Tenth Anniversary Special
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Corporate
Infosys: The growth program
Krishnan Thiagarajan
WHEN asked about his greatest regret in investing, Mr Rakesh Jhunjhunwala, a legendary value investor said two years ago: "The epitaph on my grave will be that I missed out on buying Infosys IPO." Millions are sure to share the same sentiment.
Coveted by the investment community and revered by its business peers, Infosys Technologies is a growth story with few parallels. In just a decade, since its initial public offering in February 1993, Infosys is poised to emerge a $1-billion (in revenues) global corporation. The success of Infosys are built on the twin pillars of strong business model and sound corporate governance.
Over the years, its strong financial performance has been dictated by the offshore software development model to offer high quality services to its blue chip clientele worldwide. Infosys ranks among the first few companies to spot the potential of this model early. This model entailed making the right investments in infrastructure, talented manpower, quality business processes and global marketing outfits.
However, its trailblazing contribution to Indian business will remain its focus on sound corporate governance and shareholder-friendly practices. Infosys has always enjoyed a management quality premium in its valuation over the rest of its software peers. In the mid-1990s when transparency and disclosure practices in Corporate India were hardly noteworthy, Infosys benchmarked its financial statements in line with international standards. Since its listing on the Nasdaq in 1999, the quality of disclosures has only improved.
Infosys was the first to evolve a set of financial and operating metrics to demystify the complexities involved in analysing software companies. After the meltdown in IT stocks in 2000 and the threat imposed by the US economic slowdown, the Infosys management has provided a view of business prospects that is closer to reality — yet another reflection on the quality of management.
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