Cognizant seeks India listing to narrow peer valuation gap

Cognizant’s P/E ratio is 16.59, against 18-25 for TCS, Infosys, HCL Technologies and Wipro

- Jas Bardia [e-mail]

Cognizant Technology Solutions Corp. earns more revenue than Infosys Ltd, yet the Nasdaq-listed IT services firm is valued at barely half its peer, which is listed in India as well as the US.

While Infosys, India’s second-largest IT outsourcer, has a market capitalization of $70.5 billion, Cognizant is valued at $35.01 billion—although they had comparable revenues of $19.74 billion and $19.28 billion, respectively, in the previous fiscal year. Cognizant follows a January-December fiscal.

It is this arbitrage that the Teaneck, New Jersey-based company appears to be targeting as it weighs an India listing, announced on Wednesday during the September-quarter results.

“Exactly the same thing was being considered in the 2000 technology boom by several Indian entrepreneurs in the US who were looking to list their US companies in India because Indian IT services firms were trading at 400 times earnings. It is just that the boom ended; otherwise, it would have happened 25 years ago,” said Shankar Sharma, veteran market investor and founder of GQuant Investech.