Us Funds Pick 20% Stake In Infosys Arm Yantra

Software major Infosys Technologies Ltd has roped in two well-known US venture capital firms, Hambert & Quest and Charles River, for investing $6 million in its loss-making US subsidiary, Yantra Corporation, in a move to turn around the company.

High-level sources in Infosys said that Hambert & Quest, along with Charles River and one of its subsidiaries, have picked up 20 per cent equity in Yantra Corporation by subscribing to 4.8 million convertible preferred stock (CPS).

With the fresh round of investments, Infosys' stake in Yantra has come down to 54 per cent from 74 per cent.

"These venture capitalists will also add value to the Yantra board," sources said. "This is a part of our recast plan (of Yantra)," they added.

Interestingly, Infosys has offered its stock at $1.25 per share to Hambert & Quest and Charles River, as against the purchase price of $0.75 per share paid by Donald W Feddersen, another well-known venture capitalist, and Draper International LLC. "This is because the valuation of Yantra has gone up (now)," sources said.

Infosys, which had made an investment of $0.50 million in Yantra in 1995, went in for the second round of financing for promoting its flagship product, WMSYantra (earlier known as Eagle).

The second round of financing brought $3.75 million at $0.75 a share in CPS as against the earlier issue of common stock at $0.20 a share.

Infosys subscribed to two million CPS at $0.75 per share. While Feddersen subscribed to 0.533 million CPS at the same price, Draper followed with a subscription of 2.467 million CPS.

During the calendar year 1997, Yantra reported revenues of $1.42 million and a loss of $1.19 million. R&D expenditure constituted $0.91 million of this loss. Amortisation of the cost of WMSYantra, amounting to $0.33 million, was the major cause of the loss reported by the company.

The company completed its second full year of operation in 1997. Following financing from venture capitalists, a new `US-centric' board has been formed. Besides Feddersen, who is the chairman of Yantra, William H Draper has joined the board as director. Devdutt Yellurkar is the chief executive officer.

According to Infosys, Yantra is expected to report higher revenues during 1998.

The company is now focussing on turning WMSYantra into an integrated warehouse and transportation management system.