As it struggles to sell the business, the firm is finding projects internally that Panaya could be leveraged to showcase the platform to potential bidders, said one source, who pointed that the company’s focus is to sell the unit.
In April, the software services company said it had begun discussions with prospective buyers for selling off Panaya, which was acquired during the tenure of former CEO Vishal Sikka. Acquiring the Israeli firm Panaya at an “inflated price” became a bone of contention for founders and the erstwhile management. Infosys had indicated that the platform did not fit its revised strategy set by the current chief executive Salil Parekh.
Infosys paid over $200 million in 2015 to buy Panaya. So far, it has written off over half of its value. MD Ranganath, chief financial officer, who announced his resignation last month, had reiterated negotiations for Panaya and Skava involve “multiple elements”.
The company has set a deadline of March 2019 for selling the two subsidiaries.
Infosys, to a questionnaire from ET, responded with transcripts of statements made by Parekh and Ranganath during the quarterly results announcement in April and July, saying that the company did not have an update since then. “Negotiation is really a process and it is based on multiple elements that we see or the buyers see including the business plan and their own assessments etc… Well, I think the negotiation is going on and as you know, there are always uncertainties around negotiations,” Ranganath said in July.
Another person with knowledge of the discussions said, “It could be a right fit for any services player with a large SAP implementation revenue” and it “has not been easy to find one such buyer so far”.
Global tech services sector analysts do not see merit in growing Panaya at the current juncture when Parekh looks to make Infosys a “digital services powerhouse”.
“Panaya could have been a strong fit, but would have taken a large amount of additional investment in development and sales to make profitable. I also believe that Salil wants to be laser-focused on a digital services powerhouse and Panaya and Skava are a distraction from his broader strategic goals. The firm has made great strides with McCamish (its insurance BPM platform) and some elements of Edge-Verve — so why keep these unwanted investments — it just doesn’t make sense,” said Phil Fersht, CEO, HfS Research.
“They will find buyers eventually and have probably already written down some anticipated losses on them — that’s just business.”
Former Infosys CFO and board member, V Balakrishnan, said it was not a right approach to write down value before identifying buyers.
“First talk to prospective buyers and if you identify a buyer then you have valuation established and then write off the rest; but once you write off and keep writing off for a buyer it is not going to happen,” Balakrishnan told ET.
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