MUMBAI: Though Infosys-Axon deal is being hailed as the largest outbound acquisition by an Indian IT company, some market participants believe it will have no major financial impact on the IT bellwether. They agree that this is a strategic buy in the consulting and package implementation space, but express concern on any sharp appreciation in the rupee against various currencies and a prolonged recession in major user economies.

The announcement of the Axon buy did little for Infosys ADR on Monday and it ended down 4 per cent at $39.90 on the Nasdaq, trailing the weakness in US markets. Infosys announced acquiring UK-based Axon Group in a 407-million pound (Rs 3,310 crore) all-cash deal after market hours Monday. The deal is expected to be consummated by November 2008, with the payment being made in December, and would add to its earnings from January 2009, Infosys said.

Infosys shares looked up at start Tuesday on the back of the news and a slide in the rupee to a 17-month low against the dollar. But the stock ended off the day's high on account of profit booking. "Infosys' proposed take over of Axon Group may be a tad expensive, and not exactly be a value buy, but it is a better investment than making cash sit idle in your balance sheet. This should essentially take the pressure off the management and give them the elbow room to now look at better fitting plays, something that they had been avoiding so far," said Anagram Stock Broking. However, the broking house is worried that the Eurozone may face more slowdown than the US.

Hence, investing in a company that draws majority of its earnings from the zone may not be a very good buy. Kotak Securities believes Axon is a strategic fit for Infosys, which has been consistently looking to expand its consulting and package implementation capabilities and its presence in Europe.

Kotak has maintained a 'buy' on the stock for a target of Rs 2,027 and is certain that the deal will allow Infosys to gain in terms of acquisition of marquee customers, wider reach, improved transformational capabilities and incremental abilities to bid for larger deals. "Infosys values Axon at nearly 2 times CY07 revenues and about 20 times CY07 earnings, which is fair in our view. Axon's revenues and PAT have grown by 43% and 68% CAGR, respectively over the past 5 years, albeit partly due to acquisitions," said the broking house.