The Infosys' bull run

Shashwat Chaturvedi









MUMBAI: It was in the turbulent 1993, when NR Narayana Murthy, then the CEO and
chairman of Infosys, decided to list his 12-year company on the Indian bourses.

India was finally finding its footing after the central government had

introduced a series of market reforms and liberalization policies under the

aegis of union finance minister Manmohan Singh two years earlier.

Meanwhile, the country was anguished by communal strife; blasts shocked and

bloodied Bombay just a month later, in March. Not surprisingly, Infosys initial

public offering (IPO) was not considered hot at all. Most of the broking firms

were vary of a company that dealt in computer space. IT, or information

technology, was just another acronym and precious little else.






Reminisces Milind Pradhan, head of equities, UTI Securities: “Infosys IPO went
quite unnoticed, as every one was vary about a company having a new management

team. Also, the IT industry was still to take wings.” Infosys issue was priced

at Rs. 95 per share and it managed to raise around Rs. 13 crore only. According

to Pradhan, most of the investors were foreigners and NRIs, “as they were more

aware about technology than the rest of Indian investors.”






From a price of around Rs. 100 to touching Rs. 3400 on April 7, 2006 (not
discounting a few bonus issues, etc.), Infosys has seen it all from the Harshad

Mehta's bull run to the Ketan Parekh's scam or the recent IPO scam. Even the

recent slide at the market has not really affected the shares in a big way.






Says Nazim Manasawala, founder, StockGold Yahoo Group, “Infosys has always
managed to outperform the market. The company always gives conservative

projections and tends to beat the guidance by 20 per cent or so. Though the

prices have come down considerably, it is still a blind-buy.”






Concurs Phani Sekhar, research analyst, Angel Broking. “The slide in the market
has been for fundamental reasons, still the Infosys has not fallen the way

others have on the bourses.”






Pradhan terms Infosys stock as a 'defensive buy'. “The stock has outperformed
the market by around eight per cent. Also, there is much surety about Infosys.

For instance, the billing rate is bound to remain stable. Hence the stock can be

termed as a safe bet,” he opines.






Should Infosys go for a stock split now, as the current price of the stock (it
closed at Rs. 2917 on June 21, 2006) is way beyond the reach of the common

investor? Not really, feel the analysts since the price will come down to around

Rs. 1500 as the company recently announced a 1:1 bonus for the stock holders.






Infosys sans Murthy
 

Murthy the public face of the company is about to step down from his post of

chairman and chief mentor and relinquish his day-to-day involvement in the
company affairs, will that affect the company? Again, all the analysts were in

agreement, that it wouldn't.






“Infosys is an organization that is no more dependant on an individual. Over the
past two years, there has been a constant focus on succession planning. People

have been asked to take up different duties to give them a wider exposure. Take

for instance Mohandas Pai. He was the CFO for so many years, now he is heading

the human resources department. So is the case with Hema Ravichandra and many

else. Hence, with Murthy stepping down, it will not really make a major

difference,” says Sekhar.






Since Murthy is retiring, will he go in for another American depository receipt
(ADR) issue and offload some percentage of his shares? The analysts seem to have

differing opinions on the issue. “Infosys had gone in for a sponsored ADR in

2005, so it might go in for another next year or so,” says Sekhar. Meanwhile,

Nazim maintains that the equity is well balanced between the promoters, fund

managers and the investors, so it does not really make much of a difference.






How does Infosys compare to the rest of blue chip IT stocks like TCS, Wipro,
Satyam, etc.? Quite well, if one is to believe Pradhan. “Out of the three, Wipro

has always got a bit higher valuation from the investor community, when compared

to Infosys. Similarly, Infosys is rated marginally higher than TCS. But the gap

is slowly reducing and all three are coming at more or less the same level.”









The compassionate capitalist
 

One of the biggest achievements of Infosys has been its high corporate

governance standards and an unflinching adherence to performance improvement.
The other significant one has been the way the company has enriched its

employees and the whole economy at large. “It is an excellent story about

capitalism with compassion,” says Sekhar.






He also reminds that Infosys was the first Indian company to offer employee
stock options or ESOPs to all qualified employees, “making more millionaires

than most other companies,” he adds.






The company turns 25 next month, and it has been a dream run so far. No wonder
Murthy advices Infoscions to “choose a worthy dream, to go after it confidently,

and to play a role that will make all of us proud in the years to come.”






Starting off in 1981, with an initial capital of Rs. 10,000 that too loaned from
Sudha Murthy (Murthy's wife), Infosys was the first Indian company to be listed

on Nasdaq in 1999 and recently crossed the $ 2 billion revenue mark. Things have

gone so good for Infosys that as an Indian one takes a deep breath and almost

whispers, 'touchwood'.






Though, knowing Infosys, it hardly seems necessary. The Infosys wagon sure seems
to be hitched to a star.






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