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Software scrips shatter gloom

It is the fastest growing sector in the world. And as the world moves towards the new millennium, all eyes are on this one industry -- the computer industry -- trying to gauge whether it will save many companies from destruction and doom.

It is the industry's ability to pull a few surprises from bottomless pits that is drawing investors to its scrips.

In a market where even heavyweights like ITC, Indian Hotels, TELCO and TISCO need more than a push to move a few points, software scrips have been galloping to new heights.

One look at the software scrips, and even the most indifferent investor would be shocked.

Infosys is the biggest story so far. It went public in February 1993 at Rs 95 per share and today after two bonuses the share is being quoted at Rs 2,055.

Tata Infotech, which went public in 1992 at par, is being quoted at Rs 1,250.

NIIT commands Rs 1,191.50 compared to its issue price of Rs 50, and Satyam Computers is worth Rs 358.50.

What has made these companies a success on the Bombay Stock Exchange considering the fact that the entire market is going through a downswing and every few scrips are being actively traded?

What has made the software industry the darling of investors throughout the world -- and in particular India -- is the thankless job that they have undertaken in trying to break the spell of doom that is threatening most companies with the coming of the new millennium.

The software scrips are going through the roof due to the companies's sound management policies and their mind-boggling long-term projections.

Sanjiv Kataria, director, NIIT, admits, "What makes software companies successful on the stock exchanges is that the cutting edge is the quality of human resources which is the backbone of any corporation."

Companies like Infosys, NIIT and Tata Infotech have realised that employing and retaining talent is the key to future growth and profitability, and so facilities such as stock options, residence, club memberships have become part and parcel of these companies's HRD programmes.

In fact, companies like Infosys have started valuing their human resources in their annual reports. As a result, analysts are already valuing mid-cap companies like Satyam Computers on the basis of similar guidelines.

With companies placing more and more emphasis on employees, the staff turnover ratios have declined.

When Tata Infotech started providing better perks for its employees, its staff turnover came down from 22 per cent in 1996 to 19 per cent this year.

At Satyam, this figure is 15 per cent, at NIIT it is 11 per cent and at Infosys it is below 10 per cent. And what has impressed stockbrokers and analysts throughout the country is that the average in the other sectors is as high as 35 per cent.

Another factor that has contributed greatly to the rise of the scrips has been the boom in the Indian software companies due to the Y2K problem.

With Y2K projects expected to continue till 2008, any software company taking up such projects will find a windfall coming its way.

Ajay Sharma, an analyst with Invest Trust, says, "Such would be the volume of work that Indian companies will have an uphill task in meeting the demand.''

Even after the Y2K problem is solved, the personnel can be shifted to projects involving conversion to the Euro -- another low-value activity which is expected to be big, if not bigger than the Y2K boom.

It is due to such increasing demand that analysts are confident that scrips such as Infosys, NIIT, Satyam and Tata Infotech will provide high returns in the years to come.

If the past record is anything to go by, then software scrips will scale new new highs as the millennium approaches.

For this is the second time that software scrips have risen to new highs. Last year, during October, after the half yearly results were declared, TCS, CMC, Infosys, NIIT, Pentafour , Satyam Computers, Tata Infotech, Mastek and Leading Edge headed the Bombay Stock Exchange list of companies whose market capitalisation growth was the fastest.

According to BSE records, the market capitalisation of these companies is around Rs 60 billion against the Rs 2,000 billion for the 30-share index.

What is interesting is that when the entire market was doing badly during post-Diwali period last year, the software scrips rose an astonishing 13 per cent, making the Sensex rise.

But whatever be the reason -- be it effective management policies or excellent future prospects -- the future looks bright for Indian software companies as they bid for larger and larger shares of the international market.

As M Narayana Murthy, chairman and managing director of Infosys, said at a seminar recently, "Of the global software market of $ 200 million, Indian companies can provide services of at least $ 15 billion and I expect that to grow by 20 to 30 per cent."

And considering that Indian software exports were worth only $ 1.8 billion last year, Murthy's projections are slowly coming true. And for the Indian software industry it is boom time ahead. This will automatically be translated into higher scrip values. And bigger bytes for the investors.