Infy plans sponsored ADS for 30m shares

Infy shareholders are in for a bonanza. At the company’s board meeting held on Wednesday, the directors decided to go in for a third sponsored American Depository Share (ADS) issue for upto 30m shares.

Though the time frame for the issue has not been decided, the size is expected to be around $1.5bn as per its current stock price. The aim? To increase the float in the overseas market and possibly look for entering the Nasdaq-100 list. “Increased float is a positive development,” said an analyst with a broking firm.

The first time Infy had gone for a sponsored ADS was in ’03 by raising a sum of $300m which was followed by a $1bn issue in ’05. As in case of the second ADS, the third too will see a public offer without listing (POWL) in the Japanese market.

Unlike corporates raising monies through a global depository receipt (GDR) issue, the proceeds from the ADS will not accrue to Infosys (which already has cash and cash equivalent of over Rs 4,000 crore) but to the tendering shareholders.

Speaking to the media, Nandan Nilekani, Infosys managing director said the aim of the issue would be to increase the floating stock in the overseas markets.

Incidentally, some shareholders like city-based Raymond Fernandes who had tendered during the first time and didn’t participate in the second issue during ’05 are not keen to participate the third time around. “I believe that the tech sector is in for re-rating within the next few weeks. There is a good upside still left,” he said.

Many broking firms which had forecast bearish results have gone on the defensive with many said to be looking at advising their clients to hold on and not tender for the ADS. The 12-month target set by some broking firms is Rs 2,500 to Rs 2,600 per share.

Original story