Using EVA at Infosys as a tool for performance measurement, designing executive compensation and financial management : Infosys Technology Ltd

Abstract

EVA, Acronym for economic value added, represents the concept of residual income. The owner o|f the trademark EVA, Stern Stewart & Co defines it as the profit that remains after deducting the cost of capital invested to generate that profit. The EVA concept has attracted considerable attention as an alternative to traditional accounting of earnings. It is touted to be the measure of true economic performance of a company and a strategy for creating shareholder wealth. Infosys is a bellwether software services firm in India. With a mere Rs 10,000 investment in 1981, the company has grown to a software behemoth of Rs 1,960 Cr revenue in 2001. It has also been a darling of stock market giving returns several times the normal market returns. After getting listed at Rs 100 in 1994, the stock has grown to Rs 3600 in 2002 despite the tech meltdown, giving a whopping return of 57500% over an eight year period, after adjusting for three bonus issues and a stock split. The project aims to look at comprehensively implementing EVA at Infosys.