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BACKSTORY: How Infosys overcame IPO hiccups to scale stock market peak

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In its over a four-decade journey, Infosys has always punched well above its weight. However, when the Indian IT major launched its IPO in February 1993 at an issue price of Rs 93, there were few takers for it. Sundeep Khanna goes back in time to share hiccups Infosys faced 28 years ago during its IPO launch.

BACKSTORY: How Infosys overcame IPO hiccups to scale stock market peak
The successful listing of Zomato harks back to a time, 28 years ago when a small IT services company made a similar blockbuster debut on the stock market with its share price rallying over 50 percent in the opening trade.
Despite the rally, few predicted that one day, the company’s market cap would be near $100 billion even while its influence on India’s IT landscape would be far in excess of that.
The company, of course, was Infosys which launched its initial public offering (IPO) in February 1993 offering about 40 percent of its post-offer equity capital with the aim of raising Rs 13 crore. Infosys listed on June 14, 1993, rising to Rs 145 in early trading as against an issue price of Rs 95 per equity share. By end of the day, the shares closed at Rs 160.
But before the cheers came some shivers. When the IPO was launched, it failed to find too many takers. The previous year the company’s revenue was just Rs 8.66 crore and investors thought the Rs 85 in premium Infosys was demanding was too steep given its relative size. The Indian markets, at this time, were also suffering from the effects of the Harshad Mehta scam which had sent the Sensex plunging.
As a result of all this, the Rs 13 crore issue was in serious danger of being undersubscribed. In desperation, the company reached out to several high net worth individuals including the late V.G. Siddhartha. The merchant banker Enam Securities, run by Vallabh Bhansali who had already invested a small amount in the company in 1992, would play a pivotal role in the eventual success of the issue. As the underwriters to the issue, the firm picked up the unsubscribed portion some of which they were able to later place with key investors. Among them was Morgan Stanley which made one of its smartest investment decisions, picking up 13 percent of the equity.
Both Enam and Morgan Stanley didn’t have to worry for too long. Investors soon warmed up to the start-up, founded on July 7, 1981 as Infosys Consultants Pvt Ltd. by the seven-member team of N R Narayana Murthy, Nandan Nilekani, S Gopalakrishnan, S D Shibulal, K Dinesh, N S Raghavan and Ashok Arora. Even at its modest size, the team put in place best practices in terms of operations, quality and governance.
Not surprisingly, its share was soon a runaway success. In October 1994, Infosys made a private placement to Foreign Institutional Investors (FIIs), Financial Institutions (FIs) and Corporates of 5,50,000 shares priced at Rs. 450 each.
It wasn’t done yet. In 1999, Infosys was listed on the US NASDAQ with an issue of 20.7 lakh American Depositary Shares priced at $34 each. In December 2012, these ADSs were transferred to the New York Stock Exchange and the next year listed on Euronext London and Euronext Paris.
Through its 40 year journey, the company has always punched well above its weight. Today with 2021 sales of $13.56 billion its market cap is an astounding $96.75 billion.
—Sundeep Khanna is a former editor and the co-author of the recently released Azim Premji: The Man Beyond the Billions. Views are personal
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