Keeping in view this vision, Infosys
became the first Indian company to be listed on the US bourse, Nasdaq,
when it listed its ADS. March 11, 1999, will be a red-letter day
for the Indian IT industry in general and Infosys in particular.
Under the brand name Infy, Infosys made its debut on the Nasdaq
stock exchange priced at $34 per ADS (two ADS is equal to one equity
share). The overwhelming response that it got saw the scrip shoot
up to an intra-day high of $50 on its debut. Since then, Infy has
gone on to touch $250 at Nasdaq and back home has inched its way
to the magical five-figure mark, a record of sorts.
The decision to go for a Nasdaq listing
was based on four strategic reasons–to build Infosys as a global
brand, to create currency for acquisitions, to give a dollar-based
stock option to its employees and to raise cash. “We wanted to make
Infosys a truly global brand and the biggest brand in the market.
And as we were globalizing and adding on more and more employees
all over the world, we had to give a dollar-based stock option scheme
to attract high-quality employees worldwide,” says Nandan Nilekani,
the 43-year-old President, MD and COO. Moreover, if the comhpany
had to grow at a rapid pace, it was clear that it could grow only
through the inorganic route.
"When we look at acquiring companies
abroad, we need to have a dollar-based stock. So, we thought that
it was the best method for raising currency for acquisitions,” he
says.
However, the ride to Nasdaq was not
an easy one. The process that started in December 1997 eventually
fructified in March 1999. Adhering to the US regulations, the accounting
principles and the US Generally Accepted Accounting Practices (US
GAAP) was not an easy task. “We had to understand the requirement
of the Securities Exchange Commission, the US laws, the US standards
and do a lot of path-breaking things,” says Nandan, reflecting on
the road to Nasdaq. However, Infosys by being the first company
to list on the largest and the most liquid capital market, did set
the trend for other companies to access the US capital markets.
There was an element of doubt on how
well it would be received when Infosys approached Nasdaq with an
open price of $34. But Murthy and his team had done their homework
and expected a better response at the hands of the investors. "Given
the fact that we were in a high technology area, in a software industry
with a consistent record of growth and international customers,
we were confident that we could go to the markets and meet expectations,”
says Nilekani.
Infosys’ listing had set a trend, when
Satyam Infoway became the second Indian company to be listed on
the Nasdaq, with a host of others following. The reason was very
simple. India has been recognized as the place for software and
Infosys has set a trend in it. In future, India will be looked upon
as the place for software opportunity. Infosys also did what was
expected and as predicted by analysts for long. It went for a 2-for-1
stock split, dividing the par value of its dome stic shares to Rs
5 each from its existing Rs10 on November 29, 1999. The ADS is also
to be split in a similar ratio, with the ratio of two ADS to one
underlying equity remaining unchanged. “It is customary in markets
to split the stock to improve liquidity. The Securities and Exchange
Board of India has given the flexibility to companies to sub-divide
the par value of shares to less than Rs10 and the company has chosen
this option to improve its liquidity,” says Murthy. It has become
the second IT company after Wipro to have gone for the stock split.
The bourses reacted differently to the news by pulling down the
stock price. The strength of Infosys can be gauged from the fact
that it has the second highest weight in the BSE Sensex with 12.64%
and any upward or downward movement of the company’s scrip is undoubtedly
going to affect the Sensex. That it has been able to rule the market
sentiment within six years of being listed on the stock exchanges
is a commendable achievement for a company.
In keeping with its professed goal
of obtaining the highest quality standards, Infosys also achieved
the SEI-CMM Level 5. “Level 5, which indicates a very high level
of process maturity, has been attained by only around 1.5% of software
companies in the world. Going forward, our challenge will be to
push the boundaries even further,” says K Dinesh, Director and Head,
Quality, Productivity, MIS and HR, and one of the founders of the
path-breaking company.
The future of Infosys lies in ecommerce
or ebusiness, and the company is making every attempt to catch on
with the juggernaut that is rolling by. Never to let go of an opportunity,
Infosys has already made plans to attack the burgeoning e-market.
It thinks that this is going to drive the international IT area
for the next several years. The company has made a provision of
Rs 3.50 crore during the second quarter for e-inventing the company.
This is to create knowledge infrastructure, acquiring people with
technical skills in the ecommerce area and e-inventing the company.
“The Internet and ecommerce revolution has rapidly redefined the
rules of doing business in every industry, creating in its wake
a series of new opportunities and challenges,” remarks Murthy.
Murthy and his team have been setting
trends, breaking paths and treading on new ones, where even eagles
only tread fly. He has created millionaires and billionaires, with
every third employee in Infosys being a rupee-millionaire. Infosys,
with broader corporate example, will soon be a case study at Harvard
and Wharton Business Schools. Transparency and corporate governance,
principles never heard of before in Indian businesses are being
emulated. Infosys has become an icon today, embodying the changes
that Indian companies must make to build world-class companies and
a bright and prosperous future for India.
Rajesh
Menon
in Bangalore