Infosys: From 10K to 5 Lakh Crore!

It’s the year 1981. Telephones are considered as a luxury, and there’s a telephone waiting list of approximately 20 million. Liberalization has not yet hit India, and it is immensely difficult to start a business in times like these. Foreign exchange reserves have reduced to a point where India can barely finance three weeks’ worth of imports. The government is in strong favor of closing India off to the outside world. The Indian rupee is inconvertible to other currencies and high tariffs and import licensing are preventing foreign goods from entering the Indian market. In the I. T sector, demand for customized software computing for companies is on the rise.

A group of 7 men that are working in Patni Computer Systems (PCS) in Pune, leave to embark on a journey that will prove arduous, enervating, and ultimately triumphant.

This journey is led by Mr. Narayan Murthy, the one among the 7 who is initiating the idea of starting a software computing company, along with Nandan Nilekani, S. Gopalakrishnan, S. D. Shibulal, Ashok Arora, K. Dinesh, and N.S Raghavan.

Now, these are no ordinary men. They are among the best in the field and have coding knowledge backed with years of experience. They will go on to train people to write error-free code unlike how debugging code will become relatively easy in the future.

Infosys’ story is about to be much like any quintessential start-up struggle story, but it will create a lot of firsts in the Indian history of businesses.

After leaving PCS, a room in Murthy’s house has become their new office and 10,000 Rs, borrowed from Murthy’s wife, Sudha, serves as the capital amount.

It’s 1983 and Infosys finally has a computer to its name after waiting for roughly 2 years. Infosys has now shifted its base to Bangalore. It has no name in the US market and so it has tied up with a US company Kurt Salmon Associates.

6 years have passed and after a good run, the joint venture with Kurt Salmon Associates has fallen apart and Infosys is back to stage one.

At this point, Ashok Arora leaves Infosys after which Mr. Murthy declares to the rest of them he is in this for the long run and is surely going to make something out of Infosys and anyone else who wishes to leave is welcome.

This sparks motivation in the rest of the team and they continue to work for Infosys. They are cutting costs to the furthest extent, trying to put money back into the business. While their batch mates have a house and cars with a steady income for themselves, Murthy and team are surviving on hope.

Eventually, Infosys’ business now slowly starts growing. 1991 has brought with it, liberalization, and Infosys sees rapid growth in their business because of it. The new policy now allows 100% foreign ownership in many industries and majority ownership in all except banks, insurance, telecommunications, and airlines. Procedures for obtaining permissions are now simplified, by listing industries eligible for automatic approval up to specified levels of foreign equity (100%, 74%, and 51%). 1993, and Infosys is now public. However, it is under-subscribed. Morgan Stanley has bought a 13% stake in Infosys and bailed Infosys out. On the day of listing, Infosys stocks open with a premium of 60%.