Infosys row: Did acquisition of Israeli software co Panaya trigger the rift?

At Infosys, culmination of several factors fuelled the heightened difference between the principal promoters and company board in recent times. Founding members such as NR Narayana Murthy, Nandan Nilekani and T V Mohanda Pai had raised objections to some of the board's decision like okaying higher payout to CEO Vishal Sikka for the current year, bumper severance package announced for CFO Rajiv Bansal, besides inducting Punita Sinha as an independent director to the board.

However, the possible root cause of the open displeasure between the promoters and the board could be because of the company's decision to acquire Israel-based software firm Panaya in February 2015.

According to a report in The Economic Times, Infosys board did okay the company's decision to acquire Panaya for $200 million, which raised suspicion of the lack of proper due diligence and governance followed before the acquisition was made.

Reuters

The report suggests that the ex-chief financial officer Rajiv Bansal was not in favour of the deal and questioned the acquisition price, before he offered to resign from the post.

“Bansal was not happy about the acquisition, especially the price," the ET report said quoting a consultant.

Because the ex-CFO raised some uncomfortable questions over the acquisition, Bansal was not included as part the decision-making process.

It is being reported that the Israeli firm was valued six times its revenue, even though the company was on the verge of shutting and had laid of several employees before the execution of the deal.

Hence, it is being suspected that Bansal's high-profile exit and the handsome severance package that followed could be linked to Panay's acquisiton.

Infosys' annual report said that the company has paid Rs 17 crore to CFO Rajiv Bansal post his decision to quit the company in October 2015, but continued to stay in an advisary role to the CEO and board till December. As a result, Infosys said higher non-compete fee formed the part of the higher severance package paid to Bansal.

An investigation was done by law firm Cyril Amarchand Mangaldas and consultancy firm KPMG over the circumstances that led to Bansal's departure from Infosys. The investigation also tried to see whether the company tried to cover up the issue by offering higher severance payout to Bansal. However, the investigations found of no wrongdoings.

In fact, Narayana Murthy, the founder of Infosys and other founding members, were critical of the board's decision to offer higher severance payout to the ex CFO.

Talking to CNCB TV18 today, Murthy said, "I have not withdrawn my concern," adding concerns have to be addressed properly by the board.