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Why Infy needs a venture fund

india Updated: Jan 13, 2013 21:47 IST
N Madhavan
N Madhavan
Hindustan Times
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Infosys surprised nearly everyone last Friday with third-quarter results that showed net profit well above analyst forecasts. Its market value gained about Rs. 22,000 crore on a single day.

That, incidentally, is also the amount of cash that the software giant is sitting on - and am wondering if there is a divine signal lurking somewhere in the coincidence.

CEO SD Shibulal has clearly signalled control on new hires and turned the heat on underperformers, while improving the business mix. All this is good, but lacks a magical appeal that Infosys needs to go beyond being a slightly better performer than its peers.

One good idea: Infosys should launch its own venture capital fund, or invest in venture funds as a co-investor.

Chip-maker Intel has its Intel Capital, and networking gear giant Cisco invests in venture funds. Like Infosys, they know their core focus, but they gain a lot from venture funds. Here's how.

A venture investment opens up possibilities and relationships in emerging technology areas. Infosys has highly knowledgeable engineers and managers who can gain from being involved directly in spotting and engaging in the next wave of technologies that create service opportunities.

At the same time, venture capital can yield multiple returns as capital gains when least expected. OnMobile, the listed mobile value added services firm, was incubated within Infosys as a sideshow.

A venture fund can also help bright, entrepreneurial employees stay within an extended family.

Infosys co-founder NR Narayana Murthy has his own R600-crore venture fund, Catamaran Ventures. Why can’t the company do with a small chunk of its big cash pile what its founder did?