Shares in the British consultancy group Axon jumped by 20.1 per cent on Tuesday fuelling speculation about a counterbid to Infosys Technologies' 407 million pound ($800 million) offer to buy the company.

The all-cash offer by the Indian IT major, unanimously recommended by the board of the Surrey-based company, represents a value of 600 pence per share.

But Jonathan Imlah of Altium Securities said in a note, "Axon is a global leader in its field. We believe there is room for a counterbid closer to 700 pence a share.”

Axon chairman Roy Merritt said Monday, “Against the background of the global economic environment and increasing consolidation in the IT services industry the combination with Infosys represents a compelling proposition."

“The offer from Infosys represents an attractive cash premium and provides certainty of value today for Axon shareholders. We are therefore unanimously recommending the offer to shareholders,” he said.

Speculation mounted as Axon, a global leader in the delivery of business transformation programmes for organisations that use software manufactured by the German company SAP, said Tuesday profits were up 23 per cent in interim first half results.

Revenue was up 28 per cent to 123.9 million pounds and adjusted operating profit up 23 per cent to 20.2 million pounds compared to H1 2007, the company said.

Despite what analysts said, Axion told shareholders on Tuesday, “Infosys announced yesterday a recommended offer to acquire Axon Group to be implemented by way of a Scheme of Arrangement. Under the terms of the acquisition, Axon shareholders will receive for each Axon Share 600 pence including the interim dividend of 2.25 pence announced by Axon today.”

The Infosys buyout is being interpreted in Britain as reflecting a bid by Indian companies to move up the value chain from providers of low-cost services based on cheap labour.

“As they have grown, they have also begun attempting larger acquisitions, with some moving towards offering higher margin consulting services,” one newspaper commentator said.

Wipro, India's third largest software exporter, bought US technology firm and infrastructure management firm Infocrossing for $600 million in 2007.

Infosys has also been looking west to increase revenue in order to better compete with its main Indian rival, Tata Consultancy Services.

A source close to the deal was quoted saying the transaction was a good fit.

Infosys and Axon are among two dozen companies worldwide that implement back-office software systems designed by SAP.

The Indian company provides consultancy services for a number of IT platforms, and is understood to want Axon because of its position as a higher-end consultancy, able to generate higher margins by offering after-sales service, such as maintenance assistance.

Infosys chief executive Kris Gopalakrishnan said there was a strong demand for SAP systems, with Infosys registering a 62 percent increase in orders in the past year.

He added that the deal would allow Infosys to compete more effectively on the international stage with rivals such as Accenture, Oracle and Capgemini.

“Our rationale was that with this acquisition, our global reach, scale and our ability to participate in large transformational deals would be significantly enhanced,” he said.