Construction@Infosys' Bangalore campus : Weathering the drough
3 RANK	MVA: 25,503 EVA: 242 MVA and EVA in Rs crore

In November 2002, Infosys lost a $70-million (Rs 343 crore) Lehman Brothers contract to rivals Wipro and TCS. The market was abuzz with rumours attributing the company's loss to its marketing and sales bandwidth, or lack of it-it had recently lost some senior execs. Now it emerges that Infosys could have lost the deal because it refused to sacrifice its margins, at least, not beyond a point (the buzz has it that average billing rates under the contract are as low as $17 a hour). Infosys wouldn't confirm or deny either story; it is in its quiet period ahead of an ads listing and cannot speak to the media. Still, the margins story, if it is true, won't be out of character for a company that has carefully cultivated a reputation of balancing growth and profitability.

There is some justification for that reputation: Infosys is one of the three companies among the top 10 wealth creators to have actually seen an increase in its market value added (MVA) since the last edition of the study-the other two are Ranbaxy and Nestle. And its economic value added (EVA) has improved significantly from Rs 35 crore in March 1999 to Rs 242 crore for the year ended March 2002. For the record the company ranks No. 7 on the basis of its EVA, and its EVA is the highest among it companies, although Wipro is a close second with an EVA of Rs 235 crore. To complete the list of numbers, Infosys has grown its EVA at an average of 122 per cent over a five-year period (the it industry saw its EVA fall by 37 per cent in the same period).

Infosys' Nilekani: Balancing growth and value creation

None of this has come at the cost of growth: Indeed, the company was so heartened by its performance in the first nine months of the year (a growth of 35 per cent as compared to the first nine months of last year) that it increased the guidance for revenues for the year to Rs 3,588 crore. And analysts just can't stop raving about Infosys' efficiency of operations. "The company has consistently enjoyed higher margins than its peers," gushes Ketan Sheth, Director (Research), Way2Wealth Securities. And Nirmal Ranka, Director, Ranka Securities, points to a recent industry study that found Infosys enjoyed higher margins than EDS, Accenture, and IBM. "Add to this the fact that the company has been tightening its belt in terms of spending and other measures-its receivables have gone down from 57 days to 46 days over the past two years and its manpower utilisation rate for the third quarter of 2002-03 was 84.2 per cent, up from 72.7 per cent in the same period in 2001-02-and you have a winner." With cash and cash equivalents of some Rs 1,400 crore (as on December 2002) in its balance sheet, nearly 293 active clients, 70 per cent repeat business, and a standing as India's best governed company, Infosys is a perennial investor favourite-something that can explain its high market value added.

Concerns over higher sales-, marketing-, and employee-costs remain but are a natural consequence of Infosys' attempt to grow its business in tough times and diversify into higher value added services such as information technology consulting. And Devendra Kumar, an analyst at Mumbai-based Rasiklal Securities, points out that the company "has been able to enhance employee productivity" and that most "additions in the past year have been lateral hires who have contributed from Day One". Growth, efficiency, and a clean image to boot-is it any wonder that the Infosys magic bus continues to chug along?