Monday February 14, 8:52 am Eastern Time
FOCUS-Acquisition rumours ignite Infosys
By Y.P Rajesh
BANGALORE, India, Feb 14 (Reuters) - The stratospheric rise of Infosys Technologies' (NasdaqNM:INFY - news) share was unabated on Monday as speculation that India's software services blue chip had zeroed in on an acquisition target mesmerised the market.
''The rumour in the market is that Infosys is expected to close an acquisition very soon and it is possible the company is Cambridge Technology Partners,'' Alroy Lobo, software analyst at Kotak Securities, told Reuters.
The Infosys share was frozen at a record high of 10,759.95 rupees after it jumped eight percent, the daily limit, as soon as trading started on Monday morning.
Analysts said speculation on the stock was fanned by remarks at a software industry conference two weeks ago. Kanwal Rekhi, a former chief technology officer at Novell Inc (NasdaqNM:NOVL - news) and a senior member of a group of Indian entrepreneurs from the U.S., sought to illustrate the muscle power Infosys had obtained since its U.S. listing.
''Today, the market capitalisation of Indian software companies are so high that a company like Infosys can acquire Cambridge Technology Partners with just 5 pct of their stock through a stock-swap,'' Rekhi told an annual conference of India's National Association of Software and Services Companies, the apex industry body.
Cambridge Technology Partners Inc (NasdaqNM:CATP - news) is a computer consultant based in Cambridge, Massachusetts in the United States.
''He probably let the cat out of the bag,'' an analyst at a leading Indian mutual fund said.
Infosys recently expressed its unhappiness over India's $100 million limit on overseas acquisitions, which also raised expectations that an acquisition was imminent.
Whatever the substance of the rumour, which has also been picked up by local newspapers, it has lit a fire under the stock.
After taking account of a two-for-one share split on January 24, Infosys has shot up more than 80 percent since it began its latest surge on January 17.
The company's American Depositary Receipts (ADRs), which are unconstrained by anti-volatility circuit breakers, have rocketed even faster on the U.S. Nasdaq exchange.
On Friday, its ADRs jumped 26.79 percent to $670/01.
With two ADRs equivalent to one domestic share, Infosys is trading in the U.S. at 171 percent over the domestic share price.
The ADR will be split on Tuesday, but the premium should not be unduly affected, though the split could attract more ADR buyers and result in more upward pressure on the price. There is no arbitrage available between the two markets.
Infosys, which was the first Indian company to list in the United States when it was offered at just $34 last March, has seen its ADR become the locomotive driving the Indian stock market, and on Friday it was also responsible for pulling other Asian ADRs higher.
INFOSYS REMAINS MUM
N.R.Narayana Murthy, chairman and chief executive officer of Infosys, on Friday said he saw no reason for the skyrocketing share price.
''There are no new corporate developments outside of the company's normal business activities that may impact trading,'' Murthy said in a statement in Fremont, California.
Analysts said the company had no choice but to deny or not comment on the acquisition rumours.
But they said the valuation would be justified if the rumours are indeed true.
''If these rumours are true, then the price is quite justified,'' said Srividya Rajesh, analyst at Sundaram Newton Asset Management Co.
''If they announce an acquisition soon, the share price will quickly surge to its pre-split levels,'' she said.
Analysts said it was not easy to forecast a target price for the Infosys stock but said the company's bottom line would jump as the acquisition starts contributing to revenues.
($1=43.60 rupees)
|
