Financial Daily from THE HINDU group of publications
Tuesday, Nov 09, 2004
Markets - Stock Exchanges
Infosys ADS issue to increase stock float by 6 pc on Nasdaq
Bangalore , Nov. 8
INFOSYS Technologies' move to convert up to 16 million equity shares into American Depository Shares (ADS) through a sponsored secondary issue is expected to increase its stock float on the Nasdaq by six per cent.
The Infosys' board approved the sponsored issue on Monday and the company is convening an extraordinary general meeting on December 18 to seek shareholders' approval.
The secondary issue is part of the company's plans to increase liquidity of its stock on the Nasdaq, where Infy is traded at a premium of around 50 per cent over local shares. The company, sources said, considers high liquidity as important to be a mainstream stock on international exchanges. Moreover, the issue could help Infosys to get into the Nasdaq 100 Index, which the company is eyeing in the long-term, they added. The company may also use the float as a currency for acquisition and also to attract employees, especially in the US.
Of the 267.86 million shares of Infosys in the secondary market, about 21.24 million shares are listed on the Nasdaq, constituting 7.9 per cent of the total stock. This additional issue of 16 million shares will increase the company's float on the Nasdaq to 13.9 per cent, said Mr V. Balakrishnan, Company Secretary and Vice-President (Finance), Infosys.
"We are looking at completing the issue within the current financial itself," Mr Balakrishnan said adding, the company would appoint the underwriters soon. The proposed issue will leave the company's paid-up capital untouched as the shares being offered in the overseas market are from the existing stock of equity. Infosys will not be issuing any new shares in the offering.
The issue size is pegged at a maximum of 16 million shares, including greenshoe, if any, as decided by the company/ managing underwriters of the sponsored ADS offering.
"All shareholders in India as on a specified date to be determined would be eligible to tender their equity shares in the offering on a pari-passu basis," Infosys said in a statement to the BSE. The underwriters will determine the price of the ADS and the proceeds from the issue, after meeting the expenses, will be proportionately paid to the selling shareholders in the offering.
"The increase in liquidity is likely to bring down the premium between the ADRs and local shares," analysts said. Infosys ADRs are trading at around $66 each, while the company's stock price on the Indian exchanges is around Rs 2,000. Signs of a narrowing premium are evident as the Infy stock fell 6.5 per cent to $65.59 on Friday following reports that the company was considering a sponsored ADS issue.
At the last traded price of $65.59, the size of the proposed issue exceeds over $1 billion. Infosys stock gained two per cent on the BSE to Rs 2,018.05 on Monday.
The proposed issue is second sponsored offering from Infosys. After an initial public offer in 1999, Infosys made a secondary offer of three million equity shares in July 2003 for issuing six million ADS at a price of $49.
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