India’s Infosys to Buy Israeli Startup Panaya for $200 Million

Acquisition is first for the Bangalore-based provider of information technology services.

David Bachar

Infosys, India’s second-largest information technology outsourcing company, said on Monday it would buy the Israeli automation-technology startup Panaya in a $200 million deal, creating the first major presence in Israel by an Indian tech company.

Infosys, based on Bangalore, will pay $200 million in cash for the company and get another $30 million in cash Panaya is holding. Infosys will retain all or more most of Panaya’s approximately 160 employees. Most of them work at Panaya’s research and development center, in the Tel Aviv suburb of Ra’anana, which will become Infosys Israel.

The sale is an expression of the growing business ties between Israel and India, which have often been overshadowed by Israel’s budding relationship with China. India has been buying Israeli agriculture, water and recycling technology and has become the single biggest customer for Israeli military equipment.

Panaya, which is based in New Jersey, has raised $58 million since it was founded in 2006. It backers include the U.S. venture capital funds Benchmark Capital and Battery Ventures, Germany’s Hasso Plattner Venture, Lichtenstein-based Tamares and the Israeli funds Gemini and IGP.

The Panaya sale is the first exit for IGP, a new fund founded by Haim Shani and Moshe Lichtman. IGP led Panaya’s last fundraising round, just a month ago, when the company raised $20 million.  

Infosys will add Panaya to the battery of new technologies it has been acquiring with its $5-billion war chest. Under CEO Vishal Sikka, the Indian company has been betting on automation and artificial intelligence technologies as well as cloud-based services to regain ground it has lost to rivals such as Tata Consultancy Services.

“The acquisition of Panaya is a key step in renewing and differentiating our service lines,” Sikka said in a statement. “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.”

Infosys is trying to revamp the way it delivers its outsourcing services by using more automation, big data and the cloud to slash the number of programmers and hours needed to create and manage software.

Panaya’s technology uses big data to predict what will break, how to fix it and what to test for every change made when large organization upgrade their Oracle and SAP software. The company boasts some 1,200 customers, including around one-third of America’s Fortune 500 companies. Sales are believed to be in the tens of millions of dollars annually.

Panaya uses the so-called low touch sales model for its products, that is online and by phone rather than face-to-face meetings, even for large deals. To that end it has hired a large number of people speaking an array of languages, including many new immigrants and European nationals who have relocated to Israel.

The acquisition is expected to close next month, Infosys said.

With reporting from Reuters.