Infosys on Monday said that no member of the management team was involved in any prior investments in Panaya, and insinuations that anyone from the management team at Infosys benefited from this acquisition are misleading and slanderous.

In a detailed statement, the IT major, which has been in the centre of the storm over the acquisition of Panaya, said Infosys has a strong, established internal process to evaluate acquisition targets and make investments.

It said valuation was done by Deutsche Bank, 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. The board deliberated the acquisition, and unanimously approved the investment that was well within the valuation range determined by the evaluator.

The letter (mail from a whistle-blower) alleges that Infosys acquired Panaya at a 25 per cent 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 per cent) and was towards preferred stock, whereas Infosys’ acquisition in Panaya is for 100 per cent stake.

“It should 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 one and it had significant synergies in acquiring a controlling stake in Panaya,” the Infosys statement said. The valuation of investment in preferred stock vs 100 per cent strategic acquisition cannot and should not be compared. In addition, there is a premium for acquiring a controlling stake, the company argues.

Investment defended

“The allegation that the $20 million 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 $18.6 million, or ₹116 crore (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 ₹127 crore in 2014 to ₹1.37 crore 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.”

Further, the IT major clarified that the balances of these four entities as of 2014 amounted to ₹143 crore (net of borrowings of ₹30 crore), and ₹122 crore 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 ₹116 crore ($18.6M). Further, no loans have been given by Infosys to any of Panaya’s entities post acquisition.”

Finally, it said that the fact that Hasso Plattner was an investor in Panaya was public knowledge and the board was well aware of the same, as well as of Vishal Sikka’s association with SAP.

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