Infosys Technologies Ltd. (INFY), hoarder of the biggest cash pile in India’s computer-services industry, is searching for acquisitions to add companies that specialize in providing health-care and government services.
A team is scanning “day-in and day-out” for such technology companies and is looking for targets in non English- speaking countries, billionaire Chairman N.R. Narayana Murthy said yesterday in an interview in Bangalore. The team has examined about 150 potential purchases, Murthy, 64, said.
Infosys has almost quadrupled its warchest to $3.6 billion in the past five years, almost twice that of bigger rival Tata Consultancy Services Ltd. (TCS) Indian software companies, after a decade of growth fueled by outsourcing of jobs from the U.S. and western economies, are seeking to expand overseas and in new industries amid the emergence of low-cost centers in the Philippines for back-office operations.
“I don’t see the need for them to deploy cash just for the sake of it,” said Walter Rossini, who manages a 250 million euro ($347 million) India equity fund at Aletti Gestielle SGR SpA in Milan. “I would prefer them to keep the cash and wait for a good opportunity.”
Infosys, India’s second-largest software exporter, fell 0.7 percent to 3,095.50 rupees at the 3:30 p.m. close of trading in Mumbai, valuing the company at $40 billion, or more than that of Philadelphia-based rival Accenture Plc. (ACN)
Murthy, who has a master’s degree in engineering from the Indian Institute of Technology, said Infosys will continue to hold off on purchases unless targets meet all their criteria.
The company had 162 billion rupees ($3.6 billion) of cash, near cash and short-term investments at the end of the fiscal year in March 2010, according to data compiled by Bloomberg. Tata Consultancy, which had 71.8 billion rupees, may spend as much as $500 million on acquisition in Germany or Japan, Chief Executive Officer N. Chandrasekaran said last month.
“We want to do business boldly, but not recklessly,” Murthy said. “If there is a good candidate that indeed satisfies all the criteria we’ve set out for acquisitions, we’ll do it.”
In 2008, the Bangalore-based company walked away from a plan to acquire U.K.-based Axon Group Plc after its 407.1 million pound ($657 million) bid was trumped by New Delhi-based HCL Technologies Ltd. (HCLT) In 2006, Infosys spent $115 million to buy Citigroup Inc.’s stake in Progeon Ltd., a back office service provider controlled by Infosys, in the company’s biggest acquisition to date.
Borrowing From Wives
Infosys, which builds software programs and provides back- office support to clients including Microsoft Corp. and BT Group Plc, was founded by Murthy and six colleagues in 1981 with $250 they borrowed from their wives. In 1999, Infosys became the first Indian company to sell American Depositary receipts.
Murthy will retire in August when he turns 65, he said yesterday. The company will name his successor by July 15.
In the year ended in March, the company had sales of 227 billion rupees and net income of 62.7 billion rupees, second only to Tata Consultancy in India. Sales may rise to $6 billion in the year ending March 31, Murthy said yesterday.
To increase revenue, Infosys is also betting on so-called cloud computing, where a shared pool of computing resources including servers and data storage is operated by contractors.
“In the next 10 years, almost everything will move towards the cloud, which means entire IT opportunities will be cloud- based,” he said. Murthy forecasts Indian software developers will get as much as $75 billion of revenue from managing clouds in the next five years.
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