Date:01/06/2006 URL: http://www.thehindubusinessline.com/2006/06/01/stories/2006060101831600.htm

Back Infosys & its crorepatis

R.Y. Narayanan

But many shareholders have missed opportunity to build on their wealth

Coimbatore , May 31

Infosys, the darling of the capital markets for nearly a decade, is credited with the creation of a legion of Crorepatis. Analysts have been repeatedly drawing attention to the fact as to how much its shareholders, who subscribed to its IPO at a price of Rs 95 per share in 1993, would be worth now if only they had held on to the Infosys shares allotted to them at that time, after so many bonus issues and stock split.

While the previous bonus issue of 3:1 announced in 2004 was rather generous and took the market by surprise, the company has now come out with another 1:1 issue probably to reward its investors during the 25th year of its operation.

But, surprisingly, a look at the distribution of shareholding as at the end of March 31, 2006, published in the company's latest annual report, gives the impression that many of them have missed the opportunity to build on their wealth by sticking to their investment in the counter. Or they have booked profit and moved away to other counters or investment options, if the data provided by Infosys is any indication.

It is true that in the recent bull run, IT stocks have not witnessed the sort of value appreciation that so many other stocks have seen by going up even 10-15 times from the lows in the prolonged bear phase after the 9/11 event.

But the frontline IT stocks have also not been subjected to the wild swings that the auto and metal stocks have experienced in the on-going market turmoil.

Many of the IT companies like Infosys have also given robust guidelines about their growth prospects in the current fiscal and the rapid depreciation of the Indian currency against dollarand euro will add to their benefit. The number of Infosys shareholders, in relative terms, at 1,95,956 as on March 31, 2006 looks small when compared to some of the other frontline companies such as Reliance and ITC. This is particularly so when one takes into consideration the weightage it enjoys in the Sensex and the market capitalisation of around Rs 83,000 crore. Infosys counter has been providing opportunities for the entry of small investors at regular intervals after the bonus record dates. In fact, after the last bonus announcement of 3:1, when its counter went ex-bonus at around Rs 1,200-Rs 1,300, the company offered an excellent entry-level opportunity to the buyers in the counter. It is now quoting at about Rs 2,900. In the last one year, the share price has appreciated by more than 50 per cent, from around Rs 1,800 to the current level. In fact, it touched Rs 3,400 + after the 2005-06 Q4 results but has retraced since then due to the market meltdown.

Shareholding pattern

According to Infosys annual report, 5,874 shareholders, forming 3 per cent of the total, held just one share each in the company. The number of shareholders holding 2-10 shares in Infosys was 76,975, constituting 39.28 per cent. Those owning 11-50 shares were 70,139 and formed 35.79 per cent. The number of shareholders having 51-100 shares was 16,019 (8.17 per cent of shareholders) and those having 101-200 was 8,419.

On the higher side, while 5,259 shareholders had 1,001-5,000 shares, 1,157 had between 5,001-10,000 shares, 341 had between 10,001-15,000 shares and 856 shareholders had 15,001 and more shares. It is true that the contribution of Infosys to the creation of crorepatis is really remarkable, particularly in the short span of a little over a decade since it went public. At the current market price of around Rs 2,900, one should have around 3,500 Infosys shares to be a crorepati. That would leave a small number of retail investors, if one leaves the promoters/directors, the institutional and HNI investors and the company employees who might have been given ESOPs from the list, to qualify for the honour of being crorepatis.