COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Infotech results cock a snook at 'recession'; industry upbeat but cautious

Nikhil Falerio in Bombay

That software companies would announce good first half results was a given. But the magnitude of it all, especially the show by Infosys Technologies and Satyam Computers, surprised brokers at the Bombay Stock Exchange.

Infosys declared a 126 per cent jump in its net profit, up from Rs 230.4 million to Rs 520.7 million. Satyam declared a 113 per cent rise, up from Rs 184.2 million to Rs 337 million. BFL Software's net went up from Rs 26.6 million to Rs 112 million.

The infotech companies have proved to the pundits that their recent success is not a flash in the pan.

With the economic downturn affecting the core and the service sectors, the performance of the infotech industry continues to surprise economic analysts.

Sanjeev Mohata, head of research at the Hong Kong Banking Corporation, says the Indian infotech industry scores heavily over others because of its trained manpower. This single factor, he says, was instrumental in pushing up the industry's worth to Rs 100 billion. Projections are that the figure may swell to Rs 600 billion by 2003.

Another factor is the industry is exports-driven. Big business opportunities in the form of the Y2K and Euromoney challenges and several specialised segments where the Indian professions have an edge, are expected to boost the industry. In fact, a World Bank funded study conducted in the United States has found out that US vendors have ranked India as their number one choice for offshore software development.

So much so that the Bombay Stock Exchange today decided to include two software stocks, Infosys and NIIT, in the 30-share Sensex.

According to BSE president Jayantilal Parekh, software stocks are growing and provide a momentum to the exchange. ''They are in great demand and have the potential to push up the Sensex.''

Software scrips traded on the BSE have been witnessing 300 to 800 per cent jumps in their market capitilisation over the last two years. This is 20 times higher than that of regular stocks.

For instance, Great Eastern Shipping, which will be yanked off Sensex, has an MC of Rs 5.5 billion. Arvind Mills, another share to be axed, has it at Rs 3.3 billion. The MC of Infosys is Rs 38 billion and that of Wipro, Rs 75 billion.

Manish Shah, vice-president, Gold Crest Securities Limited, says, ''Any company which has a market capitalisation of above Rs 10 billion should be included in the Sensex because these scrips have a lot of financial clout and can influence the market greatly.''

The new, software-powered index is expected to boost the combined MC from the current level of Rs 100 billion to Rs 160 billion.

The BSE has not set a trend though. In August, India Index Services Limited, a joint venture between Standard & Poor's and the National Stock Exchange, included Infosys and NIIT in Nifty (now called S & P CNX Nifty) comprising 50 stocks.

But the software companies are not getting carried away by the northward rise of their stock on the bourses. Infosys Chairman M Narayana Murthy says, ''This phase is temporary but we will try to maintain it.''