Infosys Technologies on Tuesday priced India’s largest American depositary receipt offering, with the founders of the computer services company selling $1.5bn in stock as part of a bid to win it inclusion in the Nasdaq-100 Index.
The offering comes as Indian companies are increasingly turning to overseas markets to fund their domestic expansion plans and to raise their investor profiles. ICICI Bank, India’s largest private bank, on Tuesday joined the fray with plans to borrow $1bn in yen to finance rapidly growing onshore lending.
“This is part of our whole effort to be a global company, to increase our brand awareness and brand appeal,” Nandan Nilekani, chief executive of Infosys, said of the Nasdaq offering, the company’s third such follow-on ADR issue.
Indian companies were among the world’s most active issuers of depositary receipts in the first half of this year, accounting for one in three new issues globally, according to the Bank of New York.
Most of these offerings were in Europe or Dubai but in the second half of this year, they have been turning to the US. Apart from Infosys, Sterlite Industries, the Indian metals unit of UK-based Vedanta Resources, is expected to launch a $2bn ADR issue while Dr Reddy’s, the pharmaceutical company, is holding a $200bn ADR offering.
Aside from share offerings, Indian companies have also sharply increased their offshore borrowing activities, raising a total of $13.45bn from loans and other debt overseas in 2005/2006 compared with $8.55bn a year earlier, according to a report by the Economist Intelligence Unit and Bank of America.
As part of its ADR issue, Infosys’s third since it listed in New York in 1999, the company will sell 30m ADRs, each worth one common share, for $53.50 each. This was a 3.2 per cent discount to Monday’s closing price for the ADRs.
Through the offering, severeal founding shareholders including – Mr Nilekani; NR Narayana Murthy, non-executive chairman; and S Gopalakrishnan, chief operating officer – will reduce their collective stake in the company from 19.71 per cent to 17.37 per cent. Mr Nilekani stands to make $150m from the offering, Mr Murthy $214m, and Mr Gopalakrishnan $145m.
Hitesh Zaveri, analyst with Edelweiss Securities in Mumbai, said the founders and the company did not need the money – Infosys had $1bn in cash on its books already.
The move was aimed at increasing the number of shares the company has listed on the Nasdaq to meet the free float requirements of the Nasdaq-100.
“Infosys is fundamentally qualified based on business side. However, they don’t qualify at the moment because the market cap of their free float is insufficient,” he said.