If mere numbers are considered, Panaya is a small blip on the radar of the global Information technology behemoth Infosys. The deal is valued at only $316 million dollars which is not even 1% of the valuation of Infosys. However, this Panaya acquisition has shaken the company to its core. It has created a rift between the management and the promoters which ultimately ended with the resignation of CEO Vishal Sikka. It has also maligned Infosys’s image as a transparent company.

To the outsiders, it seemed like the conundrum related to the Panaya acquisition was over once Vishal Sikka exited the company. However, this controversy refuses to die down. Less than a year after the exit of Vishal Sikka, Salil Parekh, the new CEO of Infosys has put the acquisitions up for sale. This means that Panaya and another subsidiary called Skava will be sold off by the company less than two years after their acquisition.

As a result, the storm over the Panaya acquisition is brewing again. In this article, we will have a closer look at some of the facts related to the Panaya deal and why it has led to a controversy of this magnitude.

The Panaya Deal

There is a widespread belief in Infosys that people close to former CEO Vishal Sikka have significantly benefitted from the Panaya deal. The acquisitions made by the whistleblower are as follows:

• Relatives of top Infosys officials had invested money in Panaya. They did not directly invest in the company to avoid conflict of interest. However, they invested their money in a fund which then further invested the money in Panaya. However, top Infosys officials stood to gain if Panaya was acquired at a hefty valuation

• In the next step, Panaya was acquired by Infosys. It is alleged that the valuation was not justified given the fact that the technology had not provided any tangible results. This acquisition was approved by the Infosys board.

• CFO Rajeev Bansal suddenly left the organization. He was also offered a hefty severance pay. This was against the norms of Infosys. As a result, speculations became rife that Rajeev Bansal had uncovered some incriminating details of top Infosys officials. As a result, the severance pay was actually "hush money" so that the scam goes undetected

• All this activity got the attention of Narayan Murthy who is the co-founder of Infosys. He pressurized the company into providing a point by point rebuttal of the whistleblower’s claim. Infosys has not provided this information to date. Neither has Infosys categorically denied that top Infosys officials did not benefit from this deal. Infosys has launched three separate investigations into the deal. All of these investigations found no evidence of wrongdoing on the part of any top official.

• However, after these investigations, Vishal Sikka did quit the organization to be replaced by Nandan Nilekani who acted as an interim CEO. Finally, Salil Parekh was hired from outside to take over the reins as the CEO of Infosys.

What Happened Now?

The newly appointed CEO, Salil Parekh has now classified the Panaya deal as valueless. The assets which were claimed to be strategic when acquired are today being classified as valueless. The problem is that four out of the seven members on the board today were also present when the acquisition was being done. The whistleblower is now questioning the change of opinion of these board members. Why are they writing down significant amounts as losses from the Panaya acquisition? If the technology was so strategic to the company, why isn’t the company holding on to it?

How is it that the same board members now feel that Panaya is of now use to the organization? This raises questions about the effectiveness of the corporate governance process at Infosys.

Speculations are rife about the real reason why Panaya has been put up for sale. There are several possibilities and some of them are listed below.

• The first possibility is that Salil Parekh now knows that the Panaya deal was fraudulent. As a result, he wants to distance himself and the company from this transaction. Consequently, he just wants to get rid of the so-called assets. This is what is driving the sale

• The second possibility is that Salil Parekh and the Infosys board wants to prove that Narayan Murthy was right. As a result, they are selling stake in Panaya to communicate that Narayan Murthy had made a correct observation and that Panaya was indeed nothing but an overvalued acquisition done with mala fide intent.

• Lastly, it is also possible that this is an operational decision. This means that Infosys had a different strategy under Vishal Sikka wherein Panaya was an important acquisition. However, Salil Parekh has envisioned a different future for the company. As a result, Panaya is no longer meaningful in the new scheme of things and hence is being sold off.

There is immense speculation behind what the reality is. However, it is unlikely that the average person will ever know what really happened at Infosys. The truth about Panaya may be lost forever behind closed boardrooms. The failed Panaya acquisition is an example of the lack of governance processes in top Indian multinationals.