Date:18/05/2006 URL: http://www.thehindubusinessline.com/2006/05/18/stories/2006051803320400.htm

Back Infosys HR value up 65%

Vishwanath Kulkarni

Bangalore May 17

Software major Infosys Technologies has estimated the value of its human resources of 52,715 employees including both delivery and support staff at Rs 46,637 crore for fiscal 2006. This represented a growth of 65 per cent over the previous year's Rs 28,334 crore, when the company had a total headcount of 36,750. Infosys has used the Lev and Schwartz model to compute the value of its human resources, the company said in its latest annual report. The evaluation is based on the present value of the future earnings of the employees and on the assumptions of employee compensation including all direct and indirect benefits earned both in India and abroad. It also considered the incremental earnings based on group/age and discounted the future earnings at 12.96 per cent (13.63 per cent in the previous year), the cost of capital for Infosys for computing the HR value. Infosys, which is in a people-oriented business, reported a substantial jump in the education index of its employees for fiscal 2006 at 1,48,499, up from 1,00,351 in the previous year. The average age of the Infoscians stood at 26 years in FY06, same as in previous years.

The company also reported that its Economic Value Added (EVA) for fiscal 2006 shot up 36 per cent to Rs 1540 crore as compared with Rs 1,132 crore in fiscal 2005. The EVA measures the profitability of the company after taking into account the cost of all capital.

EVA is the post-tax return on capital employed (adjusted for the tax shield on debt) minus the cost of capital employed. It is generally considered that those companies, which earn higher returns than cost of capital that creates value. Those companies, which earn lower returns than cost of capital, are deemed destroyers of shareholder value.