For the year ended March 31, 1999 you have computed the value of your brand by taking a certain multiple of 28.30. In step 2, you have mentioned how you arrived at this multiple which is a function of factors like leadership, stability and market.

Then assumptions state that this multiple is based on ranking Infosys against the industry average. Could you elaborate on how this multiple was arrived at?

The brand multiple is determined based on an assessment of the brand strength. The brand strength is determined by considering seven factors namely leadership, stability, market, internationality, trend, support and protection as specified in the brand-earnings-multiple model.

This evaluation was done internally based on certain parameters. The multiple was arrived at by plotting the results on a S-curve graph with the top of the x-axis being the average industry P/E.

You have computed the EVA for your company. How can you rely on a beta which is related to some market index. While calculating the beta you have used the industry average beta for US companies.

Being a very new company on the Nasdaq, there was not enough data on your company out there. Why not use a beta based on our markets where your company has been consistently trading for a long time?

We have used the average beta applicable to software services companies in the US. Infosys derives a majority of its revenues from the US market (82 per cent in FY99) and a majority of our clients are based in the US. Also, the US capital market is much more mature and sophisticated and has a longer trading history than the Indian stockmarkets.

The Indian markets have lesser experience in valuing growth stocks like software. We, therefore, felt that the US market would provide a better indicator of the beta measure.

When we evaluate intellectual capital, the capital employed for a company bloats. This pulls the ROCE or the RONW down. We cannot judge the ROCE of a company by taking into consideration a capital that is intangible. So the ROCE has to be hard ROCE. Is there a way to separate hard ROCE from a soft ROCE?

The issue of placing a value on intangibles is being debated across the world and this is still a controversial issue. Although intangibles are true business drivers of companies operating in the knowledge-based sector, it is difficult to place a value on them as the current accounting methodologies are unable to capture their values.

My personal opinion is that valuation of stocks of companies that are more intangible asset-based need not concentrate on ROCE but should be based more on their free cash flow generating abilities and their growth potential.

Can you throw some light on non-branded income for Infosys? In the case of fast-moving consumer goods companies, what will be the non-branded income?

The non-branded income for Infosys considered in the brand valuation is the non-operating income generated through treasury operations and miscellaneous income. For other companies, non-branded income would comprise income from products which do not command any premium in the market which may be on account of various factors.