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Last Updated : Apr 16, 2018 04:13 PM IST | Source:

What does Infosys sale of Panaya, Skava mean?

The company had put up all three for sale, and assets and liabilities amounting to Rs 2,060 crore and Rs 324 crore have been reclassified as “held for sale”.

Neha Alawadhi @alnehaa

As Infosys announced it was hiving off the three acquisitions made by ex-chief executive Vishal Sikka, does the move indicate a different strategy by the company, or is it that the Bengaluru-headquartered firm will trying to do away with the previous chief’s strategic investments?

While declaring its Q4 results on April 13, Infosys said that it would hive off Kallidus, Skava and Panaya, and look for potential buyers by March 2019.

All the three companies were acquired in 2015. It bought digital e-commerce services provider Kallidus for USD 120 million. The deal gave it access to the holding group behind San Francisco-based Skava, which provides a cloud-based platform for online services for retailers, including mobile wallets, apps and web stores, among others.

In February, it had acquired Israeli enterprise software management firm Panaya in an all cash deal amounting to USD 200 million.

The Panaya deal became the thorn that eventually led Sikka to quit the firm in August 2017, after a public spat with the co-founders. A whistleblower claimed that the acquisition was overvalued and alleged that former chief financial officer Rajiv Bansal was given an unusually high severance package as “hush money” since he was not in favour of the acquisition.

This led to the co-founders raising issues of impropriety and improper corporate governance, and Sikka eventually left Infosys.

On Friday, the company said that it had put up all three for sale, and assets and liabilities amounting to Rs 2,060 crore and Rs 324 crore have been reclassified as “held for sale”. The corresponding write down in the investment value of Panaya in the standalone financial statements of Infosys was disclosed as Rs 589 crore.

Infosys also said that it has bought WongDoody Holding Company, a US-based digital creative and consumer insights agency for about USD 75 million.

Analysts have largely agreed that the old acquisitions fit into the new CEO Salil Parekh’s broader strategy on a digital future for Infosys, but there is sense that the second largest Indian IT exporter is trying to get rid of any further issues to do with the acquisitions made under Sikka’s watch.

“The tilt of Infosys towards digital services is visible as compared to digital products earlier. This is evident from comprehensive portfolio review undertaken by the CEO, after which it decided to divest the flagship investments of the earlier CEO, viz. Panaya and Skava,” said Kotak Institutional Equities analysts Kawaljeet Saluja and Jaykumar Doshi in a note to clients.

They pointed out that revenues of all the three have shrunk and did not contribute “meaningfully” to overall company revenues.

“This is a big U-turn in its strategy, as it has been articulating the positives of these businesses in terms of their role in front-loading new engagement wins in the past. This seems to be an exercise to clean up any possible concern that may arise given the past allegations that have been raised on these acquisitions by whistleblower,” said Emkay Research analyst Rahul Jain in a note.

However, not all observers shared the same view. “The decision to sell Panaya is interesting and reflects on the mindset of the new management under Salil’s leadership. A merger isn’t just about the technology that comes with it but the overall fitment in the broader scheme of things like cultural match which is the hardest task amongst all. We must give Salil the time to explain and more importantly justify his decision to sell Panaya and not necessarily read it as undoing what Vishal did,” said Sanchit Vir Gogia, CEO and chief analyst at Greyhound Research.

Kotak analysts added that discarding Panaya and Skava does not mean that Infosys will abandon the products/platforms completely, as is evident in its commentary around focusing on its Edge suite of products and platforms, NIA, its artificial intelligence platform, and banking product Finacle.
First Published on Apr 16, 2018 04:13 pm
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