Blast from the past: This IT major turned Rs 9,500 to over Rs 2 crore since listing

Investors who shy away from the initial public offer (IPO) of Infosys have missed an opportunity to create humungous wealth over a period of time. The IT major launched its public offer in 1993, at a price of Rs 95 per share, which was undersubscribed. Financial services giant Morgan Stanley then bailed out the company by picking up 13% equity. The stock was than listed at Rs 145, a listing gain of more than 52%.

Meanwhile, Infosys has announced 11 bonus issues and one stock split since inception and the IT major has never missed out on giving dividends since the start of 2000. According to William O’Neil India, Rs 9,500 invested in the IPO of Infosys would now be worth over Rs 2 crore, along with Rs 20 lakh in dividends. At present, shares of the company traded at an adjusted price of Rs 1,685 per share.

In a report by Motilal Oswal Financial Services, Narayan Murthy, founder, Infosys said that when Infosys was in the startup stage, the company and industry went through a lot of friction due to regulatory and funding challenges, while talent availability was not a concern. He believes that today’s entrepreneurs are highly capable and there is a good ecosystem to fund them, but the market is also highly competitive, and access to good talent is critical for success.

Financials

The net profit of Infosys has jumped by over 14% annually to Rs 18,048 crore during the past 15 years. The figures stood at Rs 2421 crore in FY06. Likewise, net sales of the company increased by more than 16% annually to Rs 85,912 crore during the same period.

Of late, Infosys posted nearly 23% growth in net profit for the June quarter at Rs 5,195 crore and raised its revenue growth outlook for the full fiscal to 14-16% buoyed by its robust deal pipeline and “strong” Q1 performance. The Bengaluru-based company posted a 22.7% rise in net profit at Rs 5,195 crore for the June 2021 quarter as against Rs 4,233 crore in the year-ago period. Its revenue from operations grew 17.8% to Rs 27,896 crore in the first quarter of FY22 from Rs 23,665 crore in the year-ago period.

Infosys upped its revenue guidance for FY22 to 14-16% from the previous outlook of 12-14%, and said that its confidence stemmed from “strong” Q1 growth, good order wins and a robust deal pipeline. In the June quarter, Infosys’ large deal flows remained strong with a total contract value (TCV) of $2.6 billion.

Should you buy now?

Brokerage firm Emkay Global Financial Services has a ‘Buy’ call on Infosys with a target price of Rs 1,900, indicating an upside of nearly 13% from the current market price. “Infosys revenue growth is expected to accelerate in FY22 on the back of acceleration in digital spending, strong deal wins and robust pipeline, increased focus on large deals, and strengthening relationships with ecosystem partners, startups and deal advisors,” Emkay said adding it is building in a 16.9% revenue CAGR over FY21-24E. On the other hand, Sharkhan is also positive on Infosys with a target price of Rs 1,950.