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Vishwanath Kulkarni

Market capitalisation up by 35 per cent

Bangalore , May 17

The value of the brand Infosys shot up 62 per cent to Rs 22,915 crore in fiscal 2006 against Rs 14,153 crore in fiscal 2005.

Similarly, the market capitalisation of country's second largest software exporter grew by 35 per cent to Rs 82,154 crore during the year from Rs 61,073 crore, the company said in its annual report for 2005-06. The value of the Infosys brand was at 27.9 per cent of its market cap during fiscal 2006 against 23.2 per cent in 2005.

Generic brand

Infosys had adopted the generic brand earnings-multiple model to value its corporate brand, the company said. The concept finds mention in "Valuation of Trademarks and Brand Names" by Mr Michael Birkin in "Brand Valuation", edited by Mr John Murphy.

Using the brand earnings-multiple model, Infosys based its valuation on the following assumptions, among others the total revenues excluding other income after adjusting the cost of earnings, the annual inflation at five per cent and five per cent of the average capital employed used for purposes other than promotion of the brand and a tax rate of 33.66 per cent.

Infosys annual report said it had used various models for evaluating assets off the balance sheet to bring certain advances in financial reporting. "Such an exercise also helps the Infosys management in understanding the components that make up goodwill. The aim of such modelling is to lead a debate on the balance sheet of the next millennium,'' it added.

Umbrella concept

Goodwill is a nebulous accounting concept that is defined as the premium paid to tangible assets of a company. It is an umbrella concept that transcends components such as brand equity and human resources.

Corporate attributes including core competency, market leadership, copyrights, trademarks, brands, superior earning power, excellence in management, outstanding workforce, competition, longevity were built into this concept, the annual report said.

Infosys believes the client base was its most valuable intangible asset. Marqué clients or image enhancing clients accounted for 48 per cent of Infosys' total revenues.

"Marquee clients give stability to our revenues and also reduce our marketing costs," Infosys said.

More Stories on : Software | Brands | Performance | Infosys Technologies Ltd

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