Infosys' Panaya deal: CEO Vishal Sikka gets all-clear from US law firm

Investigation details were released by Infosys on eve of the company's AGM

An independent probe had cleared Infosys Chief Executive Officer Vishal Sikka over allegations of personal gains made during the acquisition of Israeli software firm Panaya, the company said on Friday.

The details of the investigation by US law firm Gibson Dunn & Crutcher were released by Infosys on the eve of its annual general meeting on Saturday. 

The clean chit will deflect any criticism against Sikka, except for the ambitious target he had set when he joined Infosys in August 2014.  The growing rift between the Infosys management and its founders led by NR Narayana Murthy is likely to come up for discussion at the AGM. The other issue shareholders may raise is the watering down of the revenue target—$20 billion by 2020—set by Sikka when he took over as Infosys CEO three years ago. 

In February, an anonymous employee had written to the Infosys board, its founders, and stock market regulators in India and the US, alleging wrongdoing by Sikka in the $200 million acquisition of Panaya.

The mail accused Sikka of using Infosys resources for personal reasons.

It also said differences over the Panaya deal led to the exit of former chief financial officer Rajiv Bansal, who was offered a severance package of more than Rs 17 crore. Murthy had objected to the severance package, accusing the Infosys board of diluting disclosure norms.

Since then, Murthy and his aides,  former directors TV Mohandas Pai and V Balakrishnan, have sought an investigation into Bansal’s severance package.

Infosys had commissioned Gibson Dunn & Crutcher to investigate the charges, which interviewed over 50 witnesses and went through mails, documents and public records.

“We found no evidence supporting the whistleblower’s allegations regarding the acquisitions – there were no conflicts of interest or kickbacks, required approvals for the acquisitions were obtained, thorough due diligence was conducted, the valuations of the target companies done by an outside financial advisor were reasonable, and the purchase prices were within the range of values determined by that advisor,” Gibson Dunn & Crutcher stated in its report to the audit committee of the Infosys board. 

Infosys acquired Panaya on February 16, 2015, for $200 million and valued the company at a 25 per cent premium over the $162 million arrived at by Series E investors one month before the deal. Panaya was struggling to raise money and employees were leaving the company, the complainant wrote in the letter. 

“The Indian law firm Khaitan & Company was appointed to provide legal counsel on Indian law matters associated with the anonymous complaint, independent investigation and related matters. The auditors of the company performed select procedures related to the independent investigation as part the audit for the year ended March 31, 2017,” said Infosys in a statement. 

The company informed the Securities and Exchange Board of India about the findings of the investigation.  

Following Murthy’s accusations, Infosys has included DN Prahlad on the board and elevated Ravi Venkatesan as co-chairman and strengthened disclosure norms.