Speaking at the Nasscom'99, Pai said the high-returns and sufficient cash accruals associated with the software industry make medium-term financing as an ideal option for growth.

Another way to reduce risks is the venture capital funds. "It will expertise and contacts," Pai says.

"Liquidity is key to success in software business," he said while highlighting reasons like expenses, which are mostly in cash and easy restructuring.

Stock options are seen by companies as an effective tool to retail intellectual capital as employees become partners in the success of every company. It is also a good tool to finance projects, he reminded.

Reducing risks and rewarding shareholders could be the sound financial strategy for anycompany.

Indian software companies are known for their services and not products. Tocuhing the characteristics of software product companies, Pai said large investment is a necessity since development has a long gestation period and market development costs a lot.

Generally a mediun-sized software company needs funding for asset creation, working capital requirements, growth and maitaining liquidity. Large companies, however, require funds for creation of infrastructure, globalisation, acquisitions and stretegic investments.

He also talked about some of the RBI guidelines on working capital financing.

In another paper presented on the topic, Datamatics chairman Lalit S Kanodia highlighted some recommendations of the Prime Minister's IT Task Force on working capital requirements of Indian software industry. It had said that the present capital requirements would be in the region of Rs 1,200 crore by year 2000.

Presenting some insights into the infotech stocks' performance on the exchanges, hesaid had IT stocks only comprised the BSE index, then this index would have been over 7,000 points. Infosys recently touched a whopping Rs 5,000 on the BSE.

Casting a glance at the world scenario, Kanodia presented some interesting figures. Almost 11 per cent of the US gross domestic product is constituted by infotech industry. Microsoft and GE are the world's most highly capitalised companies, he said emphasising the importance of information technology industry.