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Infosys chairman Nandan Nilekani on Tuesday declared that the company had found no evidence of wrongdoing in the Panaya acquisition in 2015.  Photo: Hemant Mishra/Mint
Infosys chairman Nandan Nilekani on Tuesday declared that the company had found no evidence of wrongdoing in the Panaya acquisition in 2015. Photo: Hemant Mishra/Mint

Infosys gives clean chit to Panaya acquisition, Narayana Murthy ‘disappointed’

Narayana Murthy says his questions on Infosys's decision to buy Panaya and the high severance package to Rajiv Bansal and David Kennedy remain unanswered

Bengaluru: Infosys Ltd co-founder and chairman Nandan Nilekani on Tuesday declared that the company had found no evidence of wrongdoing in the contentious $200 million acquisition of Israeli automation technology firm Panaya Ltd in 2015.

Nilekani reiterated Infosys’s previous stance on the investigation, effectively handing a clean chit to former CEO Vishal Sikka and the previous board, drawing an immediate riposte from co-founder N.R. Narayana Murthy. Nilekani’s remarks raised further questions about the recent overhaul of the company’s board and top management.

Nilekani declined a direct answer when asked whether the company’s latest stance on Panaya effectively backed the stand of Sikka, who quit in August, and the previous board, although most experts and analysts tracking Infosys interpreted the latest statement from Infosys as a vindication of sorts for Sikka.

“Publishing additional details of the (Panaya) investigation would inhibit the company’s ability to conduct effective investigations on any matter in the future," Nilekani said, largely sticking to scripted remarks that were also published in the company’s statement on Tuesday.

“Let me say that the investigations were regarding the (Panaya) matter and we’ve said that there is no merit in the allegations of wrongdoing. That’s what we’ve said... I think if you look at the actions of the last 60 days, you would’ve seen that what needed to be done has been done," added Nilekani.

The company’s latest stamp of approval for the Panaya investigation also raises the prospect of further questions from investors, who still have no clarity on the contents of the probe.

Murthy, who has demanded that the report be made public, said on Tuesday he stood by “every question on poor governance raised in my speech to Infosys investors dated August 29, 2017".

The latest declaration by Nilekani has also raised questions on whether Murthy’s crusade against the previous board and Sikka was a futile exercise at the end.

Nilekani, for his part, declined to comment when asked by Mint why the recent board overhaul was conducted when there was no evidence of wrongdoing in the Panaya deal or any other major corporate governance lapses. “I don’t want to get into that. I really don’t want to waste my time on that," said Nilekani, who also declined to comment on whether Infosys had spoken to Murthy on the decision to not release the full report on the probe of the Panaya deal.

Experts and proxy advisory firms also raised questions over why the recent board overhaul was undertaken if there was no wrongdoing. “If there was no wrongdoing, the need for bringing about a change to the board in August is not clear," said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research.

Over the past three months, Infosys has witnessed unprecedented turmoil, having had to deal with the exit of the CEO and the chairman, and a complete overhaul of the board.

Emails sent to Sikka went unanswered.

“Has Vishal been vindicated? Short answer is yes," said Ray Wang, founder of Constellation Research, a technology research and advisory firm. “Simply because this required a third-party investigation agreeable by all interested parties to either indict or clear the charges."

Over the past year and a half, Murthy has repeatedly attacked previous chairman R. Seshasayee and other board members over issues of poor corporate governance. Some of the decisions that were questioned by Murthy were Infosys’s decision to buy Panaya, the board’s decision to give a generous severance payout of Rs17.38 crore to former chief financial officer Rajiv Bansal, and another unusual severance payout to former chief legal officer David Kennedy.

“The fact remains that none of these questions have been answered by the Infosys board with the transparency it deserves. I am disappointed," Murthy said in his statement on Tuesday. “The core question still is how and why the Infosys board approved an unusual and unprecedented severance payment agreement of 1000% (of the standard Infosys employment contracts) to the former CFO, and why the board did not disclose this information proactively and much earlier. Sadly, it appears we will no longer know the truth."

Still, there are some who believe Nilekani’s decision to give a clean chit is actually a kind of truce with the earlier board and management and helps the company move forward. “Enough has been discussed on this subject and now the company wants to put an end to all this talk of poor corporate governance," said an executive who has worked with both Murthy and Nilekani and didn’t want to be named. “And this is best possible way to get out of this. This allows the company to just focus on business going forward. Even if this means NRN has to swallow his pride and be made to look like a sacrificial lamb"

A Mumbai-based analyst at a foreign brokerage said the episode may have an impact on Infosys’s search for a CEO.

“A bigger risk now is the message it sends to an external CEO candidate who may have been considering joining Infosys. The founders, who hold less than 13% stake, can hound any CEO without being accountable to anyone," said the analyst on condition of anonymity.

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