The Hindu Business Line : Infosys scores high on intangible assets

High value
The brand value of Infosys stood at Rs 31,617 crore for FY07
The market capitalisation of Infosys grew by 40 per cent to Rs 1,15,307 crore

Bangalore May 25

Infosys continued to score with its intangible assets as its brand value soared 39 per cent, human resources value grew 23 per cent whereas its economic value added (EVA) rose 38 per cent for the financial year 2006-07 over last year.

The brand value of Infosys stood at Rs 31,617 crore for FY07, up from Rs 22,915 crore in the previous year. The market capitalisation of Infosys grew by 40 per cent to Rs 1,15,307 crore as compared to Rs 82,154 crore in FY06.

The value of Infosys brand was at 27.4 per cent of its market cap in FY07, almost flat when compared to the previous year, the company said in its annual report for 2006-07.

Brand valuation

Using the brand earnings-multiple model, which finds a mention in "Valuation of Trademarks and Brand Names" by Michael Birkin in "Brand Valuation", Infosys based its brand valuation on the following assumptions, among others the total revenues excluding other income after adjusting the cost of earnings, the annual inflation at six 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' EVA for fiscal 2007 shot up 38 per cent to Rs 2,122 crore, up from Rs 1,540 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.

Infosys has estimated the value of its human resources of 72,241 employees, including both delivery and support staff at Rs 57,452 crore for FY2007. This represented a growth a 23 per cent growth over the previous year's Rs 46,637 crore, when the company had a headcount of 52,715 employees.

Infosys has used the Lev and Schwartz model to compute the value of its human resources. The evaluation is based on the present value of the future earnings of the employees and on the assumptions that employee compensation includes 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 14.97 per cent (12.96 per cent in the previous year), the cost of capital for Infosys for computing the HR value.

Infosys reported a substantial jump in the education index of its employees for 2007 at 2,03,270, up from 1,48,499 in the previous year, reflecting the rising quality of its employees. The average age of the Infoscians stood at 26 years in FY07, same as in previous years.

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

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Infosys scores high on intangible assets