NCLT Liquidates Infosys Arm Skava Worth Rs 2.72 Crore, Effective Nov. 14

The National Company Law Tribunal (NCLT) has ordered the liquidation of Skava Pvt., a wholly owned subsidiary of Infosys Ltd. This decision was confirmed in an exchange filing by Infosys, stating that the liquidation became effective on November 14, 2024. A certified copy of the NCLT's order was received by Infosys on November 28.

As of March 31, 2024, Skava's net worth was reported at Rs 2.72 crore. Infosys had originally acquired Skava in 2015 for $120 million. However, the subsidiary faced challenges, including write-downs amounting to ₹451 crore before the NCLT's liquidation ruling.

Background on Skava

In 2019, Infosys had initially planned to sell Skava, but later reclassified the firm from "held for sale" status. Instead of a sale, Infosys chose to repurpose Skava's business, citing that a timely sale seemed unlikely.

The company's total assets were valued at Rs 2,060 crore (approximately $316 million), while liabilities stood at Rs 324 crore (around $50 million).

After the acquisition, the reclassification significantly affected Infosys's financials, contributing to a decline in operating margin by about 40 basis points, resulting from additional depreciation and amortization.

Financial Impact

The write-downs included Rs 358 crore related to goodwill and Rs 93 crore concerning the value of customer relationships. The financial struggles of Skava have been recognized before NCLT's final decision.

Following the news, shares of Infosys Ltd. saw a decline, closing at Rs 1,856.65 on the NSE, which reflects a decrease of 3.53%. In contrast, the benchmark Nifty 50 index dropped by 1.49%. Despite this dip, Infosys stock has increased by 21.02% since the beginning of the year, and by 28.7% over the past 12 months.

Analysts remain divided on the stock’s forecast; currently, of the 48 analysts covering Infosys, 32 hold a 'buy' recommendation, while 10 suggest 'hold' and 6 recommend a 'sell'. The consensus price targets imply a potential 11% upside over the next year.

Market Outlook

The liquidation of Skava is part of larger trends affecting technology shares in the Indian market, as various companies, including Infosys, respond to changing economic conditions and uncertainties in market demand.

NCLT, Skava, Infosys