­ing con­cerns over Panaya. The email said re­ports of the Panaya ac­qui­si­tion be­ing over­val­ued were "spec­ula- tions and fab­ri­ca­tions", and an at­tempt to tar­nish the rep­u­ta­tion of the com­pany.

“Once again to­day, some news­pa­pers have car­ried false and ma­li­cious sto­ries about our com­pany; this time it is about the ac­qui­si­tion of Panaya. Th­ese spec­u­la­tions and fab­ri­ca­tions are clearly de­signed to tar­nish our rep­u­ta­tion, and they specif­i­cally tar­get our em­ploy­ees, in­clud­ing my­self, to the point of harass­ment,” wrote Sikka. He added that such sto­ries cre­ate “a false al­ter­nate-re­al­ity” that “mis­lead and sen­sa­tion­alise”.

ET has seen a copy of the email, ti­tled ‘Fo­cus, in times of dis­trac­tion’.

Sikka urged em­ploy­ees to not get dis­tracted by such sto­ries and fo­cus on achiev­ing the goals set out by the com­pany as ar­ti­fi­cial in­tel­li­gence and digi­ti­sa­tion be­come more and more main­stream.

“I am, as al­ways, count­ing on your faith and un­wa­ver­ing at­ten­tion to what re­ally mat­ters... I am count­ing on all of us to rise above the dis­trac­tions, fo­cus on what re­ally mat­ters, and de­liver,” Sikka signed off in the email on Mon­day.

In­fosys said all pro­cesses had been fol­lowed in the Panaya ac­qui­si­tion

De­nies that Panaya was stripped of its cash and that loans were given to the com­pany Says no com­flict of in­ter­est due to CEO Sikka as­so­ci­a­tion with Panaya in­vestor Hasso Plat­tner

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