Economic Times suggests in an article that Infosys is a very attractive acquisition target right now. Look at some of the facts:
- Infosys has Cash and cash equivalents (Rs 22,000 crore) equal to 17% of the company’s total market capitalisation of over Rs 1,34,000 crore – compared to TCS’ ratio (Cash/Market Cap) of 2.2% and Cognizant’s 12.5%
- With no debt burden and presence of cash reduces the enterprise value or the price that an acquirer would put on a going concern by an equal amount which would mean that Infosys is valued at over Rs 1,00,000 crore or approximately $20 billion.
- Stock has tumbled 21% since last week and may fall further
The article suggests that the top three global IT companies can be the potential buyers – Accenture, IBM, and HP. I agree. I would say that of the three, HP would probably gain the most from buying Infosys, as the other two have a substantial presence in the Indian market and have similar capabilities overall. HP doesn’t seem to have used its EDS acquisition in the past, and as it reinvents itself, acquiring a strong Indian IT company can do a world of good for its future.
What do you think?