Employees walk past the K Dinesh Communication Design Center at the Infosys Ltd. campus in Electronics City, Bengaluru. (Photographer: Karen Dias/Bloomberg)

Infosys Gives Up Plan To Sell Subsidiaries Panaya, Skava

Infosys Ltd. has given up its plan to sell its two subsidiaries, at least for now.

The subsidiaries—Kallidus and Skava (together called Skava) and Panaya—have been declassified as “held for sale” as it doesn’t expect a sale to materialise until March, according to Chief Executive Officer Salil Parekh. “We now plan to repurpose Skava’s business and refocus Panaya’s suite of products.”

Infosys had acquired Skava and Panaya for $120 million and $200 million, respectively in 2015. The Panaya deal was one of the issues that led to differences between co-founder NR Narayana Murthy and the Infosys board, eventually leading to the resignation of Parikh’s predecessor Vishal Sikka and some of the board members. An internal probe was initiated after two anonymous whistleblower complaints were received by the Securities and Exchange Board of India, alleging wrongdoing by the company during the acquisition of the two firms in 2015. The company didn’t find any wrongdoing.

With Panaya and Skava being relatively small, their consolidation wouldn’t have additional impact on Infosys, said interim Chief Financial Officer Jayesh Sanghrajka. The Bengaluru-headquartered company had said in April last year it would scout for potential buyers for Panaya and Skava after it felt they didn’t fit its criteria for scaling business.

During the quarter, we reclassified Panaya and Skawa from assets held for sale. That impacted our margin by $12 million.
Jayesh Sanghrajka, Interim Chief Financial Officer, Infosys

Also read: Q3 Results: Infosys Raises Revenue Forecast On Strong Deal Momentum

Impact On Infosys Earnings

  • Operating margin fell 40 basis points due to additional depreciation and amortisation following their reclassification.
  • Recognised reduction of Rs 451 crore in the carrying value for Skava, including Rs 358 crore towards goodwill and Rs 93 crore towards value of customer relationships.
  • Operating profit for the December-ended quarter declined 1.3 percent on the back of additional depreciation and amortisation expenses of Rs 88 crore.
  • The basic earnings per share of Rs 8.30 includes reduction in fair value of Skava which together resulted in a reduction of EPS by Rs 1.24.

This reclassification is in accordance with the requirements of the International Financial Reporting Standards- 5, which relates to non-current assets held for sale and discontinued operations.

Also read: Q3 Results: Infosys Announces Rs 10,000-Crore Buyback, Special Dividend