Questions/topics for “Infosys – Should it Consider Delisting”
The following are some points to work on for the case. Infosys has been India’s IT
service industry’s flagship, a symbol of success for its service outsourcing model.
Understanding how it became successful and what productive as well as
counterproductive roles the Indian government policies have played are of great interest
for this course. Of course, why listing on or delisting from overseas exchanges is the
central question for this case. Of course, you are encouraged to work on other aspects of
the case as well.
1. India tightly controlled the computer/information/software industries out of
national security concerns. In 1984, its IT policies went from a completely closeddoor to a more open door. Export and service outsourcing were the main
argument for such a policy switch. Why did they have to rely on foreign trade or
export to make the argument? Why couldn’t they use domestic intra-trade reasons
to liberalize IT policies?
2. The Software Technology Parks (STP), which amounted to free-trade zones, and
Export Promotion Capital Goods Scheme (EPCGS) were specific instruments
introduced between 1984 and 1987. Texas Instrument was the first foreign firm to
struggle through the red tape even under STP. Why were STP and EPCGS
necessary in the context of India? How important were these for the later boom of
India’s IT outsourcing industry? Can other countries follow such programs to
succeed as well? One might say that such deregulation policies were instrumental
for India’s success and hence government involvement in promoting industries
are important. But, when all they needed to do was to remove earlier restrictions,
doesn’t this mean government industrial policies are not necessary in the first
place and free trade should be the base policy?
3. How different is the IT service landscape in India and globally, compared to 1999?
Why should this difference make Infosys think about delisting from NASDAQ?
4. List at least 4 benefits, as well 4 costs, from overseas listing for Infosys. It appears
that in 1999 the benefits from a NASDAQ listing outweighed the costs. Why? But,
now, is the cost-benefit tradeoff tilted towards delisting from NASDAQ? What is
your recommendation to the Infosys CEO and CFO? Why?
5. Infosys’ stock is not getting a high multiple in recent years. Since this may be a
short-term result of the financial crisis, should a company delist its stock just
because of a disappointingly low valuation that may be corrected later on? What
other remedies does Infosys have to address the situation besides delisting? Or,
should it consider listing on additional exchanges like HSE, LSE etc.?
6. Should Infosys think about buying growth by acquiring smaller competitors? Use
the peer group analysis to identify possible targets. Also look at revenue mix of
these verticals of Infosys vs. growth in those verticals while identifying these
targets.
7. Should Infosys defend itself from possible acquisition by Xerox or another
American firm? Is there a price at which the Infosys management should agree to
sell for the interest of its shareholders? If no, why not? If yes, what is the
minimum price at which the board should say yes? Use at least two methods to
value the company: comparables multiples and DCF using assumptions that you
can justify.
8. Should Infosys consider a stock buyback or increasing dividend to prop up its
stock by using leverage on its balance sheet?