Software companies getting ready to launch overseas issues

Infosys would be the first Indian company to be listed on the NYSE, if it gets the MoF’s approval and the issue gets good response from fund managers abroad. The company applied for a $ 75 milion ADR in December last tothe ministry. A host of other software companies are waiting for Infosys to launch the issue and see the response. The software boom on the Indian bourses software shares are hitting the circuit breakers almost every day is expected to get them a good price for their shares.

Even NIIT Ltd, which collected Rs 258.38 crore from exports in the last fiscal, is readying itself to make an ADR offering sometime next year. "Internally lots of steps are already being taken and we should be fully prepared with the exact size of the issue and other details in about six months," says Vijay Thadani of NIIT. The issue is likely to be to the tune of $ 100 million.

NIIT has over the years diversified into areas like software developement and has opened over 50 centres overseas and an ADR issue would help it to raise cheap funds as compared to high interest rates prevailing in the domestic sector. The ADR issue is also a step towards Thadani’s globalisation strategy.

"We believe there should also be part ownership inthose markets where we have customers," says Thadani. A listing will also give the company opportunities for acquisitions abroad something it is actively contemplating. With Indian software companies doing well on the overseas markets, fund managers expect foreign investors to lap up their shares.

"Most of the business comes from outside the country for software companies.

Once you are listed overseas, your standing improves potential clients know for certain you are not a fly-by-operator," says V Chandrasekaran, chairman and managing director of the Rs 284.56 crore Pentafour Software and Exports. Pentafour has already made two GDR offerings in October 1996 and September 1997 of $ 11 million each.

However, depsite these obvious advantages, few other software companies are fighting shy of a listing on the NYSE or Nasdaq. At least, three top companies with revenues of over Rs 80 crore have categorically ruled out an overseas offering in their future plans. Expectations of US investors are very highand even a high-profile company like Infosys cannot compare with the dramatic growth of companies like the Netscape in the US.

An Indian company listed on the NYSE would invariably invite comparisions with other US companies. Another stumbling block, say analysts, is the US GAAP method of accounting which is a prerequisite for a listing on the NYSE.

Depreciation is calculated over a much shorter period (one or two years) as compared to the 15 to 20 years stipulated under the Indian accounting practices.

The need to tap the overseas market is not pressing, at this juncture, for most software companies. But as competition gets more intense, they will be forced to go global, say analysts. And an NYSE listing would certainly help them raise debts from foreign banks at cheaper rates.