Infosys: The Party Goes On

The quarterly results of Infosys are always awaited with bated breath as they
provide a strong indication of what is to follow in the rest of the tech sector.
The over 50% growth in sales and profits of the company this quarter as well as
the upgraded outlook for the full year bodes well for the technology sector as
we are likely to see improved performance of the others who follow shortly.

Infosys Technologies is one of the top software services and consulting
companies in India.  It provides end-to-end business solutions that
leverage technology, thus enabling its clients to enhance business performance.
The company provides solutions that span the entire software life cycle
encompassing technical consulting, design, development, re-engineering,
maintenance, systems integration and package evaluation and implementation. It
also offers software products for the banking industry. Incorporated in 1981 by
the chairman and chief mentor, NR Narayana Murthy, it is now led by its
co-founder, Nandan M Nilekani, CEO, president and the managing director of the
company. With over 66,000 employees worldwide Infosys' current equity stands
at Rs138 crore with promoters holding 19.33%, Institutional  investors
holding  42.85%, the public holding  23.87% and  ADRs 13.95%.

The company reported its annual results for the financial year ended March
2006. Revenue increased to Rs 9,521 crore from Rs 7,130 crore in the same period
last year, an increase of 33.53%. Net profit for the same period was up
29.98% to Rs 2,458 crore from Rs 1,891 crore in the same period last year.

During the financial year Infosys announced a five year  deal to
develop, support and enhance a wide spectrum of applications for ABN AMRO.
Infosys Technologies (Shanghai) Company Ltd, the China subsidiary of Infosys
Technologies, signed letters of intent with Shanghai Zhangjiang (Group) Company
Ltd and with the Administrative Commission of Hanghzhou Hi-Tech Development
Industry Zone, Hangzhou, to set up software development centers in China.
Infosys has 250 employees in China, and the new centers will undertake projects
in software development and ITeS and will also act as one of the training and
research centers of the company.

Euronext Eurolist and Infosys signed a partnership agreement to address the
growing machine-to-machine (M2M) wireless connectivity market. As part of this
agreement, Infosys Technologies becomes a Wavecom Certified Competence Center,
offering design, development and integration services based on Open AT®,
Wavecom's wireless software platform. The partnership will enable Wavecom to
provide wireless solutions to global customers utilizing Infosys' proven
expertise in product engineering and IT.

Infosys entered into an agreement with Citicorp International Finance
Corporation to acquire their entire holdings in Progeon Limited. Infosys will
buy all of Citi's holdings in Progeon amounting to approx Rs. 518 crore.
Infosys entered in to partnership with North Star, providers of wealth
management software solutions to the financial services industry.

Infosys' reported results for the second quarter ended Sept 2006:
Consolidated revenue grew sequentially by 14.5%  to Rs 3,451crore as
compared to Rs 3,051 crore. On y-o-y basis the revenues were up 50.4% as
compared to Rs 2,294 crore in the same period last year. Net Profit for the same
period was up 52.0%, to Rs 930 crore as compared to Rs 612 crore in the same
period last year. Operating profits for the quarter was Rs 1,109 crore as
compared to Rs 734 crore in the same quarter previous year, an increase of 51.1%
y-o-y and a growth of 24.7% on Q-o-Q, from Rs 889 crore.

During the quarter 45 new clients were added, taking the total client base to
476. An addition of 10,795 employees (gross) and 7,741 (net) resulting in the
total number of employees to stand at 66,150-an increase of 43% from 46,196 in
the same period last year. Onsite revenue increased to 50.3% as compared to
48.8% in the same period last year. The onsite person-months comprised 33,346 of
total billed efforts as compared to 23,486 during the previous year, an increase
of 42%.

During the quarter Infosys signed a three year CoE agreement with Triumph,
suppliers of aerospace systems, components, and services. This would enable
Triumph to respond to market shifts and manage its engineering resources,
enabling it to expand its breadth and depth of customer engagements. Infosys
announced the expansion of its nearshore operations in the Czech Republic, the
center will continue to deliver BPO services and increase its capacity for IT
services to its European customers.

Infosys also announced its alliance with Schlumberger to provide
comprehensive information management solutions that integrate technical and
business processes for oil and gas companies. This alliance would provide
end-to-end solutions integrating petrochemical data with the Global Delivery
Model (GDM).

The company is expecting a growth of 45.5%-46.0% in its revenues for the
fiscal ending March 2007 upgrading its earlier expectations. We believe that
with the current growth trends, the company is likely to outperform these
numbers quite easily.

Infosys shares currently trade at Rs 2,089 discounting its FY '07 earnings
by 29.87 times. Given the strong growth expected in earnings and revenues we
believe there is potential for the stock to appreciate further in the current
context and outperform its peers.

Market Outperformer.