Infosys refutes allegations over Panaya purchase

21 Feb 2017


Indian software major Infosys on Monday denied all allegations made by a purported whistleblower concerning its $200- million acquisition of Israeli software company Panaya in 2015.

Panaya is an Israeli 'software as a service' company that provides cloud-based quality management services for enterprise applications worldwide.

Infosys said in a letter that the ''assertions made in the letter are libellous and are aimed at tarnishing the image of Infosys and its management''.

According to media reports, a whistleblower has written to the Securities and Exchange Board of India alleging irregularities in Infosys' acquisition of Panaya in February 2015.

In the latest mail, the whistleblower has alleged that the $200 million paid for the purchase of Panaya was 25 per cent more than the valuation the firm received in a Series E funding round, a month before the acquisition.

''We categorically state that no member of the Infosys management team was involved in any prior investments in Panaya, and insinuations that anyone from the management team at Infosys benefitted from this acquisition are misleading and slanderous,'' the company said in a letter.

Infosys also said it will continue to investigate the charges made against it and will respond to queries raised by the regulatory authorities.

The company has clarified that in the Panaya acquisition, the valuation was done by Deutsche Bank, legal diligence was carried out by Kirkland & Ellis, and the financial and tax due diligence was done by one of the big four firms. The board had unanimously approved the investment, which was within the valuation range.

''It should be noted that the Series E investor was a minority shareholder (less than 15 per cent) and was towards preferred stock, whereas Infosys' acquisition in Panaya is for 100 per cent stake,'' the company said.

At the time of acquisition, Panaya's cash balance stood at $18.6 million or Rs116 crore. Also, the allegation that cash balance in Panaya came down to Rs1.37 crore from Rs127 crore in 2014 is only for one entity of Panaya, which has four entities and consolidated cash balances need to be looked at.

''It should also be noted that as part of the acquisition, we required Panaya to repay the borrowings and therefore the cash at the time of acquisition was Rs116 crore ($18.6 million). Further, no loans have been given by Infosys to any of Panaya's entities post acquisition,'' it further said.

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