India's Infosys Shrs Surge; Still Seen As Buy
BOMBAY (Dow Jones)--Infosys Technologies Ltd.'s (Infy) run of limit-up gains on the Bombay Stock Exchange appeared set to end Wednesday following five sessions during which its shares rose by the maximum 8%.
Still, analysts say they see more gains ahead for the Indian software maker's shares as it expands in overseas markets and continues to enjoy support from the government's software-industry promotion policies at home.
"The stock is a decent buy at the current levels because of the growth expected in the company's sales and profits in the coming years via its various business tie-ups and planned acquisitions overseas," said Saumil Sheth, institutional sales executive at Kisan Ratilal Choksey & Co.
The stock's recent rise was triggered by a government decision in the Feb. 29 federal budget to extend an income tax exemption for exports from software parks. Most of Infosys's exports are made in software parks.
Infosys stock price has risen by more than 50% on the BSE since the budget announcement.
At 0645 GMT Wednesday, Infosys shares, which have a 27% weighting in the BSE Sensitive Index, or Sensex, are up INR510.15 rupees ($1=INR43.57), or 4.0%, at 13,299.90 rupees. The Sensex is up 145.40 points, or 2.6%, at 5735.25.
Infosys is one of India's leading blue-chip companies and the first Indian company to list on Nasdaq. Infosys' American Depository Receipts closed down $10.00, or 2.9%, at $335 on NASDAQ Tuesday.
Adding fuel to the stock's climb was a string of business tie-ups that promise to boost Infosys's already strong revenue and earnings growth, analysts said.
"The company's foray into the U.K. market has made the Infosys stock very attractive," said Sanjeev Kumar, software analyst at ASK-Raymond James. He said that until now most of the software maker's exports have gone to the U.S. but with other overseas markets opening up the company should witness greater export growth.
As reported, Infosys said recently it will establish its first European proximity development center in the U.K., as part of a five-year contract with Sainsbury's Supermarkets Ltd., one of the U.K.'s largest supermarket chains.
Throughout the term of the contract, valued at GBP28 million, Infosys will develop software and provide maintenance support for Sainsbury's finance and human resources divisions, as well as provide some marketing and warehousing applications.
Infosys has also said it has many orders in hand for projects at home.
Given the company's rising earnings potential, the stock price could rise to about INR20,000 in a couple of months, especially if - as expected - it announces its first major acquisition, said Vinod Bangera, investment analyst at Investsmart India Ltd.
Sheth said the acquisition will be primarily aimed at boosting the company's e-commerce business.
The company's plan to grow through new software products and to get into newer areas of software business will allow it to "sustain its future growth," he said.
In the current year the company is expected to post a 100% jump in net profits, Seth said.
Jagdish Malkani, a broker on the National Stock Exchange said the run-up in the stock's price also reflected expectations foreign investors will add more Infosys shares to their portfolios after the government said in the federal budget that foreign funds will be allowed to increase their holdings in an Indian company's equity to 40%, up from 30%. |
