Scenarios

Base case
management case
upside case
downside case
Base case

1
2
3
4
1

GROSS ADDS
Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
40000
0
0
0
40000

2012E
45000
0
0
0
45000

ATTRITION RATE
Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
18%
0%
0%
0%
18%

2012E
19%
0%
0%
0%
19%

Technical staff as % of total staff

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
93%
0%
0%
0%
93%

2012E
93%
0%
0%
0%
93%

Support staff as % of total staff

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
7%
0%
0%
0%
7%

2012E
7%
0%
0%
0%
7%

ON SITE EFFORT MIX

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
23%
0%
0%
0%
23%

2012E
23%
0%
0%
0%
23%

OFF SITE EFFORT MIX

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
77%
0%
0%
0%
77%

2012E
77%
0%
0%
0%
77%

UTILISTION RATE
Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
74.0%
0.0%
0.0%
0.0%
74.0%

2012E
74.0%
0.0%
0.0%
0.0%
74.0%

HOLIDAYS IN INDIA
Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
25
0
0
0
25

2012E
25
0
0
0
25

AVAILABLE HOURS PER DAY

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
8
0
0
0
8

2012E
8
0
0
0
8

AVAILABLE rate on site growth

Base case
management case
upside case
downside case
Base case

2009A

2010A

2011E
1%

2012E
2%

1%

2%

AVAILABLE rate offsite growth

Base case
management case
upside case
downside case

2009A

2011E
1%

2012E
2%

2010A

Base case

RS./$
Base case
management case
upside case
downside case
Base case

2009A

Software & BP expenses as % of revenue

Base case
management case
upside case
downside case
Base case

2009A

Selling and marketing as % of revenue

Base case
management case
upside case
downside case
Base case

2009A

General and administration as % of revenue

Base case
management case
upside case
downside case
Base case

2009A

Effective Tax rate as % of revenue

Base case
management case
upside case
downside case
Base case

2009A

Pay out ratio as % of revenue

Base case
management case

2009A

2010A

2010A

2010A

2010A

2010A

2010A

1%

2%

2011E
46

2012E
46

46

46

2011E
53.5%

2012E
53.5%

53.5%

53.5%

2011E
5.1%

2012E
5.1%

5.1%

5.1%

2011E
7.2%

2012E
7.2%

7.2%

7.2%

2011E
22.0%

2012E
23.0%

22.0%

23.0%

2011E
23.0%

2012E
24.0%

upside case
downside case
Base case
sundry debtors as % of revenue
Base case
management case
upside case
downside case
Base case

2009A

current liabilities as % of opex

Base case
management case
upside case
downside case
Base case

2009A

CAPEX as % of revenue
Base case
management case
upside case
downside case
Base case

2009A

Depreciation % of opening fixed assets

Base case
management case
upside case
downside case
Base case

2009A

Dividend received as % of investment

Base case
management case
upside case
downside case
Base case

2009A

2010A

2010A

2010A

2010A

2010A

23.0%

24.0%

2011E
15.0%

2012E
15.0%

15.0%

15.0%

2011E
15.5%

2012E
15.5%

15.5%

15.5%

2011E
5.0%

2012E
4.5%

5.0%

4.5%

2011E
23.0%

2012E
23.0%

23.0%

23.0%

2011E
3.0%

2012E
3.0%

3.0%

3.0%

2013E
50000
0
0
0
50000

2013E
19%
0%
0%
0%
19%

2013E
93%
0%
0%
0%
93%

2013E
7%
0%
0%
0%
7%
2013E
23%
0%
0%
0%
23%

2013E
77%
0%
0%
0%
77%

2013E
74.0%
0.0%
0.0%
0.0%
74.0%

2013E
25
0
0
0
25

2013E
8
0
0
0
8

2013E
2%

2%

2013E
2%

2%

2013E
46

46

2013E
53.5%

53.5%

2013E
5.1%

5.1%

2013E
7.2%

7.2%

2013E
23.0%

23.0%

2013E
25.0%

25.0%
2013E
15.0%

15.0%
2013E
15.5%

15.5%
2013E
4.0%

4.0%
2013E
23.0%

23.0%

2013E
3.0%

3.0%

MODEL

March y/e
Opening headcount
Gross adds
Attrition
Attrition Rate
Net adds
closing headcount
% growth
Average headcount
Of which
Technical staff
% of total headcounts
Support staff
% of total headcounts
Average technical staff

2009A
91,187
28,231
14,568
14.9%
13,663
104,850

2010A
104,850
27,639
18,693
17.1%
8,946
113,796

2011E
113,796
40,000
22,095
18%
17,905
131,701

98,019

109,323

122,749

97349
92.8%
7501
7.2%
97349

106864
93.9%
6932
6.1%
102107

122482
93%
9219
7%
114673

Effort mix
onsite
off site

23.60%
76.40%

22.60%
77.40%

23%
77%

Utilisation - including trainees (not on payroll)

68.60%

68.10%

74.0%

Days in year
sat/sun
Holidays in india
Available days in a year
Available hours per day
Available hours per year

365
104
25
236
8
1888

365
104
25
236
8
1888

365
104
25
236
8
1888

Avearge rate onsite $ hour

% growth
Avearge rate offsite $ hour
% growth

73.2

74.6
2.0%
25.5
-1.20%

75.4
1%
25.7
1%

2215
46.10%
2589
53.90%
4804
3.02%
22742

2778
46.67%
3175
53.33%
5953
23.92%
27384

Onsite revenue (mn $)

% of total revenue
off site revenue ( $mn)
% of total revenue
Total revenue ( $mn)
% growth
Total revenue ( rs .cr)

25.8

2178
46.70%
2485
53.30%
4663
21693

% growth
INR / USD

46.52

4.84%
47.34

20.41%
46

2012E
131,701
45,000
26,756
19%
18,244
149,945

2013E
149,945
50,000
30,356
19%
19,644
169,589

140,823

159,767

139449
93%
10496
7%
130965

157718
93%
11871
7%
148583

23%
77%

23%
77%

74.0%

74.0%

366
104
25
237
8
1896

365
104
25
236
8
1888

76.9
2%
26.3
2%

78.4
2%
26.8
2%

3250
46.67%
3714
53.33%
6964
16.99%
32036

3745
46.67%
4280
53.33%
8025
15.23%
36916

16.99%
46

15.23%
46

Profit & Loss statement

March Y/E - Rs crores

Total Revenue
% growth

2009A
21693

2010A
22742
4.8%

2011E
27384
20.4%

2012E
32036
17.0%

2013E
36916
15.2%

software & BP expenses

% of revenue
Selling and Marketing expenses
% of revenue
General and administration expenses
% of revenue
Opex
% margin
% growth

11765
54.2%
1104
5.1%
1629
7.5%
14498
66.8%

12071
53.1%
1184
5.2%
1626
7.1%
14881
65.4%
2.6%

14651
53.5%
1397
5.1%
1972
7.2%
18019
65.8%
21.1%

17139
53.5%
1634
5.1%
2307
7.2%
21079
65.8%
17.0%

19750
53.5%
1883
5.1%
2658
7.2%
24290
65.8%
15.2%

EBITDA
% margin
% growth

7195
33.2%

7861
34.6%
9.3%

9365
34.2%
19.1%

10956
34.2%
17.0%

12625
34.2%
15.2%

D&A
EBIT
% margin
% growth

761
6434
29.7%

905
6956
30.6%
8.1%

927
8439
30.8%
21.3%

1029
9928
31.0%
17.6%

1124
11502
31.2%
15.9%

871
5

783
111
3.0%
0
0
0
0
9333

1110
111
3.0%
0
0
0
0
11149

1496
111
3.0%
0
0
0
0
13109

Interest income
Dividend Received
% of investments
Other income
Gains/(losses) on Fx
Provision for investments
income from sale on investments
Profit before tax

38
-439
-2
0
6907

775
106
2.9%
23
30
9
48
7947

TAX expense
% tax rate
net income
% margin

919
13.3%
5988
27.6%

1681
21.2%
6266
27.6%

2053
22.0%
7280
26.6%

2564
23.0%
8585
26.8%

3015
23.0%
10094
27.3%

Basic weighted avg shares (cr)

Diluted weighted avg shares (cr)

57.2
57.3

57.2
57.1

57.2
57.1

57.2
57.1

57.2
57.1

Basic EPS
% growth

104.6

109.5
4.7%

127.3
16.2%

150.1
17.9%

176.5
17.6%

DILUTED EPS

104.5

109.7

127.5

150.3

176.8

% growth

5.0%

16.2%

17.9%

17.6%

Dividends
Payout ratio

1345
22.5%

1434
22.9%

1674
23.0%

2060
24.0%

2523
25.0%

Retained Earnings

4643

4832

5606

6524

7570

Benchmarking

2011E

2012E

2013E

Revenue (Rsm)
Consensus
IRFM estimates
Difference

272945
273842
0.3%

327649.7
320355
-2.2%

385467
369155
-4.2%

EBITDA ( rs m)
Consensus
IRFM estimates
Difference

91615
93654
2.2%

108212
109562
1.2%

127080
126251
-0.7%

EBIT
Consensus
IRFM estimates
Difference

82192.3 97220.7
84385.02 99275.24
2.7%
2.1%

113833
115015
1.0%

Net Income
Consensus
IRFM estimates
Difference

70024 83663.3
72799.01 85846.18
4.0%
2.6%

99695
100939
1.2%

TAKEN FROM BLOOMBERG

FACTSET
capitaline
thomson reuters
factiva

Balance sheet

March y/e Rs crores

fixed asstes (PP&E)
Acc Dep
Work in progress
Tangible assets
Goodwill

2009A
6,404
2,416
677
4,665
689

2010A
6,923
2,893
409
4,439
916

2011E
8,292
3,820
409
4,881
916

2012E
9,734
4,849
409
5,294
916

2013E
11,210
5,972
409
5,647
916

Investments
Deferred tax Assets

0
163

3,712
432

3,712
432

3,712
432

3,712
432

Sundry Debtors
Cash balance
Loans and advances
Current Assets
Total Assets (A)

3,672
9,695
3,279
16,646
22,163

3,494
10,556
4,187
18,237
27,736

4,108
15,555
4,187
23,850
33,791

4,805
21,444
4,187
30,436
40,790

5,537
28,427
4,187
38,151
48,858

Current Liabilities
Provisions
Short term borrowings / Revolver
Toatl Current Liabilities

2,004
1,868

2,343
2,112

3,872

4,455

2,793
2,112
0
4,905

3,267
2,112
0
5,379

3,765
2,112
0
5,877

37

232

232

232

232

286
17,968
18,254
22,163

286
22,763
23,049
27,736

286
28,369
28,655
33,791

286
34,893
35,179
40,790

286
42,463
42,749
48,858

Deferred tax liability

Share capital
Reserves and surplus
Shareholders equity
Total liabilities + capital (B)

Difference

Working Capital

March y/e Rs crores

Sundry debtors
% of revenue
Loans and Advances
Current liabilities
% of OPEX
Provisions
Working capital (WC)
Change in WC ( cash impact )

2009A
3672
16.9%
3279
2004
13.8%
1868
3079

2010A
3494
15.4%
4187
2343
15.7%
2112
3226
-147

2011E
4108
15.0%
4187
2793
15.5%
2112
3390
-164

2012E
4805
15.0%
4187
3267
15.5%
2112
3613
-223

2013E
5537
15.0%
4187
3765
15.5%
2112
3847
-234

Cash Flow Statement

March y/e RS crores

EBIT
ADD : Depreciation
Add/Less: changes in WC
Net cash flow from operating activities

2009A
6434
761
0
7195

2010A
6956
905
-147
7714

2011E
8439
927
-164
9202

2012E
9928
1029
-223
10733

Interest income
Dividend income
Servicing of financing

871
5
876

775
106
881

783
111
895

1110
111
1221

Capex ( capital exp.)

Taxes paid
Dividend Paid
Free cash flow

0
919
1345
5807

0
1681
1434
5480

1369
2053
1674
4999

1442
2564
2060
5888

2013E
11502
1124
-234
12391
1496
111
1607
1477
3015
2523
6983

30-Aug-12
FIXED ASSETS & CAPEX
March Y/e Rs. Crores
Capex ( excluding WIP)
% of revenue

2009A
1974

2010A
943
4.1%

2011E
1369
5.0%
4030
1369
927
4472

Opening net FA (excl goodwill and WIP)

Additions
Depreciation charge
Closing net FA (excl goodwill and WIP)

761
3,988

3,988
943
905
4,030

Acc Dep
Closing gross FA (excl goodwill and WIP)

2,416
6,404

2,893
6,923

3820
8292

905
22.7%

927
23.0%

Depreciation charge WDV

Depreciation % of opening fixed assets

2012E
1442
4.5%

2013E
1477
4.0%

4472
1442
1029
4885

4885
1477
1124
5238

4849
9734

5972
11210

1029
23.0%

1124
23.0%

Debt Schedule

March Y/e Rs crores

Short term borrowings
Beginning balance
(repayment)
New Borrowings
Closing balance
Average
Interest Expense
Cash Balance
Beginning balance
Free cash flow generated
Movement in bank Overdraft / revolver
Closing balance
Average
Interest income
Minimun cash requirement
bank Overdraft / revolver
Beginning balance
(repayment)
New Borrowings
Closing balance
Average
Interest Expense

2009A

2010A

2011E

2012E

10,556

10,556
4999
0
15,555
13,056
783
0

15,555
5888
0
21,444
18,500
1110
0

0
0
0
0
0
0

0
0
0
0
0
0

6%

0
0%

2013E

21,444
6983
0
28,427
24,935
1496
0

0
0
0
0
0
0

DCF
(In INR cr.)
Fiscal Year End 31 December
Net Income
Allowable D&A
Capital Expenditures
Change in Working Capital
Free Cash Flow to Equity
Growth
Years Discounted
Discount Factors
Discounted Cash Flows
Valuation Parameters
Cost Of Equity
Terminal Growth Rate
2016E Normalized Free Cash Flow
Terminal Value

13%
6%
9,860
149303.5

Discounted Terminal Value

Dicounted Cash Flows
Equity Value
Implied Share Price(INR)
Shares Outstanding

103474.8
18719.43
122194.2
2129.561
57.38

2011E
7,280
927
-1369
-164
6,674

2012E
8,585
1029
-1442
-223
7,948

1
0.88
5906.103848

2
0.78
6224.743355

2013E
10,094
1124
-1477
-234
9,507
3
0.69
6588.583461

norm
10,094
1477
-1477
-234
9,860

assumption for normalized year:

capex and D&A are exactly same with opposite sign

3
0.69

Implied Share Prices

Implied Multiples

2011
111,638
11.9x

2012
106,639
9.7x
EV/EBIT

2011
111,638
13.2x

2012
106,639
10.7x

Cost Of Equity

EV/EBITDA

2129.561
11%
12%
13%
14%
15%

4%
2205.026
1922.181
1702.358
1526.646
1383.009

5%
2537.078
2166.793
1889.26
1673.555
1501.126

Growth Rates
6%
3001.951
2492.942
2129.561
1857.192
1645.491

actly same with opposite signs

Implied Share Prices

Growth Rates
7%
3699.26
2949.551
2449.963
2093.296
1825.948

8%
4861.443
3634.464
2898.526
2408.102
2057.964