IT major Infosys courtship with Israeli software service company Panaya is ending in three years.
The acquisition of the cloud-based application delivery and test automation solutions provider in 2015 had kicked off a major crisis in Indias second largest IT firm, when its co-founder NR Narayana Murthy raised a storm over lack of transparency in the deal, which was clinched by the companys star CEO and MD Vishal Sikka.
The controversy eventually led to the exit of Sikka, former SAP executive, from Infosys on August 18, 2017. The Indian IT bellwether had acquired the Israeli firm for $200 million.
Infosys on Friday reclassified Rs 118 crore as impairment loss with respect to Panaya in the consolidated profit and loss for the quarter and year ended March 2018 and lined up the company for sale.
After conclusion of a strategic review of its portfolio of businesses, the company has initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava and Panaya — collectively referred to as the “disposal group” — it said in a statement.
The software behemoth on Friday reported a 28.2 per cent drop in sequential net profit at Rs 3,690 crore for the March quarter. The results were announced post market hours.
Earlier in the day, Infosys stock settled 0.58 per cent up at Rs 1,169.
The company has projected completion of the sale by March 2019 and accordingly, assets amounting to Rs 2,060 crore and liabilities of Rs 324 crore in respect of the disposal group have been reclassified and presented as “held for sale”.
Impairment loss or charges refer to the value of an asset in the books of a company which is no longer fully recoverable. These charges may relate to goodwill or fixed assets.
Such assets may be the ones acquired in business deals or major capital projects of the company. Impairment charges arise either because the current fair value of the asset has declined, or the future cash flows that will be generated through the use of the asset have dropped.
“On reclassification, the disposal group has been measured at the lower of carrying amount and fair value less cost to sell and consequently, an impairment loss of $18 million in respect of Panaya has been recognised in the consolidated profit and loss for the quarter and year ended March 31, 2018. The disposal group does not constitute a separate major component of the company and therefore has not been classified as discontinued operations,” Infosys said in a release.