Infosys shares fall after Axon backs HCL bid

Infosys shares fall after Axon backs HCL bid

Bangalore: Shares in India’s Infosys Technologies shed more than 4% on Friday morning after Axon Group dropped its backing for the outsourcer’s takeover bid in favour of a higher offer from HCL Technologies.

HCL Technologies, India’s fifth-ranked software services exporter, climbed as much as 3.5% early on the British consultancy’s backing, but faltered in choppy trade as investors speculated on a possible bidding war.

“The Axon move has come as a short-term dampener for Infosys to some extent," said Harit Shah, a sector analyst with Angel Broking in Mumbai. “It seems that HCL is now better positioned to get this deal, but Infosys could go for a counter bid."

Infosys’s 600 pence per share, or £407 million ($719.9 million), bid for Axon was trumped by HCL’s cash offer last week of 650 pence per share or £441.1 million pounds.

Axon said on Thursday it gave Infosys 60 hours to mull over the higher HCL offer before it shifted its recommendation.

A spokeswoman for Infosys refused to comment on the Axon move to back the HCL bid.

Nasdaq-listed Infosys, however, is widely expected to raise its offer and is seen by analysts as having the most synergies with Axon.

“It’s too early to say anything on the outcome of this offer," said Tejas Doshi, head of research at Sushil Finance. “A third party can also come into the fray and submit a higher bid than what has been offered to the shareholders."

Infosys, India’s second-largest software services exporter, was down 3.6% at Rs1,401.50 by 11:25am, after falling as much as 4.5%.

HCL was down 0.1% at Rs205.50, falling back from an early rally to 212.85.

In comparison, the main BSE index was down 1.4%.

Analysts say a bidding war for what would be the largest overseas acquisition by an Indian information technology firm could push up acquisition costs and dent earnings in the near term.

Axon provides services to companies using products of German business software maker SAP, a services segment which is seen as having strong business potential.

Comparatively cheaper wages and a large pool of English-speaking graduates had helped sector leader Tata Consultancy Services and smaller rivals Infosys and Wipro ride an outsourcing boom for years.

But growth has slowed sharply after Wall Street banks began to make huge writedowns and as the U.S. economy lurched towards recession, forcing the companies to look elsewhere to cut their dependence on the US market and add new service lines.