Infosys can't sell off Panaya, Sebi should probe: Whistleblower

Bengaluru: A day after Infosys said it started seeking suitable sell out options for Skava and Panaya, which were acquired by the company’s controversial CEO Vishal Sikka, a fresh whistleblower email on Saturday questioned the company’s decision to sell these and requested market watchdogs, SEBI and SEC, to question the board of the company on why it changed a “strategic acquisition to a completely valueless one” and decided on a sell off.

The whistleblower in his/her email said, the Board and the management led by Seshasayee and Ravi Venkatesan had not only defended the acquisition but also gave a clean chit to the erstwhile CEO and publicly said that they had not found anything wrong with the acquisition. 

The current board under the chairmanship of Nandan Nilekani too gave a clean chit to please some of its existing board members who were part of the decision to acquire Panaya, the whistleblower alleged. “Yesterday (Friday), the Board of Infosys had written down almost 50% of the Panaya acquisition value they have written down $90 million out of a total investment of $220 million without assigning any reason. Infosys board also took some impairment on other acquisitions in the past few quarters”, the email said.

“But the current board is clearly saying that both Skava and Panaya were dud acquisitions and writing down almost 50% of its investment. We need to believe the current board as the earlier board was an accomplice in that crime,” alleged the whistleblower.

Infosys on Friday said, in the quarter ended March 31, 2018, on conclusion of a strategic review of its portfolio of businesses, the company initiated identification and evaluation of potential buyers for its subsidiaries, Kallidu,  Skava and Panaya (collectively referred to as the disposal group) The company said it anticipates completion of the sale by March 2019 and accordingly, assets amounting to Rs 2,060 crore ($316 million) and liabilities amounting to Rs 324 crore ($50 million) in respect of the disposal group have been reclassified and presented as "held for sale".  On reclassification, an impairment loss of '118 crore ($18m) in respect of Panaya has been recognized in the consolidated profit and loss for the quarter and year ended March 31, 2018.  

The corresponding write down in the investment value of Panaya in the standalone financial statements of Infosys Ltd is Rs 589 crore ($90 million), the company said.

The whistle blower asked, "My question to you as the regulator is where is the board accountability in this whole transaction? The members of the earlier board - Ravi Venkatesan, Kiran Majumdar, Punita Sinha and Roopa Kudva - who participated in approving and defending these acquisitions are still in the current board. Should they not resign taking moral responsibility for this disaster? Should not their board fees/commissions been clawed back by the current board and make them pay for this wrong and disastrous decisions?

We all understand business decisions go wrong. But, here there was connivance and conflict of interests which the erstwhile board ignored and allowed the crime to happen. Worse is they defended their actions and have no remorse. The tragedy is some of them like Kiran Majumdar Shaw was elevated to be Lead Independent Director of the Board. The whole thing is a joke on the investors, the whistleblower said.

As a regulator I request you to ask the Board of Infosys to fix accountability for this transaction and take action against people who had approved these transactions.

The whistleblower also raised the flowing questions in the recent email: Will SEBI make Infosys board accountable and protect shareholders interests. Will SEBI ask Infosys to claw back the board fees/commissions paid to independent board directors - Kiran Majumdar Shaw, Ravi Venkatesan, Roopa Kudva and Punita Sinha? Will SEBI require the Infosys Board to explain the inconsistency of the board in defending the acquisitions hard one year back to complete write off now?