The Hindu Business Line : Marginal rise in Infosys’ brand value

Bangalore, May 20 Infosys Technologies Ltd, India’s second largest IT software services vendor, has said in its annual report that for the fiscal year ended March 2008, there has been only a marginal increase of 0.8 per cent in its brand value.

Its economic value added grew 7.7 per cent, modest compared with the previous year’s growth rates. But its human resource value grew 72 per cent.

The company said its brand value stood at Rs 31,863 crore, compared with Rs 31,617 crore in the previous year.

However, its market capitalisation fell 28.6 per cent to Rs 82,362 crore, from Rs 1,15,307 crore in the previous year.

The value of the Infosys brand was 38.7 per cent of its market capitalisation in FY08, compared with 27.4 per cent in the previous year.

However, brand value as a unit of revenues fell to 1.91 for fiscal 2008 compared to 2.28 in the previous year and 2.41 in fiscal 2006.

Using the brand earnings-multiple model, which finds a mention in “Valuationof Trademarks and Brand Names” by Michael Birkin in ‘Brand Valuation’, Infosys based its brand valuation on assumptions that brand revenue is total revenue excluding other income, the annual inflation is at seven per cent and five per cent of the average capital employed used for purposes other than promotion of the brand and a tax rate of 33.99 per cent.

Infosys’s EVA too rose a modest 7.73 per cent to Rs 2,286 crore compared with Rs 2,122 crore in the previous year. The previous year’s growth was a substantial 38 per cent from Rs 1,540 crore in 2006.

The EVA measures the profitability of the company after taking into account the cost of all capital.

EVA is the post-tax return on capital employed (adjusted for the tax shield on debt) minus the cost of capital employed.

Computation model

Infosys has estimated the value of its human resources of 91,187 employees, including both delivery and support staff at Rs 98, 821 crore for fiscal 2008.

This represented a growth a 72 per cent growth over the previous year’s Rs 57, 452 crore, when the company had a headcount of 72,241 employees.

The IT major has used the Lev and Schwartz model to compute the value of its human resources.

The evaluation is based on the present value of the future earnings of the employees and on the assumptions that employee compensation includes all direct and indirect benefits earned both in India and abroad.

It also considered the incremental earnings based on group/age and discounted the future earnings at 13.32 per cent (14.97 per cent in the previous year), the cost of capital for computing the HR value.

Education index

The company reported a substantial jump in the education index of its employees for fiscal 2008 at 2,51,970 up from 2,03,270 in the previous year, reflecting the rising quality of its employees. The average age of the Infosys employees stood at 26 years in FY07, the same as in the previous years.

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