The announcement of the bonus in the ratio of 1:1 during the last phase of the trading session led to a sell off at the day's high of Rs 3,050. The stock breached the crucial barrier of Rs 2,900 to trade at the day's low of Rs 2,890. However, in the final countdown, the stock closed at Rs 2,945, thereby registering a minor price loss of 0.4 per cent. The counter clocked a phenomenal volume of over 4 lakh shares. The sell off, according to market observers, was operator driven.

``Its been a `realistic bonus'. The impact is bound to be positive. The announcement is an adequate boost to push up the sentiment of investors,'' said a research analyst with a leading financial institution.

The current equity is pegged at Rs 16.02 crore due to fresh shares issued in 1995 to the existing employees under the employees stockoption schemes. Analysts also highlighted that the most positive aspect of the bonus would be felt by the employees of the company. It should be recalled that under the employees stock option scheme, the shares are locked in for a period of five years.

``The issue of 1:1 bonus has infact helped the employees realise a sharp jump in their holding of the company's shares despite the fact that they cannot immediately sell off to encash upon the sudden spurt in the stock price,'' said the analyst.

While analysts echoed the view that the company has once again rewarded investors handsomely, brokers at large failed to agree to this view. Considering the general reserves of the company, which was pegged at a high of Rs 111.85 crore on March 31, 1998, analysts made a strong case for the company to maintain the ratio of 1:1.

Twice in the past, the company has rewarded investors with a bonus of 1:1. The first bonus came in 1994, which saw the equity rise from Rs 3.5 crore to Rs 7.26 crore, while the second bonuswas issued in 1997 which propped up the equity to a high of Rs 14 crore.

``Considering the growth prospects of the company, one should peg the post-bonus earning per share (EPS) at Rs 37.7 against the current EPS of around Rs 70,'' explained a research analyst with Prabhudas Liladhar, also highlighting that the bonus will prop up the book value to above Rs 100.

It should be recalled that immediate reaction to the company's notice dated December 18, issued to the stock exchanges about the date of board meeting to consider bonus, was a price jump of over 5 per cent. On Friday, the stock closed at the day's high of Rs 2,675 and further appreciated by over 2 per cent at the kerb to trade at a high of Rs 2,850. Interestingly, on December 21, the stock shot up by over 8 per cent to be locked at the day's high of Rs 2,887.95. The stock registered a high of Rs 3,079 on Tuesday but profit booking at these levels saw the stock dip below the 3,000 barrier.

INSIGHT
Rewarding shareholders

Thedecision by Infosys Technologies to issue bonus shares is a good one. The net worth has been growing at a compound rate of 57 per cent YoY for the last four years while revenues have grown at a CAGR of 72 per cent. Another bonus issue so close on the heels of the last 1:1 issue has come as a pleasant surprise. There were few options to reward its shareholders. The company follows a very stable dividend policy of increasing it by 5 per cent a year and hiking the dividend sharply without a bonus issue would not have improved the market value of the stock. A buyback of shares cannot be an option for Infosys. The message from the Infosys management is clear; that they expect the relentless growth achieved by the company so far to continue, and that shareholder participation will be rewarded. The bonus issue will further serve the aim of increasing liquidity in the stock.