Finally, it has all boiled down to the $200 million Panaya acquisition done by Infosys in February 2015. After months of speculation over the deal, Infosys MD& CEO Vishal Sikka resigned from the board, taking up a new role of Executive Vice-Chairman till a new management is in place.
“It is clear to me that despite our successes over the last three years, and the powerful seeds of innovation that we have sown, I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious and increasingly personal attacks,” wrote Vishal Sikka in his personal blog, explaining his decision to quit.
This was followed by a show of support by the Infosys board who backed Sikka and his decisions through a statement on Friday. The statement hit out against Infy founder N. R. Narayana Murthy blaming him and his ‘continuous assault’ as the primary reason for Sikka’s decision to put in his papers despite strong Board support.
Not willing to concede even an inch, Murthy also released a statement, reminding the board of the questions he has raised and the cloud of suspicion around the Panaya deal. “It is below my dignity to respond to such baseless insinuations. However, several shareholders who have read the whistle-blower report have told me that it is hard to believe a report produced by a set of lawyers hired by a set of accused, giving a clean chit to the accused, and the accused refusing to disclose why they got a clean chit! They say that this is not the way an impartial and objective investigation should be held,” said Murthy in his terse statement released to the media.
Earlier this year, in a strongly-worded email to employees, Chief Executive Vishal Sikka said reports questioning acquisition of Israeli company Panaya were “orchestrated by people who are hell-bent on harming the reputation of the company and its employees”.
BOOM tried to sift through all the noise surrounding Panaya and explain why it is an important piece in the on-going fight between Infosys’ founders and its board.
What is Panaya?
Panaya is an Israel based software company that provides automation technology to businesses. Panaya helps companies that use SAP or Oracle systems to manage major system changes through its cloud-based software. It was founded in 2006 by entrepreneur Yossi Cohen.
Why is it in the news and how is it related to Infosys?
Infosys bought Panaya in February 2015 for $200 million. The Panaya deal has been linked to Infosys CFO Rajiv Bansal’s departure in October 2015, by media outlets. Bansal allegedly had reservations about the deal and thought Infosys was overpaying. He is also reported to have walked out of a meeting when the deal was about to be ratified.
Consequently Bansal’s severance package of 24 months’ pay (17.38 crore) is at the crux of the dispute between Infosys founders, led by NR Narayana Murthy and its current board including CEO Vishal Sikka. The founders said the severance pay was excessive and raised concerns that it could be seen as “hush money” for hiding something. Infosys also received an anonymous letter in 2016 by a whistleblower alleging the severance pay Bansal received was intended to silence him.
A separate anonymous letter was sent to markets regulator SEBI as well in the month of February this year. It is not clear whether both letters were sent by the same person.
What do media reports say about Panaya?
According to media reports, the latest whistleblower letter questioned why Infosys paid $200 million in February 2015 for Panaya when, in the previous month, Panaya had been valued at $162 million by Israel Growth Partners.
The whistle blower also alleged a conflict of interest between SAP co-founder Hasso Plattner’s stake in Panaya and Vishal Sikka, who was a member of SAP’s executive board before he joined Infosys.
What has Infosys said in response?
Infosys has been consistent in its defence of the deal. The company has said the valuation was done by Deutsche Bank and that the board deliberated and unanimously approved the deal, well within the valuation determined by the investment bank.
Infosys also said Plattner’s stake in Panaya was public knowledge, the board was aware of the same and that there was no conflict of interest due to Sikka’s past professional association with Plattner.
See Infosys’ statement on Panaya here.
What has Infosys said on Rajiv Bansal’s severance package?
Infosys said of the 17.38 crores it agreed to pay Rajiv Bansal only about 5 crores had been paid. Chairman R Seshasayee admitted in a press conference that the entire issue could have been handled better. Seshasayee said there was an element of “subjectivity” in deciding the severance pay but that the process had been standardized and there would be “no more Rajiv Bansals”.
What has Infosys said on the whistle blower letter?
The company denied and refuted allegations made by the whistleblower but said it would investigate the charges made.
Infosys had previously ordered two independent investigations by law firm Cyril Amarchand Mangaldas in October 2015 and August 2016. Both investigations were shadowed by the company’s auditors KPMG, and revealed no wrong doings or efforts to cover up any wrong doings.
What has former CFO Rajiv Bansal said?
Rajiv Bansal has not spoken publicly since leaving Infosys in 2015. But it has been reported that he has invoked arbitration proceedings against the company seeking full payment according to the severance agreement arrived at the time of his exit.