BANGALORE, INDIA: Shares in Infosys Technologies Ltd. rose as much as 2.5 percent today, spurred by market talk that India's No.2 software exporter could bid for Capgemini, Europe's biggest IT services group.
But, by 0910 GMT, those gains had been all but wiped out as some analysts said a deal was improbable as it would pose major funding and integration challenges for the Bangalore-based company.
"The deal rumour mainly gave strength to the Infosys stock. There wasn't any other trigger to give support ahead of its quarterly earnings," said a sector analyst at a Mumbai brokerage, who asked not to be named.
Infosys and Capgemini, which has a significant presence in India, have declined comment on the speculation.
By 0910 GMT, Infosys shares were up 0.16 percent at 1,929 rupees, in a Mumbai market up 0.8 percent.
In Paris, Capgemini shares were up 1.5 percent at 54.60 euros, taking its gains to 7 percent since Tuesday's close.
Infosys, which develops applications, designs supply chains and offers back-office services to clients including ABN AMRO, Goldman Sachs and Airbus, reports April-June results on July 11.
Capgemini, with a market capitalisation of $10 billion and 2006 revenue of 7.7 billion euros ($10.4 billion), would be an expensive target for Infosys, whose sales grew to 138.9 billion rupees ($3.4 billion) in the year to March and which has a market value of $27 billion.
"I don't think it makes sense for Infosys ... They will bite off more than they can chew," said Harit Shah, sector analyst at Mumbai's Angel Broking Ltd.
"If it actually happens, integration issues will be huge and there will be a massive fall in margins," he said, adding funding for the deal would be a major issue.
"Infosys' balance sheet will change beyond recognition."
Given Infosys was growing robustly without making major buys, Shah saw little possibility it would change that by bidding for Capgemini, which is emerging from years of restructuring.
Others felt Infosys could be attracted by Capgemini's consulting business, an area where it has not made significant in-roads since it set up a consulting arm in 2004.
Although Infosys' 2006/07 profit rose 57 percent to 38.56 billion rupees, its consulting arm posted a loss of 1.11 billion rupees as it faced tough competition from IBM and Accenture.