pri Takeover of Panaya by Infosys – An Insight Takeover of Panaya by Infosys – An Insight


The controversy in Infosys post the takeover of Panaya elucidates the tussles that may ensue between the promoters and the board as a result of failed transformation of a largely promoter driven company into a professionally managed enterprise. It brings to the fore the promoters’ unwillingness to loosen their grip on the company despite voluntarily stepping down and entrusting the administration in the hands of carefully chosen highly qualified outside professionals. Right from his appointment as CEO in August 2014 till his resignation in August 2017, there was continued discord and acrimony between Vishal Sikka and the promoters as regard the best way of managing one of India’s largest software companies.

Panaya Acquisition

In February 2015, Infosys acquired US-based automation technology company Panaya for $200 million (over Rs 1,200 crore). the valuation was six times the multiple of Panaya’s revenues, making the acquisition Infosys’s second-largest acquisition ever. The transaction reflected Vishal Sikka’s desire to bring more automation to the IT services model that had so far depended heavily on people. According to Sikka, the acquisition exemplified Infosys’ execution of its Renew and New strategy to enhance the competitiveness and productivity of current service lines by leveraging automation, innovation and artificial intelligence. Panaya’s CloudQuality™ suite would enable Infosys to leverage automation for several of its service lines through an agile SaaS model, and help mitigate risk, reduce costs and decrease time to market for clients.

The controversy

Despite the Panaya deal being pulled off amidst great zeal and expectation, it was not long before it was shrouded by controversy. Sikka and team suffered a major blow when two anonymous whistleblowers sent emails to SEBI alleging wrongdoing on several counts in relation to the Panaya deal.Inter alia, the emails made the following major allegations.

  • The $200 million Infosys paid for acquiring Panaya was nearly 25% more than the valuation that the firm got in a Series E funding round just a month prior to the acquisition, coming from Israel Growth Partners (IGP), a private equity firm founded by two of Israel’s most experienced global tech leaders.
  • The deal seemed to be tended towards personal interests of top Infosys executives, specially Mr. Sikka:Panaya having strong business ties with SAP, Sikka’s previous company. Moreover, SAP co-founder and chairman Hasso Plattner was a major investor in the firm.
  • The inadequate disclosure of the “unusually high” severance package to former chief financial officer Rajiv Bansal, who was reportedly not in favour of the acquisition. Bansal was reported to have walked out of the Board meeting conducted to consider the acquisition in February 2015 and later stepped down from his post.
  • The high severance package to general legal counsel of Infosys David Kennedy who allegedly wrote an email to the CEO that he could no longer hide Bansal’s severance package.

Infosys’s stand

Infosys categorically denied and refuted the allegations, labelling the insinuations as false, malicious and defamatory. Sikka  defended the decision to buy Panaya as a prudent business decision aimed to transform the company and dismissed the charges, calling them slanderous. He categorically denied that any executive was involved in any prior investments in Panaya.


Two independent firms, Gibson Dunn & Crutcher, a US-based law firm, and Control Risks, a risk consulting firm, appointed by Infosys cleared the company of all charges of financial impropriety, as alleged in the two anonymous letters. They found no evidence whatsoever to support any of the allegations in the complaints regarding wrongdoing by the company or its directors and employees. The investigating firms claimed that there were no conflicts of interest or kickbacks, the requisite approvals for the acquisition were obtained, thorough due diligence was conducted, the valuation of the target company done by an outside financial advisor was reasonable, and the purchase price was within the range of values determined by that advisor.

Narayana Murthy’s allegations

Infosys co-founder and past Chairman, Narayana Murthy had since past six to seven months been lambasting the Board for lack of transperancy and objectiveness in administration. He was miffed with the company’s acquisition of Panaya and the incidental developments that ensued, especially after the revelations made in the whistleblowers’ mail to SEBI.

In his letter dated 8th July 2017, he raised the following major issues:-

  • His suggestions to keep the investigation away from all the accused parties, to invite a set of highly respected outsiders (some of whom could be former independent members of the Infosys board including Prof. Marti Subrahmanyam and Dr. Omkar Goswami), to hire a highly respected international law firm like Wilson Sonsini Goodrich and Rosati to work under the supervision of these respected individuals, to conduct the investigation in a transparent manner, to clear the board and the management of all accusations, and to disclose the entire report on the website of the company, were totally ignored by the Board.
  • Murthy stated that it was hard to believe a report produced by a set of lawyers hired by the accused themselves. Moreover, he was distraught at the refusal of the Board to make public the full report of the investigators.
  • The board shall make public the ‘special treatment shown to Mr. Rajiv Bansal and Mr. David Kennedy’.
  • The whistle blowers allegations included claims that an e-mail was sent by Mr. David Kennedy to Dr. Vishal Sikka that Mr. Kennedy could not hide the Bansal agreement from the board and the CFO any longer. Murthy urged the company to scotch this accusation either by denying the existence of such an e-mail with proof and clear the names of both Mr. Kennedy and Dr. Sikka, or explain the shareholders what action was taken against the individuals who hid information from the board.
  • The investigation was rumoured to have revealed that Mr. Bansal being in possession of some special secret competitive data which necessitated the payment of Rs. 23 Crores to him. Mr. Murthy wanted that part of the investigation report to be released.
  • Bansal’s objections and reservations pertaining to the Panaya acquisition as retrieved from the email and mobile conversations should be released.
  • The company shall also categorically deny that none of its employees were directly or indirectly benefited from the Panaya acquisition.
  • The rationale behind the severance agreement to pay nearly one million dollars to Mr. David Kennedy when he resigned even though there was already an employment contract. Moreover, the reason for allowing a special 12-month severance to Mr. David Kennedy when the norm was just 3 months in the company.

Consequent developments

Folowing a series of public spats, allegations and counter allegations between Narayana Murthy and the board, Mr. Sikka resigned from the post of CEO in August 2017. Consequently, the Board unanimously appointed co- founder and CEO Nandan Nilekani as non executive Chairman.

In October 2017, while posting its quarterly results, the Infosys board headed by chairman Nandan Nilekani gave a clean chit to the Panaya acquisition. “After careful consideration, the Board reaffirmed the previous findings of external investigations that there was no merit to the allegations of wrongdoing. Moreover, Nilakeni rejected the demand for publishing the full investigation report, which he said could impair cooperation. Emphasising that confidentiality was key to ensuring the cooperation of whistleblowers and other participants in any investigative process.


Though, things seem to have settled down now after Mr. Nandan Nilekani’s appointment, the Panaya incident has greatly dampened the image of a company hitherto an example for sound governance and visionary leadership.

(Author Details:- Turab Chimthanawala, CS, BA, LLB, Email:

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July 2021