Date:19/04/2006 URL: http://www.thehindubusinessline.com/2006/04/19/stories/2006041904100400.htm

Back Infosys ADS hits 5-yr high of $85.08

Vishwanath Kulkarni

Premium between ADS, local shares set to rise

Reduced gap Analysts attributed the earlier drop in premium to the emergence of a strong domestic market compared to the US market in the past months.
The increased overseas float of the Infosys stock after the second sponsored issue in May last year had also resulted in a narrowing premium

Bangalore , April 18

The premium between Infosys Technologies' American Depository Share (ADS) and the local shares has begun to rise, with the ADS hitting a five-year high on Nasdaq on April 17.

The Infy ADS hit a five-year high of $85.08 on Monday before closing at $84.78, following the declaration of a bonus issue and aggressive revenue and EPS growth projections by the management for financial year 2006-07 on Friday last week.

Infosys said its revenues would grow between 28-30 per cent.

The EPS is expected to grow between 26 per cent and 28 per cent for financial year 2006-07. The Infy ADS had gained 13 per cent on Monday, while the Nasdaq fell by 0.6 per cent.

Premium rises 18.5 pc

The premium between Infy's ADS and local shares shot up to 18.5 per cent on April 17, as compared to an all-time low of 5.42 per cent on April 10 in the run-up to the fourth quarter and yearly results.

Infosys shares closed 3.25 per cent higher on Tuesday at the Bombay Stock Exchange at Rs 3,335 over the previous close.

Following the 3:1 bonus in July 2004, the Infosys stock is seen trading at the highest levels in the domestic exchanges. As against the traded levels of Rs 1,350 in early July 2004, the shares have gained by over 140 per cent till now.

The premium between ADS and local shares that used to be as high as 35-40 per cent about a year ago has progressively narrowed down considerably over the past several months.

Analysts attributed the drop in premium to the emergence of a strong domestic market compared to the US market in the past months.

The increased overseas float of the Infosys stock after the second sponsored issue in May last year had also resulted in a narrowing premium and the FIIs took advantage of low pricing of the domestic stock and favourable exchange rate, analysts said.

The reduced gap between Infy's ADS and local shares was expected to reduce the element of arbitrage volatility, they said.

About 14 per cent of the Infosys stock is traded overseas.

The foreign institutional investors, non-resident Indians and overseas commercial bodies hold a total of 44 per cent of Infy stock.