Infosys Tech sulked in early trades on Wednesday on reports that SEC has asked for a full review of the company's offer document, that may see the ADR conversion issue delayed a bit.

The news had the scrip of India's second largest software exporter slipping 0.25% to Rs 4,230 on volumes of 71,000 shares on NSE. In the three sessions between 6 and 11 February 2003, Infosys Technologies had eased 6.7% to Rs 4,245.55 from Rs 4,549.

Reports have emerged that the US Securities & Exchange Commission has asked for a full review of the offer document, which was filed two weeks ago by Infosys with Nasdaq - a process that takes four-five weeks. This is expected to delay the company's proposed $400-million sponsored ADR programme to convert 2-3 million equity shares into ADR.

According to reports, a company listed on Nasdaq is usually not required to have an SEC authentication of its offer document. But the Infy ADR is under full review as overseas markets are volatile and investor confidence is weak. The SEC move does not reflect investor confidence in the company, though. It is believed that the offer document will be made public around the second week of March 2003, followed by roadshows. The issue will close in April 2003.

In early December 2002, the Infosys board approved the plan to convert between two and three million equity shares of the company into ADR. The company will hold a shareholders meeting on 22 February 2003, to seek their nod for the proposal.

Currently, ADRs account for only 3% of the company's total equity. After the issue, however, the share of ADRs is likely to rise to 8-10%. Apart from increasing the stock's visibility among US investors, by gradually building up its liquidity overseas, Infosys also hopes to reduce the huge premium carried by the Infy ADR to the local price with its latest conversion initiative.

Dealers say that talk that Infosys may delay the proposed move to convert domestic shares into ADR has prompted sustained selling from institutions over the last few sessions. As per market buzz, on Tuesday, CL Securities sold over 50,000 shares on the counter. On Tuesday, there were rumours that Unit Trust of India was selling in Infosys.

There is also a general weakness in tech stocks due to US-Iraq tensions. UN weapons inspectors Hans Blix and Mohamed ElBaradei, on 14 February 2003, will present a second report on Iraq to the UN Security Council . If war breaks out between the US and Iraq, the Indian software sector will be badly affected, putting further pressure on top lines as well as bottom lines of tech companies. There may be a delay in the flow of orders from overseas, especially the US. As a result, investors may offload software stocks, thereby dragging the overall market lower.

Besides, there have been reports that some federal states in the US are planning to stop business process outsourcing orders to India.

For the third quarter ended 31 December 2002, Infosys Technologies registered a 24.4% rise in net profit to Rs 256.31 crore (Rs 2.56 billion) on net sales of Rs 958.64 crore (Rs 9.58 billion).

BSE Code: 500209