The two-session market slide has battered the Infosys Technologies to such an extent that its current valuation has turned quite attractive, according to IT analysts.

The stock of the Bangalore-based software bellwether declined further today. It was down by 15.7% at Rs 2,570 on the BSE in afternoon trades. Intense volatility was witnessed in the stock, which plunged by as much as 20.5% to a low of Rs 2,420 earlier in the session. The stock rose by 2.8% on commencement of trading to a high of Rs 3,131.10 only to plunge later. It recorded a staggering volume of 16 lakh shares on the BSE

The Infosys Technologies stock crashed following the disappointing FY 2003-04 guidance from the company and its Q4 results, that were on the lower side of expectations. With today's fall, the stock has lost a whopping 38% in mere two sessions from its Wednesday's close of Rs 4,158.05. This is probably the biggest fall recorded in the stock in such a short span.

The slide was attributed to problems relating to payment of margins in the derivatives segment of the bourses with a series of bank holidays in the coming days. But the National Stock Exchange on Friday denied reports that the exchange was witnessing payment problems following Thursday's market slump. Margin calls were also triggered in the stock. Margin calls take place when financiers, who lend money against a stock, offload the stock when it slips below a certain limit. Usually, when a stock witnesses a sharp slide, financiers demand additional margins. If the investor is unable to cough up the additional margin, financiers sell the stock.

But IT analysts said the erosion in the value of the ITL stock by 38% in just two sessions post-results is a bit surprising. "Its obviously overdone," said an analyst with a local brokerage. The crash provides an opportunity to acquire the stock, analysts said. Following the two-session carnage, the valuation of the ITL stock has become quite cheap, thereby making it a value buy at the current level, they added. At the current Rs 2,570, the scrip discounts its projected FY 2003-04 earning per share of Rs 162 (middle of the range of Rs 161-163 that Infosys has given) by a price to earnings multiple of 15.8.

The general feeling among analysts is that all the negative factors are factored in the current price of the ITL stock.

Meanwhile, analysts said the pressure on billing rates of the IT bellwether may continue. The pressure on billing rates and its impact on profit margins had led ITL to give a conservative guidance for FY 2003-04. The challenging external environment like the recession in the US economy and competition were the reasons given for the pressure on margins, even as the top line growth remained strong on the back of volume growth. The ITL management indicated that the billing pressure in the fourth quarter was very intense and it expects the pressure to continue during the year ending 31 March 2004.

Another reason for the pressure on margins is the share of on-site revenues may continue to remain high due to new project starts. The margin in on-site projects are lower than those in offshore ones. Also, the incidence of SARS disease in Asia has led to cancellation of visits by some clients.

The muted FY 2003-04 guidance has disappointed the investors, who offloaded the stock. For the year ending 31 March 2004, ITL expects income from software development services and products to be in the range of Rs 4,408-4,479 crore (Rs 44.08-44.79 billion) translating into a 21.7% to 23.6% growth on a year-on-year basis. It expects a EPS between Rs 161 and Rs 163, translating into 11.3% to 12.7% growth in its bottom line on a year-on-year basis.

BSE code: 500209