Infosys denies allegations made by whistleblower's letter

IT solutions provider Infosys retaliated against allegations made in the anonymous whistleblower's letter that was published in newspapers on Monday, stating that the assertions made are libellous 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", the statement read.

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, the company will respond to all queries received either directly or from the regulatory authorities, as per its process.

Furthermore, in a detailed clarification, Infosys raised certain pointers with regards to the Panaya 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 further alleged that Infosys acquired Panaya at a 25 percent 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 percent) and was towards preferred stock, whereas Infosys' acquisition in Panaya is for 100 percent stake.

Additionally, the aforementioned investment in Panaya was a strategic investment and Infosys had significant synergies in acquiring a controlling stake in Panaya.

The valuation of investment in preferred stock when compared to 100 percent strategic acquisition cannot be compared. In addition, there is a premium for acquiring a controlling stake.

The allegation that the USD 20 million invested in Panaya before the acquisition was taken out and distributed to the shareholders is also false. At the time of its acquisition, Panaya had a cash balance of USD 18.6 Million (Rs. 116crore).

It is further alleged that the cash balance in Panaya came down from Rs. 127crore in 2014 to Rs. 1.37crore in 2015. It should be noted that these balances represent only one entity of Panaya's four legal entities (Panaya Inc., Panaya limited, Panaya GMBH and Panaya Japan). 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, the statement further clarified.