[Reuters]

Published date: 3rd Dec 1997

3 December 1997

22:32

Reuters News

English

(c) 1997 Reuters Limited

NEW DELHI, Dec 3 (Reuters) – Software firm Infosys Technologies Ltd is poised to become the first Indian firm to raise new capital through American Depositary Receipts (ADRs), chairman and managing director N.R. Narayana Murthy said on Wednesday.

The blue-chip Infosys announced on Tuesday that it plans to issue ADRs worth up to $75 million.

“We are not certain exactly when we will issue the ADRs,” Murthy told Reuters in a telephone interview from his company’s headquarters in the southern city of Bangalore.

“The reason why we’ve said we’ll do it during calendar 1998 is because there are so many uncertainties. As far as Infosys is concerned, it is fully prepared.

“But I have no way of knowing how much time the government of India will take … Given the fact that there is some political uncertainty, I’m not sure about the deadline, but our hope is that it should happen in the first quarter (of 1998).”

Murthy said Infosys’s ADRs would be the first level-three issue by an Indian firm.

A level-one ADR trades over-the-counter and raises the profile of the underlying shares, but does not raise any capital for the issuer. A level-two ADR is listed on a U.S. exchange, and a level-three ADR raises new capital.

“Level-three is the same as a U.S. company. We will be treated exactly like a U.S. company,” Murthy said, noting that Infosys already followed U.S. corporate accounting principles.

India’s BPL Cellular Holdings Ltd completed a $100 million ADR issue last May, but Murthy noted it was a level-one ADR that was a private placement.

An Infosys board meeting on Tuesday also decided to create an employee stock option plan (ESOP) pool of up to $50 million in additional ADRs.

“We’re also looking at getting permission for (another) $50 million worth of ADRs for acquiring a software business in the U.S ., ” Murthy said.

Infosys, which was set up by Murthy and six other software professionals in 1981, is a favourite with investors and foreign institutional investors (FIIs) regularly hit a ceiling of 30 percent in the company’s stock imposed by India’s central bank.

For the year to March 31, 1997 Infosys declared net profit of 369.8 million rupees ($9.42 million), up from 210.1 million a year earlier. It also declared a one-for-one bonus share issue.

Murthy said a decision on which U.S. exchange to list Infosys stocks on would depend on when government permission came in.

“The primary motivation for listing on a U.S. stock exchange is not to raise money,” he said.

“It is to create better brand equity for Infosys, a better level of comfort with our customers; and to create an employee stock option plan whereby we can attract the best and the brightest in the U.S. and in Europe.”

Murthy said the size of the initial ADR issue could be less than $75 million.

“We have all along said ‘up to $75 million’ because right now because of the (rupee’s) devaluation we may reduce that. It could be $50 million,” he said. The rupee has declined about nine percent against the U.S.dollar since mid-August.

(c) Reuters Limited 1997