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June 11, 2001
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Money > Reuters > Report June 11, 2001 |
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Infosys among Merrill's 23 global picksInvestment bank Merrill Lynch has put leading Indian software services firm Infosys in a list of top 23 technology shares to own in the long-term. Merrill has a long-term 'buy' recommendation on the stock. The Bangalore-based firm is expected to benefit from a slowdown in the US tech sector as firms shift work to India in order to take advantage of the country's low-cost workforce. "Infosys is well-known for its strong management, high disclosure standards, conservative accounting practices and recognised brand," Merrill said in a June 5 report, titled "Technology Upstarts: The Next Generation of Leaders." "We expect it to be a chief beneficiary of the outsourcing trend." The Nasdaq-listed Infosys also has high-quality clients, including 70 Fortune 500 customers, Merrill said. YEAR AHEAD Over the next five years, Merrill estimates a 40 per cent growth in the software firm's earnings per share. It forecasts revenues of Rs 25.55 billion ($544 million) for the year to March 31, 2002. Infosys has forecast a 30 per cent revenue growth this year, down from the 90 per cent average of the last four years, due to the slowdown in the US The firm earned 73.5 per cent of its revenues from North America for the past financial year. It posted a net profit of Rs 6.29 billion on revenues of Rs 19.59 billion in 2000-01. "During the transition from systems-centric to PC-centric computing in the 1980s, the largest companies showed disappointing five-year-earnings growth and underperformed the market," Merrill said. "We think the same could be true today during the transition from PC-centric to Internet computing. Investors might want to avoid the largest companies and instead go down in size to look for the next wave's gorillas." Infosys' share has fallen 45 per cent from the year's high of Rs 6988, even though it is up 41 per cent from the year's low of Rs 2,720. "Infosys' traditional 15 to 30 per cent premium in bill rates compared with the sector could shrink in the current tough demand scenario," Merrill said. But the Indian firm plans to add 1,500 to 2,000 employees this year to its staff of 9,800, in a bid to boost growth.
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