Infosys strongly refutes and denies the allegations made in the anonymous whistleblower letter that has been featured in today’s newspapers. The assertions made in the letter are libelous and are aimed at tarnishing the image of Infosys and its management.
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.
Regardless of the malicious intent of this anonymous letter, the company will pursue its normal course of action and investigate the charges made. As stated before, we will respond to all queries received either directly or from the regulatory authorities, as per our process.
In addition, we would like to clarify the following with regard to points raised in relation to Panaya’s acquisition:
Infosys has a strong, established internal process to evaluate acquisition targets and make investments. In the case of Panaya, all the requisite steps in this process were followed. The valuation was done by Deutsche Bank, the financial and tax due diligence was done by one of the Big four firms and legal diligence was done by a leading law firm – Kirkland & Ellis. The management presented the rationale behind the acquisition – including synergies and business potential to the Board, along with necessary reports and findings. The Board deliberated the acquisition, and unanimously approved the investment which was well within the valuation range determined by the evaluator.
The letter alleges that Infosys acquired Panaya at a 25% margin to the valuation of Series E investor that came in on January 8, 2015. It should be noted that the Series E investor was a minority shareholder (less than 15%) and was towards preferred stock, whereas Infosys’ acquisition in Panaya is for 100% stake.
It should also be noted that the last investment (series E investment in January 8, 2015) in Panaya was not a strategic investment whereas Infosys’ investment in Panaya was a strategic investment and we had significant synergies in acquiring a controlling stake in Panaya.
The valuation of investment in preferred stock vs. 100% strategic acquisition cannot and should not be compared. In addition, there is a premium for acquiring a controlling stake.
The allegation that the $20M invested in Panaya before the acquisition was taken out and distributed to the shareholders is also untrue. At the time of its acquisition, Panaya had a cash balance of $18.6M/Rs. 116 cr (this is evidenced in our disclosures in the 20F/Annual Report – additional information for the year ended March 31, 2015).
It is further alleged that the cash balance in Panaya came down from Rs. 127 cr in 2014 to Rs. 1.37 cr in 2015. It should be noted that these balances represent only one entity of Panaya. Panaya has four legal entities (Panaya Inc., Panaya limited, Panaya GMBH and Panaya Japan – financials for all of these entities are available on our website) and we should look at consolidated cash balances and not selectively look at only one entity. The balances of these four entities as of 2014 amounted to Rs. 143 cr net of borrowings of Rs. 30 cr and Rs. 122 cr in 2015. 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 Rs. 116 cr ($18.6M). Further, no loans have been given by Infosys to any of Panaya’s entities post acquisition.
The fact that Dr. Hasso Plattner was an investor in Panaya is public knowledge and the Board was well aware of the same, as well as of Dr. Vishal Sikka’s association with SAP. Panaya was looked at as an acquisition candidate based on its strategic fit. There is absolutely no conflict of interest due to Dr. Sikka’s past professional association with Dr. Plattner.