Panaya, Skava controversy remain key theme at Infosys' 38th AGM

Panaya and Skava buyouts were mired in controversy owing to allegation of overpayment apart from not being an ideal fit

At Infosys’ 38th annual general meeting (AGM) on Saturday, shareholders raised concerns over falling operating margin of the firm while many congratulated the management for sound revenue growth during the last fiscal and for good dividend payout.

However, ghosts of Panaya and Skava continued to haunt. Replying to shareholders’ queries on the deals, Infosys Chairman Nandan Nilekani said, “The investigation report is a confidential document and many statements given by people were on the assurance of confidentiality. So, the board is very comfortable with the decision of keeping it as it is.”

In 2015, Infosys, under the leadership of then Chief Executive Officer (CEO) Vishal Sikka, had bought Israeli automation technology firm Panaya for around $200 million and e-commerce service provider Skava for $120 million. The buyouts were mired in controversy owing to allegation of overpayment apart from not being an ideal fit.

In April, 2018, the firm decided to sell these two assets, which it reversed in December quarter due to lack of buyers in the market. By March 2019, the company has taken a hit of around Rs 854 crore towards impairment owing to fall in holding value of these entities. “We are now looking at repurposing and refocusing the activities of Panaya and Skava. We have assigned senior leaders of our membership team, one each for Panaya and Skava, who are looking into various segments for growth. We hope to improve the performance in short to medium-term,” said Salil Parekh, CEO & managing director, Infosys.  

Some of the shareholders of country's second-largest IT firm also raised questions on the hefty arbitration payout to its former chief financial officer Rajiv Bansal. “Has the company already paid Rs 12.7 crore with interest to Rajiv Bansal? What was the interest component in the total payout?” asked Tamal Kumar Majumadar, one of the shareholders.

A few other shareholders raised concerns over falling operating margin levels and wanted to know the way forward. “The drop in margin was due to our continued investments in sales and localisation efforts. The company had guided for an operating margin range of 22-24 per cent and achieved 22.8 per cent in FY19. For this fiscal year, we have given a range of 21-23 per cent,” said Nilanjan Roy, chief financial officer (CFO), said. 

The CFO also said the company was monitoring the situation with regard to its auditor, Deloitte.

Many shareholders also hailed the firm for getting the growth momentum back with 9 per cent revenue growth in the last fiscal. Dhruv Joshi, another shareholder, said: “I congratulate Salil Parekh on his first anniversary of marriage with Infosys. Normally, the second year of marriage is a difficult year. So, if he is able to manage the second year at Infosys, then there will be no issues afterwards.”

Why didn't Infosys become a white knight for Mindtree?

The issue of hostile takeover of Mindtree by L&T crept into Infosys' 38th AGM on Saturday, as one of the shareholders asked the Infosys management why the company didn't become a white knight for Mindtree. "Mindtree has close to 50 per cent digital revenue. Its attrition is around 10 per cent. When Mindtree was crying for a white knight, why Infosys didn't become one. It could have created value for shareholders," said the shareholder who only read out a folio number without name. To this, Salil Parekh, CEO & MD of Infosys, said the IT firm is constantly looking for opportunities, which can be good fit for growth.