Against a price of Rs 5500 per share of Infosys, the stocks of other major software players in India - Satyam and Pentafour - are trading at an effective price (after adjusting for 1:1 bonus) of just Rs 735 and Rs 640, respectively. The current discounting of these stocks in the form of price earning multiple (PE) is much lower than that of Infosys.

The market expects the valuations of these stocks to improve substantially over the next few sessions ahead of going ex-bonus. Satyam Computers and Pentafour Software have both fixed September 1, 1999 as the record date for the purpose of bonus and the stocks will be go ex-bonuson August 11. Both the companies had approved a one for one bonus.

Apart from the steep rise in Infosys, the rally has already shifted from the cyclicals and commodity stocks to information technology. An excellent performance in the first quarter of the current financial has made the valuations even more attractive. Growth in earnings augurs well for these companies as it will help them servicing the expanded equity as a result of 1:1 bonus.

Pentafour Software registered a 63 per cent surge in net profit during the first quarter to Rs 34.4 crore from Rs 21.1 crore in the quarter for the previous year. Turnover during the quarter at Rs 143.82 crore was up 50.3 per cent from Rs 95.78 crore. The company's business mix has undergone a change over the past couple of years and currently, business software forms 44 per cent of its revenues, while multimedia forms 56 per cent of the revenues.

As a result of this performance, the company's annualised earning per share (EPS) has risen to Rs 68.9 from the1998-99 EPS of Rs 59.65. The latest annualised EPS discounts the current market price of Rs 1275 with a PE multiple of just 18.5. At the same time, Infosys' latest PE multiple is well past the three figure mark.

Satyam, on the other hand, reported a 53 per cent jump in net profit from Rs 15.5 crore to Rs 23 crore for the first quarter ended June, 1999. The annualised EPS of Rs 35.86 discounts the current price with a price earning multiple of just over 40.