Infosys sees a sharp 44% slump in its investment in Panaya; finds it difficult to get buyers for troubled firm

Infosys, the country’s second-biggest software services exporter, is reportedly having difficulties finding buyers for its subsidiary Panaya - the Israeli firm whose acquisition became a contentious issue between the founders and the erstwhile management led by Vishal Sikka, the former chief executive officer, according to a media report. Infosys, which bought Panaya for $200 million in February 2015, on Thursday said the fair value of its subsidiary at the end of 2017-18 stood at $130 million, a sharp drop of 44 percent, Business Standard reported. The acquisition of Panaya had rocked the company in 2017 after its co-founder NR Narayana Murthy red-flagged the lack of transparency in the deal and accused the previous board members of compromising on governance issues during its negotiations. The 2015 Panaya deal was the tipping point for former Infosys chief Sikka, handpicked by co-founder Narayana Murthy for the top job. The allegations leveled against Sikka and the Board back then was that Infosys overvalued Panaya. In April 2018, Infosys said upon reclassification, an impairment loss of Rs 118 crore ( $18 million) in respect of Panaya was recognised in the consolidated profit and loss for the quarter and year ended 31 March 2018. [caption id=“attachment_4240995” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] The corresponding write-down in the investment value of Panaya in the standalone financial statements of Infosys is Rs 589 crore ( $90 million). Mint, citing company executives, said that if Infosys fails to find a buyer quickly, there could be further write-downs over the next few quarters. Last week, Infosys posted a lower-than-expected 3.7 percent rise in net profit for the quarter ended on 30 June 2018, due to a one-off charge related to fair value reduction of Panaya business. The consolidated net profit in April-June at Rs 3,612 crore, or Rs 16.62 a share, was higher than Rs 3,483 crore, or Rs 15.24 a share, net earnings in the same period of the previous fiscal. Panaya, the automation technology firm, was bought to offer large-scale enterprise software management as a service to the company’s global clients. The controversial deal came to light after an anonymous whistleblower alleged that the company’s executives had personal interests in buying it, also resulted in the exit of its first non-promoter Sikka in August 2017. An internal audit committee set up by Infosys, however, found no evidence supporting the whistleblower’s allegations. However, Murthy had demanded that the full report by Gibson, Dunn and Crutcher on these whistleblower allegations be made public. Later in October, the Infosys board – under its new chairman Nandan Nilekani - gave a clean chit to the controversial Panaya acquisition, saying there was no merit in the allegations of wrongdoing. The company, in April, announced its decision to sell Panaya by March 2019. The Bengaluru-based firm is also looking at offloading its other subsidiaries Kallidus and Skava . With inputs from agencies