Infosys Denies Execs Gained from Panaya
Co says insinuations misleading and slanderous; Sikka too sends email to staff
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