Infy to buy Panaya for $200m

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By Our Special Correspondent
  • Published 17.02.15
  •  

Mumbai, Feb. 16: Infosys will acquire US-based automation technology company Panaya for $200 million (over Rs 1,200 crore).

The all-cash deal is the second-largest acquisition for the Bangalore-based firm, after Swiss consulting company Lodestone, which it bought for about $350 million (Rs 1,932 crore) in 2012.

However, this is the first acquisition since former SAP board member Vishal Sikka took over as the CEO and managing director of the over $8-billion firm in August last year.

"The acquisition of Panaya is a key step in renewing and differentiating Infosys's service lines," Sikka said.

The transaction is expected to close before March 31, 2015, subject to customary closing conditions.

"This will help amplify the potential of our people, freeing us from the drudgery of many repetitive tasks, so we may focus more on the important, strategic challenges faced by our clients," Sikka said.

"At the same time, Panaya's proven technology helps to dramatically simplify the costs and complexities faced by businesses in managing their enterprise application landscapes," he added.

The move comes as part of the "Renew and New" strategy of the company to enhance competitiveness and productivity of current service lines by leveraging automation, innovation and artificial intelligence, Infosys said in a statement.

In a conference call with analysts late last year, Sikka had revealed that the next acquisition by the company could come in these new services.

According to Infosys, Panaya has a strong cloud-based service and this will help the company to bring automation to several of its service lines, thereby mitigating risk, reducing costs while also shortening the time to market for clients.

Some of Panaya's customers include Mercedez-Benz, Coca-Cola, AstraZeneca, Renault and Volvo. Its existing investors include venture capital firms such as Benchmark Capital, Hasso Platner Ventures and Battery Ventures.

While some analysts felt that Infosys may have paid a tad more for the Panaya acquisition, they added that the deal would be beneficial for Infosys.

"The acquisition is positive for the company (Infosys) as it will enable better utilisation of the cash," Sarabjit Kour Nangra of Angel Broking said.

At the end of December 2014, Infosys had cash and cash equivalents of $5.65 billion (Rs 34,873 crore).

Talking about the deal, Greyhound Research chief analyst and group CEO Sanchit Vir Gogia said the mid-size acquisition would prove easier and lighter for the teams to integrate.

"Panaya will offer significant differentiated advantage to Infosys for its testing services, which continues to be a manual process for many service providers," he added.

Infosys has been aggressively scouting for acquisitions as it looks to catch up with rivals such as Tata Consultancy Services and HCL Technologies in terms of growth.

News of the acquisition did not make much of an impact on the share price of Infosys.

On the Bombay Stock Exchange, the scrip ended lower by Rs 17.90 at Rs 2,278.50 against Friday's close.