Deep laid down graves need to be dug to bring India’s largest IT services company, Infosys back on its feet. The continuous debate between the management and founders may hinder the growth as well as lead to some serious breakout. Before that happens, it’s best to look behind and check for flaws and faults internally. One such significant matter is the Panaya acquisition by Infosys.

Infosys acquired the New Jersey-based Enterprise Resource Planning (ERP) company, Panaya, back in February 2015. It paid a hefty sum of $200 million to finalise the transaction. Then, a series of events took place following the acquisition. The former chief financial officer Rajiv Bansal not only argued the validity of the transaction but also resigned from the company, a few months post the acquisition. Bansal also claimed that the people involved in the deal valued it at six times the revenue.

The employees for the company now demand a revisit to the Panaya deal in shareholder interests. The deal not only questions Bansal’s exit but further challenges the norms followed. The executives also ask for revealing the procedure that Infosys followed to crack the deal. One of the consultants who has worked with Infosys for over a decade expressed his concerns over the matter and said,

Did it comply with all due diligence norms to ensure there were no conflicts of interest? The circumstances in which it got board approval, Bansal was not happy about the acquisition, especially the price.

It is being reportedly said that Bansal was kept out of the scene because of the questions he raised regarding the deal. The then CFO not even reverted back to email queries, text messages and phone calls from Bansal. The said move was possibly taken so as to hide the impropriety or ‘hush money’ involved. Though Independent Director Roopa Kudva clarified her stance stating,

There was never any intention to silence him (Bansal), and he has always been free to complain to a regulator about any impropriety he may have seen during his tenure. He has been at absolute liberty to do so. In the case of Bansal’s severance, due process was followed, necessary approvals were taken and disclosures were made.

Though Infosys founder NR Narayana Murthy has retired from his duties, he has been asked to step in the matter. The latter couldn’t remain silent on the acquisition and raised his concerns over the high severance payouts. He’s further been asked the executives to clarify the causes of such payments made since July 2015. He says such money not only creates speculations but also jeopardizes the credibility of Infosys.

Panaya was acquired at the verge of shutdown. Prior to its takeover, a number of people were laid off by the cloud solutions venture. Bansal also triggered his doubts over the flailing company which initiated the intense debate within Infosys. Panaya also hired Hasso Plattner, the founder of SAP, Haim Shani and Moshe Lichtman’s Israel Growth Ventures in the company at the last minute. The sources revealing their doubts on the entries said,

The company was in a severe state of crisis and had laid off employees, and now they are receiving a decent return on their money. The list of investors includes the Benchmark Capital and Battery Ventures venture capital firms, alongside Hasso Plattner Ventures.

Moreover, Infosys took the leap just a month after capital infusion took place in Panaya. It is, hence, a crucial factor to consider with regard to the internal turmoil Infosys is facing currently. The 2015-16 Infosys annual report further exposed that the company had paid Rs 17 crore to CFO Rajiv Bansal, who quit in October 2015.

Though Bansal departed the platform, he continued to serve as an adviser to the CEO and the board until December. Infosys subsequently explained the payment as part of an enhanced non-compete, though certain questions pop in our minds related to the huge payout.

Infosys also carried out investigations into severance payment made to Bansal. The investigation was done under the supervision of  Cyril Amarchand Mangaldas and was “shadowed” by consultancy KPMG. The first investigation took place in October 2015 while the second one came in August 2016. The investigations were ordered by the audit committee of the board following the receipt of an anonymous letter that alleged that the severance payments made to Bansal were to silence him. But both the investigations resulted in favor of Infosys claiming no wrongdoings or efforts being done.

Ashwin Mehta, the stock brokerage for Nomura dissatisfied with the probe, asked Infosys CEO Sikka to share the amount of premium paid on valuations versus the $20 million round that happened in there in January. Responding to Mehta’s inquiry, Infosys CEO Sikka said,

Maybe, I can make a broad comment on the valuation, we looked at the valuation from multiple different perspectives, and in all perspectives, the valuations come within the correct band. We had an independent group, bankers from Deutsche Bank, look at the valuation of Panaya, and we feel very comfortable with the valuation.

Though that doesn’t end the speculations as post-Panaya acquisition, the company carried out a CEO change back in May. Sikka kept quiet when asked about  Bansal’s departure. He blamed it on the board’s decision and said,

In retrospect, you can argue that it (the severance package) was larger than it should have been. It was a judgement that we made at the time, it was done over a two-day period that was intense. The thing that I am comforted by is that the company has done nothing wrong.

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