After piling up cash reserves of nearly $1.85 billion (Rs7,345 crore), India’s second largest software services firm Infosys Technologies Ltd says it needs more cash to meet expenses such as wages for its workers, developing software and building new offices.

“We are still short of more than $1 billion to meet our cash expenses," said V. Bala-krishnan, chief financial officer of Infosys, which has traditionally said it likes to maintain reserves to cover a year’s expenditure.

Growing Kitty (Graphic)

The firm’s gross expenses are nearly 70% of its revenues. It has forecast around $4.17 billion in US revenues for the year to March 2008.

As on 30 September, Infosys had the largest cash reserves among Indian IT vendors at Rs7,304 crore, which is seven times that of Tata Consultancy Services Ltd (TCS) and more than three times that of Wipro Ltd, India’s largest and third largest technology companies, respectively. TCS had cash reserves of Rs1,080 crore and Wipro Rs2,048 crore during the quarter to September. The statistic for Satyam Computer Services Ltd was Rs4,005 crore.

Cash and cash equivalents, or the money in liquid assets such as mutual funds and bank deposits, for Infosys were 51% and 65% of total cash reserves for fiscal 2007 and 2006, respectively.

Infosys maintains a highly liquid balance sheet, which it says is required to operate in a constantly changing technology environment and shifts in client spending patterns that can cause revenue volatility.

“We have to do a balance. We are investing $400 million in capital expenditure for the year and we need cash for our inorganic growth," said Balakrishnan.

Contrary to perception that cash reserves are being accumulated to face any likely impact from the subprime crisis-led slowdown in the US, analysts say they expect the company to execute more orders. “They will be more liberal (in spending) going forward," said an analyst from a foreign brokerage in Mumbai, who did not want to be named.

Unlike its peers TCS and Wipro, Infosys has been conservative on buyouts. The last acquisition it made was in July, when it paid $28 million for three back-office centres of Philips Electronics NV as part of a deal that would give it revenues of $250 million over seven years.

The deal was only its second in four years—it bought Australia’s Expert Information Services Pty for around $23 million in 2003.

In contrast, its Bangalore-based rival Wipro has spent more than $1.2 billion to acquire 10 firms in two years, including the US’ Infocrossing Inc. in August for $600 million.

Apart from the cash it has, Infosys could raise debt, issue more shares or use equity itself as currency for any possible acquisition in the future, the analyst added.

Shares of Infosys closed Friday trades at Rs1,604, closer to its one-year low of Rs1,511 than its 52-week high of Rs2,439 on BSE. Queried on whether Infosys would buy back shares from the market, Balakrishnan said: “We don’t decide on corporate actions depending on market price."