Hectic trading on Infosys counter

A possible bid for Cap Gemini SA, Europe's largest computer services company, by Infosys, kept the stock markets busy for the second day running as analysts began to weigh the pros and cons of such a big acquisition from the Bangalore-based company.

Shares of Infosys, the second most valued IT services company in India, rose by 2.6 per cent in early trade on the Bombay Stock Exchange (BSE) before closing at Rs 1,929.20 up 0.17 per cent from yesterday.

In Paris, shares of Cap Gemini were trading at ¤54.45, up 1.17 per cent. It was the most active stock among the IT stocks with a volume of 1.2 million shares. The share rose 4.6 per cent yesterday.

The stock has increased 15 per cent this year, beating 8.3 per cent gain for France's benchmark CAC 40 Index.

"Make no mistake, Indian companies are going global. The coming three years will see more and more Indian companies acquiring global companies," said Nimesh Kampani, chairman of JM Financial. "True or false, I don't know," he said, referring to Infosys deal buzz.

Suveer Chainani, IT analyst with foreign brokerage Macquarie Securities said the acquisition of Cap Gemini's will give Infosys an access to continental Europe, besides giving it an entry into the high-end consulting space. "In Europe, companies are struggling with rising cost structure. There is a big demand for people, but it is very difficult to find them as the demography of Europe itself is changing," he said.

Analysts also said Infosys shares may have lost the momentum after the investors' realisation that the European company's lower profitability and large workforce of European employees make the company an unattractive acquisition target.

Paris-based Cap Gemini generates more than triple the sales of Infosys and will help the Bangalore-based company narrow the gap with larger rivals such as IBM Corporation, the world's largest computer services provider.

The French company is less profitable than Infosys.

Both Infosys Technologies and Cap Gemini spokespersons declined to comment on the market speculation.

Infosys's profit is $14.24 per 1,000 employees, almost three-times that of Cap Gemini's $5.75, Bloomberg data shows. The French company had a return on assets ratio of 3.6 per cent last year, according to data compiled by Bloomberg. Infosys posted return on assets of 33.8 per cent for the 12 months ended March 31.

Cap Gemini has a market value of 7.88 billion euros ($10.6 billion). Of the company's approximately 68,000 employees worldwide, only 12,000 are in India, according to February 9 statement. Most of Infosys's 72,200 employees as of March 31 were in India, where wages are as low as one-eighth that of US salaries.

Infosys has a market value of about Rs 1.1 trillion (or $27 billion).