With the company positioning itself at the higher end and all set to tap the E-commerce market, it is likely to maintain its growth rate for at least next couple of years. The current rallyin the stock was aided by the first quarter results coupled with good news from the border front. Post-Q1 show, the stock has moved up 32.4 per cent from Rs 3715 to Rs 4921.05. The company has maintained its growth momentum and reported a net profit of Rs 60.6 crore, a 156 per cent jump over the previous corresponding quarter. Total income rose 87 per cent to Rs 184.06 crore. For the fiscal 1999, it has recorded a sales growth of 98 per cent from Rs 257 crore to Rs 508.9 crore.Incorporated in 1982 with a capital of Rs 10,000, the company has come a long way. But the question still remains whether the company will able to maintain the momentum.

Over the last five years, Infosys has moved up the value chain by offering more productised services such as In2000 (for Y2K), IntERPryz for ERP and In-Euro for the Euro opportunity and banking services. About 20 per cent of its revenues comes from Y2K repairs. Infosys plans to add about 4000 professionals during the next few years. The company has been able toattract/retain talent. High employee productivity through strategic entry into productisation (branding) of services and software products has made the company a class apart from others. Even in fiscal 1999, an eight per cent rise in the average rates per employee saw Infosys's operating margin rise from 33.3 per cent to 36.9 per cent.

The company has also succeed in keeping its clients. The list of Infosys's clients include global majors like GE, AT&T, Bell Northern, Xerox, Levi Strauss, Reebok, etc. The company has the state-of-the-art facilities at its development centres and has five 64kbps links (essential for off-shore activities). It has a reputation for quality and reached Level 4 of the Capability Maturity Model (CMM) in fiscal 1998 for 90 per cent of its services. The company is very customer conscious. The company has provided Rs 6.66 crore to meet any possible disruption in customer support due to Y2K impact (this pertains to Rs 19 crore estimated for the next one and half years for 100 peopleto be posted overseas to resolve the Y2K related issues on projects undertaken by Infosys).

For E-commerce, Infosys has entered into a strategic alliance with CyberSource Corporation. CyberSource is a leading developer and provider of real time internet commerce services like transaction processing services for payment, tax calculation, risk management, fulfillment management and distribution control. Under the agreement, Infosys will deliver scalable, reliable and comprehensive solutions using CyberSource services and technologies. Thus Infosys will use its expertise to provide complete E-commerce solutions integrated with back-end systems that shorten time to market cycles. Most importantly, its alliance with CyberSource will help Infosys to start internet services to its existing global clients and provide a launch pad to enter the global E-commerce market. Revenues from E-commerce is likely to be in the range of 18-22 per cent in the next couple of years as against mere 4 per cent in fiscal 1999.

Thecompany is the leader in banking automation software in the domestic segment with Bancs2000 and also exports to several countries. During 1998-99, the company boasted of 370 installations across 18 banks.However, Infosys is highly depending on the US market. Of the total service income, around 82 per cent is derived from USA. The company has a de-risking strategy, wherein it plans to spread its business to Europe, Japan and other markets with a view to reduce its dependence on the American markets. In fiscal 1999, new markets of Japan and Europe were opened up and engineering services and internet consulting were added to its service portfolio.Infosys is constructing a new 360,000 square feet software development centre at Bangalore (Infosys Park) which is expected to be commissioned in the current year. The new center will have seating capacity of 1215 employees. The company has plans to add 8.9 lakh square feet of additional space with a capacity to house more than 6000 professionals. This includes a newcenter at Pune which will house more than 2000 employees. The Indian software industry is expected to grow at a rate of 50 per cent and Infosys is likely to grow faster than the industry. As the company moves up the value chain, the profit margins will be driven by branded products and offshore service. Infosys should be able to maintain an 80 per cent growth in the bottomline.

Infy's dream run

Since its listing on Nasdaq on March 11, 1999, Infy has been trading at a considerable premium to its domestic price as well as its peers in the US. Today, the market capitalisation of Infy in the US is higher than well-known companies like Lycos, PeopleSoft, i2 Technologies, Cadence, BaaN and Informix. The conversion (based on Thursday's close of $ 98) of two ADRs into rupees works out to be Rs 8476.35. Compared with this, on BSE, Infosys Technologies is trading at a discount of 66.20 per cent.

The premium in the overseas market is due to high institutional interest in the counter as there is a cap (of30 per cent of the issued capital) on further FII investments in the counter in the domestic market. Interested FIIs have no option but to pick the stock from the US market. The ADR was issued in March at $ 34. The ADR made a debut at $ 37.36 and, since then, has been on an upward journey. It crossed $ 50 in May-end and $ 60 in early June. On July 9, it crossed the $ 70-mark.