Infosys, Only Indian Company With U.S. Shares, Surges on E-Commerce Hopes
inf.com
By Rajat Bhattacharya
Infosys Trades in U.S. at 55% Premium to Indian Stock (Update1)
(Adds comments from managing director, local share price.)
Mumbai, June 9 (Bloomberg) -- Infosys Technologies Ltd., India's only company to trade in the U.S., saw its U.S. shares surge to their highest since their March 11 debut and closed yesterday at a 55 percent premium to its local stock on optimism e-commerce will boost revenue.
The software maker's shares on the Nasdaq Composite Index have surged 34 percent in the last three weeks even as its local shares fell 2.5 percent in the same period to close at 3,115.00 rupees ($72.40) yesterday. Today, the local shares rose 2.4 percent to 3,190.00 rupees.
With one American depositary receipt representing half of a local share, the $56 1/8 price of each ADR implies a 55 percent premium over the local shares as of yesterday's close. The gap makes it attractive for global investors to buy Infosys shares from Indian stock exchanges and sell them on the Nasdaq, analysts said.
''We believe there's a significant arbitrage opportunity here to switch from the ADR to the local'' stock, said Supratim Basu, an analyst at brokerage Ask-Raymond James & Associates Ltd.in Mumbai.
Infosys's ADRs soared 8.5 percent yesterday to a high of $56 1/8 in Nasdaq trading after the company said it tied up with CyberSource Corp. of the U.S. to provide its clients e-commerce software that enables businesses to conduct trade over the Internet.
''This new alliance with CyberSource should strengthen Infosys' offerings in the Internet and e-commerce arena,'' said Basu at Ask-Raymond. He sees the share of Internet-related software rising to 15 percent of Infosys' total revenue in a year, from 5 percent today.
Expansion
Efforts by Infosys to spread from its traditional market in the U.S. into Europe and Japan have enthused U.S. investors.
Infosys won a contract from Dell Computer Corp.'s Japan unit in March to provide software that will enable Dell to conduct trades and receive payments from Asia-Pacific clients over the Internet.
''One of our goals is to be in the e-commerce space,'' said Nandan Mohan Nilekani, managing director, Infosys, in a telephone interview from the company's Bangalore headquarters today. Still, ''it was premature to say'' how much the new tie-ups will contribute to boost earnings, he said.
Since April, Indian investors have profited from gains made at India's leading software, drug and consumer goods companies in the last year to raise funds to buy cement, automobile and oil stocks, which are likely to rise as the economy rebounds from a three-year slump. Infosys' local shares have surged 110 percent since Jan. 1.
Many brokerages say Infosys remains a good investment as the profit of the software maker is seen rising about 59 percent in the year through March 2000, according to an IBES International Inc. poll of 12 brokerages. The profit expansion follows an average 51 percent yearly growth in the last five years.
Y2K Bug
While analysts expect orders for software companies to slow down this year as businesses and consumers delay purchases until next year when they know which programs are affected by the Y2K bug, Infosys wasn't ''anticipating a slowdown,'' said Nilekani.
He said Infosys' revenue will match the industry's yearly growth rate of 40 to 50 percent.
Infosys is the first Indian company to list its shares in the U.S. The company raised $61.2 million in March from a sale of 1.8 million ADRs, each equal to half its local common stock, at $34 a piece.
The receipts rose as much as 47 percent to $50 on the first day of trading on March 11 before closing that day at $46 7/8.
They fell to a record low of $40 on April 28.
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