PROJECT REPORT On Equity Analysis IT Sector

1
A PROJECT REPORT
ON
EQUITY RESEARCH AND ANALYSIS OF IT SECTOR
Project Submitted in fulfillment of
MMS
Submitted by:
ROBIN ANIL AWATHARE
Roll No. M1001
Batch 2010-2012
Under the guidance of
Mrs. MAHALAKSHMI SUBRAMANIAN
(Professor)
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Declaration
I, Robin Anil Awathare solemnly declare that the project work entitled
Equity research and analysis of IT sector , is my original work, it is
neither copied from any earlier submitted work elsewhere or not merely
copied, this is specifically prepared as a part of MMS curriculum, to be
conducted in Year 2011.
Signature of the student: ________________________

Name of the Student: Robin Anil Awathare
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ACKNOWLEDGEMENT
A summer project is a golden opportunity for learning and self-development. I
consider myself very lucky and honored to have wonderful people lead me through in
this project.
My grateful thanks to Mr.Shasank Ajoy, manager who in spite of being

extraordinarily busy with his duties took time out to hear, guide and keep me on the
correct path. I do not know where I should have been without him. A humble thank
you madam Ms. Smita Narker, HR department monitored my progress and arranged
all facilities to make life easier. I chose this moment to acknowledge her contribution
gratefully. Prof Mrs. Mahalakshmi Subramanian whose patience I have probably
tested to the limit. She was always so involved in the entire process, shared her
knowledge, and encouraged me to think. Thank you madam. I would also like to
thank Ms. Tanaj and Mr. Abhijeet of placement department for their effort and help
provided to me to get such an excellent opportunity.
Last but not the least I will also like to thank the staff of Anand Rathi who shared
valuable information that helped in the successful completion of this project.
Robin Awathare
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Certificate of Completion
Robin Anil Awathare
has successfully completed the summer project at Anand Rathi kandiwali branch
for a period of two months from 16/05/2011 to 16/07/2011.

He has conducted a study entitled Equity research on IT sector
___________________ ______________
Name & Designation Department
Date:________________
Place:_______________
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CERTIFICATE
This is to certify that the project titled Equity research and analysis of it
sector from investors point of view has been successfully and satisfactorily
completed and submitted by M
Mr. Robin Anil Awathare bearing a roll number,
M1001 as a student of Chanakya Institute of Management Studies & Research as
Prescribed by AICTE in fulfillment of the requirement for MMS during the year 2011
12.
Internal Guide Director
Mrs. Mahalakshmi Subramanian Mr. Biswa B. Das

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INDEX
Sr. no. TOPIC Page no.
1 Executive summary 7
2 Company profile/company background 8
3 Introduction 13
4 Objective/scope of study 14
5 Definations 15
6 Research methodology 35
7 Data collection 36
8 Analysis 37
9 Conclusion 64
10 Recommendation 65
11 Limitation 66
12 Bibliography 67
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EXECUTIVE SUMMARY
The field of equity research is very vast and one has to look into various aspects of the
functioning of the company to get to any conclusion about the possible performance
of the company in the market. Investors like warren buffet made a fortune out of
investments in the stock market, which is quiet impossible without proper research
about the companies. The field of equity research is full of challenges. It is your door
to fame, fortune and, above all, professional challenge. In a world that is shrinking in
size due to information technology and blurring boundaries between nations, the stock
market (or the equities market), which is considered to be in its infant stage, is all set
to grow in size.
The project on Equity Analysis of IT sector was carried out in Anand Rathi
Securities Pvt Ltd., Mumbai, a very well known company in the field of stock broking
and capital market services sector. The duration of the project was two months. These
two months were not only limited to learning and devoting time towards equity
research but it also provided an insight on what various services such broking houses
provide and what efforts are required to manage such organizations.
The reason behind choosing this project is that it provides hands on experience with
what goes on in the stock market on a day-to-day basis. Some value investors only
look at present assets/earnings and don't place any value on future growth. Other
value investors base strategies completely around the estimation of future growth and
cash flows. Despite the different methodologies, it all comes back to trying to buy
something for less than its worth.
The project initiated with understanding the mannerisms of the stock market trading
followed by the dynamics of the telecom sector. Some of the major players in
Telecom sector were then chosen for further analysis. These companies were further
studied in detail with respect to their financials and the managements future plans
regarding the functioning of the company, their expansion plans, and various news
about these companies and their global forays.
Based on the complete study of the companies, TCS INFOSYS & WIPRO looked
promising and with a view to derive maximum value from the investment
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COMPANY PROFILE
AnandRathi is a leading full service investment bank, founded in 1994 offering a

wide range of financial services and wealth management solutions to institutions,
corporations, highnet worth individuals and families. The firm has rapidly expanded
its footprint to over 350 locations across India with international presence in Hong
Kong, Dubai & London. Founded by Mr. Anand Rathi and Mr. Pradeep Gupta, the
group today employs over 2,500 professionals through out India and its international
offices.
The firms philosophy is entirely client centric, with a clear focus on providing long
term value addition to clients, while maintaining the highest standards of excellence,
ethics and professionalism. The entire firm activities are divided across distinct client
groups: Individuals, Private Clients, Corporate and Institutions. Asia-money in their
Fifth Annual Private Banking Poll 2009 has named AnandRathi The Best Domestic
Private Bank in India. The firm has emerged a winner across all key segments in
Asia-moneys largest survey of high net worth individuals in India.
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In year 2007 Citigroup Venture Capital International joined the group as a financial
partner.
Board of Directors
Anand Rathi, Founder & Chairman
Pradeep Gupta, Co- founder & Vice chairman
Amit Rathi, Managing Director
Board of Directors Independent
P G Kakodkar, Director
Dr. S A Dave, Director
C D Arha, Director
Ajit Bhushan, Director

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COMPANY BACKGROUND
Set up in 1994,19.9% stake held by Citigroup Venture Capital International (CVC)
AREAS OF EXPERTIES
Wealth Investment Brokerage &

Management Banking Distribution
Institutions Equity Capital Equities

Market IPOs /
Private Clients Derivatives
FPO / QIB
Priority Clients Bonds
Private Equity /
Non-Resident Advisory Mutual Funds
Clients M&A Commodities
Debt Raising, Insurance
Syndication and
Restructuring
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Milestones:
1994: Started activities in consulting and Institutional equity sales with staff of 15
1995: Set up a research desk and empanelled with major institutional investors
1997: Introduced investment banking businesses. Retail brokerage services launched
1999: Lead managed first IPO and executed first M & A deal
2001: Initiated Wealth Management Services

2002: Retail business expansion recommences with ownership model
2003: Wealth Management assets cross Rs1500 crores; Insurance broking launched;
Launch of Wealth Management services in Dubai; Retail Branch network exceeds 50
2004: Commodities brokerage and real estate services introduced; Wealth
Management assets cross Rs3000crores; Institutional equities business re launched
and senior research team put in place; Retail Branch network expands across 100
locations within India
2005: Real Estate Private Equity Fund launched; Retail branch network expands to
200 locations within India
2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity
Exchange (DGCX);
Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money
2006 poll; Ranked 6th in FY2006 for All India Broker Performance in equity
distribution in the High Net worth Individuals (HNI) Category
Ranked 9th in the Retail Category having more than 5% market share; Completes its
presence in all States across the country with offices at 300+ locations within India
2007: Citigroup Venture Capital International picks up 19.9% equity stake; Retail
customer base crosses 200 thousand; Establishes presence in over 450 locations
2009: Ranked #1 Private Domestic Asia Money polls 2009.
2010:AnandRathi Private Wealth adjudged Best Domestic Private Bank (India) by

Asia Money Polls 2010 for the second consecutive year
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2011:AnandRathi for the third time in a row has been voted as the 'Best Domestic
Private Wealth Management Firm' by Asia money Polls 2011.
Key behind Anand Rathi success:
INVEST CORRECTLY (RIGHT ASSET CLASS)+INVEST REGULARLY
=WEALTH CREATION
Client-centric philosophy, with focus on providing long term value addition to clients,
maintaining highest standards of excellence, ethics and professionalism
They always strive to develop strong relationships with there clients nurtured by
personal attention of senior management
They approach their clients holistically with the goal of balancing their strategic and
financial objectives
Proficiency in rendering consistent high quality value added services
A senior product team of retail specialists who provide hands on support to Personal
Investment Advisors for all products
Research:
Dedicated fundamental Research team for corporate guidance.

Publish variety of quality research reports
1. Sector specific
2. Macro Economic trends
3. Fundamental Reports Daily, Weekly.
4. Technical Reports
Our excellent relationship with major market players gives us an edge over
our competitors in information collation
Regular Sector wise surveys enable us to have first hand information from
ground level
Success ratio of our positional calls is 70%
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INTRODUCTION
Indian information technology (IT) industry has played a key role in putting India on
the global map. In addition to fuelling Indias economy, this industry is also positively
influencing the lives of its people through an active direct and indirect contribution to
various socio-economic parameters such as employment, standard of living and
diversity. The industry has played a significant role in transforming Indias image
from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a
global player in providing world-class technology solutions and business services,
according to National Association of Software and Service Companies (NASSCOM).
The sector is estimated to have grown by 19 per cent in the FY2011, clocking revenue
of almost US$ 76 billion. Indias outsourcing industry has witnessed a rebound and
registered better than expected growth according to NASSCOM.
The export revenues are estimated to have aggregated to US$ 59 billion in FY2011
and contributed 26 per cent as its share in total Indian exports (merchandise plus
services), according to a research report IT-BPO Sector in India: Strategic Review
2011, published by NASSCOM. The workforce in Indian IT industry will touch 30
million by 2020 and this sunrise industry is expected to continue its mammoth
growth, expect various industry experts.
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OBJECTIVE
As IT sector is the fastest growing sector in India due to heavy demand of IT
services in western countries. There are huge investment opportunities as there
is high rate of return.
To exploit this opportunity and earn profit by means of investment in this sector
To help analyze the company by understanding simple terms to invest correctly
and effectively
SCOPE OF THE STUDY

The scope of this project is limited to only one sector i.e. IT sector. This project
is concerned with only one sector of companies in the stock market. The
project does not extend its scope to any other sector of companies.
Also, the project is concerned with only 3 companies from among the major
players in the IT sector i.e. TCS, INFOSYS and WIPRO.
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DEFINATIONS
Equity/Share
Total equity capital of a company is divided into equal units of small
Denominations, each called a share. For example, in a company the total
Equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10
Each. Each such unit of Rs 10 is called a Share. Thus, the company
Then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such
shares are members of the company and have voting rights.
Debt Instrument
Debt instrument represents a contract whereby one party lends money to another on
pre-determined terms with regards to rate and periodicity of interest, repayment of
principal amount by the borrower to the lender.
In Indian securities markets, the term bond is used for debt instruments issued by the
Central and State governments and public sector organizations and the term
debenture is used for instruments issued by private corporate sector.
Derivative?
Derivative is a product whose value is derived from the value of one or more basic
variables, called underlying. The underlying asset can be equity, index, foreign
exchange (forex), commodity or any other asset.
Derivative products initially emerged, as hedging devices against fluctuations in
commodity prices and commodity-linked derivatives remained the sole form of such
products for almost three hundred years. The financial derivatives came into spotlight
in post-1970 period due to growing instability in the financial markets. However,
since their emergence, these products have become very popular and by 1990s, they
accounted for about two- thirds of total transactions in derivative products.
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Mutual Fund?
A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board
of India) that pools money from individuals/corporate investors and invests the same
in a variety of different financial instruments or securities such as equity shares,
Government securities, Bonds, debentures etc. Mutual funds can thus be considered
as financial intermediaries in the investment business that collect funds from the
public and invest on behalf of the investors. Mutual funds issue units to the investors.
The appreciation of the portfolio or securities in which the mutual fund has invested
the money leads to an appreciation in the value of the units held by investors.
binding on the Mutual Fund scheme. The investment objectives specify the class of
securities a Mutual Fund can invest in. Mutual Funds invest in The investment
objectives outlined by a Mutual Fund in its prospectus are
12various asset classes like equity, bonds, debentures, commercial paper and
government securities. The schemes offered by mutual funds vary from fund to fund.
Some are pure equity schemes; others are a mix of equity and bonds. Investors are
also given the option of getting dividends, which are declared periodically by the
mutual fund, or to participate only in the capital appreciation of the scheme.
Index
It is a basket of securities and the average price movement of the basket of securities
indicates the index movement, whether upwards or downwards.
Depository
A depository is like a bank wherein the deposits are securities (viz. shares,
debentures, bonds, government securities, units etc.) in electronic form.
Dematerialization
Dematerialization is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited
An Index shows how a specified portfolio of share prices is moving in order
to the investors account with his Depository Participant (DP).
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SEBIs role
The Securities and Exchange Board of India (SEBI) is the regulatory authority in
India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for
establishment of Securities and Exchange Board of India (SEBI) with statutory
powers for (a) protecting the interests of investors in securities (b) promoting the
development of the securities market and (c) regulating the securities market. Its
regulatory jurisdiction extends over corporate in the issuance of capital and transfer of
securities, in addition to all intermediaries and persons associated with securities
market. SEBI has been obligated to perform the aforesaid functions by such measures
as it thinks fit. In particular, it has powers for:
Regulating the business in stock exchanges and any other securities markets
Registering and regulating the working of stockbrokers, subbrokers etc.
Promoting and regulating self-regulatory organizations
Prohibiting fraudulent and unfair trade practices
Calling for information from, undertaking inspection, conducting
Inquiries and audits of the stock exchanges, with the securities market.
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Market Segments
Securities markets provide a channel for allocation of savings to those who have a
productive need for them. The securities market has two interdependent and
inseparable segments: (i) primary market and (ii) secondary market.
Primary Market
Primary market provides an opportunity to the issuers of securities, both Government
and corporations, to raise resources to meet their requirements of investment.
Securities, in the form of equity or debt, can be issued in domestic /international
markets at face value, discount or premium.
The primary market issuance is done either through public issues or private
placement. Under Companies Act, 1956, an issue is referred as public if it results in
allotment of securities to 50 investors or more. However, when the issuer makes an
issue of securities to a select group of persons not exceeding 49 and which is neither a
rights issue nor a public issue it is called a private placement.
Secondary Market
Secondary market refers to a market where securities are traded after being offered to
the public in the primary market or listed on the Stock Exchange. Secondary market
comprises of equity, derivatives and the debt markets. The secondary market is
operated through two mediums, namely, the Over-the-Counter (OTC) market and the
Exchange-Traded market. OTC markets are informal markets where trades are
negotiated.
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PRIMARY MARKET
Role of the Primary Market

The primary market provides the channel for sale of new securities. Primary market
provides opportunity to issuers of securities; Government as well as corporates, to
raise resources to meet their requirements of investment and/or discharge some
obligation.
They may issue the securities at face value, or at a discount/premium and these
securities may take a variety of forms such as equity, debt etc. They may issue the
securities in domestic market and/or international market.
Face Value of a share/debenture

The nominal or stated amount (in Rs.) assigned to a security by the issuer. For shares,
it is the original cost of the stock shown on the certificate; for bonds, it is the amount
paid to the holder at maturity. Also known as par value or simply par. For an equity
share, the face value is usually a very small amount (Rs. 5, Rs. 10) and does not have
much bearing on the price of the share, which may quote higher in the market, at Rs.
100 or Rs.1000 or any other price. For a debt security, face value is the amount repaid
to the investor when the bond matures (usually, Government securities and corporate
bonds have a face value of Rs. 100). The price at which the security trades depends on
the fluctuations in the interest rates in the economy.
Premium and Discount in a Security Market

Securities are generally issued in denominations of 5, 10 or 100. This is known as the
Face Value or Par Value of the security as discussed earlier. When a security is sold
above its face value, it is said to be issued at a Premium and if it is sold at less than its
face value, then it is said
to be issued at a Discount.
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Why do companies need to issue shares to the public?
Most companies are usually started privately by their promoter(s). However, the
promoters capital and the borrowings from banks and financial institutions may not
be sufficient for setting up or running the business over a long term. So companies
invite the public to contribute towards the equity and issue shares to individual
investors. The way to invite share capital from the public is through a Public Issue.
Simply stated, a public issue is an offer to the public to subscribe to the share capital
of a company. Once this is done, the company allots shares to the applicants as per the
prescribed rules and regulations laid down by SEBI.
The different kinds of issues
Primarily, issues can be classified as a Public, Rights or Preferential issues (also

known as private placements). While public and rights issues involve a detailed
procedure, private placements or preferential issues are relatively simpler. The
classification of issues is illustrated below:
Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue
of securities or an offer for sale of its existing securities or both for the first time to
the public. This paves way for listing and trading of the issuers securities.
A follow on public offering (Further Issue) is when an already listed company

makes either a fresh issue of securities to the public or an offer for sale to the public,
through an offer document.
Rights Issue is when a listed company which proposes to issue fresh securities to its
existing shareholders as on a record date. The rights are normally offered in a
particular ratio to the number of securities held prior to the issue. This route is best
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suited for companies who would like to raise capital without diluting stake of its
existing shareholders.
A Preferential issue is an issue of shares or of convertible securities by listed

companies to a select group of persons under Section 81 of the Companies Act, 1956
which is neither a rights issue nor a public issue. This is a faster way for a company to
raise equity capital. The issuer company has to comply with the Companies Act and
the requirements contained
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SECONDARY MARKET
Introduction to Secondary market

Secondary market refers to a market where securities are traded after being initially
offered to the public in the primary market and/or listed on the Stock Exchange.
Majority of the trading is done in the secondary market. Secondary market comprises
of equity markets and the debt markets.
Role of the Secondary Market

For the general investor, the secondary market provides an efficient platform for
trading of his securities. For the management of the company, Secondary equity
markets serve as a monitoring and control conduitby facilitating value-enhancing
control activities, enabling implementation of incentive-based management contracts,
and aggregating information (via price discovery) that guides management decisions.
Market Capitalization mean

The market value of a quoted company, which is calculated by multiplying its current
share price (market price) by the number of shares in issue is called as market
capitalization. E.g. Company A has 120 million shares in issue. The current market
price is Rs. 100. The market capitalization of company A is Rs. 12000 million.
Products and Participants
Products
Financial markets facilitate reallocation of savings from savers to entrepreneurs.
Savings are linked to investments by a variety of intermediaries through a range of
complex financial products called securities. Under the Securities Contracts
(Regulation) Act [SC(R)A], 1956, securities include (i) shares, bonds, scrips, stocks
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or other marketable securities of like nature in or of any incorporate company or body

corporate, (ii) government securities, (iii) derivatives of securities, (iv) units of
collective investment scheme, (v) interest and rights in securities, and security receipt
or any other instruments so declared by the central government. Broadly, securities
can be of three types - equities, debt securities and derivatives.
Participants
The securities market has essentially three categories of participants (i) the investors,
(ii) the issuers, (iii) the intermediaries (Figure 1.1). The Securities and Exchange
Board of India (SEBI), Reserve Bank of India (RBI), Ministry of Corporate Affairs
(MCA) and the Department of Economic Affairs (DEA) of the Ministry of Finance
regulate these participants.
Market Segments and their Products

The Exchange (NSE) provides trading in four different segments - Wholesale Debt
Market, Capital Market, Futures and Options and Currency Derivatives Segment as
depicted in the figure 1.2 below.
(i) Wholesale Debt Market (WDM) Segment: This segment at NSE commenced
its operations in June 1994. It provides the trading platform for wide range of debt
securities which includes State and Central Government securities, T-Bills, PSU
Bonds, Corporate debentures, Commercial Papers, Certificate of Deposits etc.
(ii) Capital Market (CM) Segment: This segment at NSE commenced its operations
in November 1994. It offers a fully automated screen based trading system, known as
the National Exchange for Automated Trading (NEAT) system. Various types of
securities e.g. equity shares, warrants, debentures etc. are traded on this system.
(iii)Futures & Options (F&O) Segment: This segment provides trading in

derivatives instruments like index futures, index options, stock options, and stock
futures, and commenced its operations at NSE in June 2000.
(iv)Currency Derivatives Segment (CDS) Segment: This segment at NSE

commenced its operations on August 29, 2008, with the launch of currency futures
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trading in US Dollar-Indian Rupee (USD-INR). Trading in other currency pairs like

Euro-INR, Pound Sterling-INR and Japanese Yen-INR was further made available for
trading in February 2010. Interest rate futures was another product made available
for trading on this segment with effect from August 31, 2009.
Equity Investment
why should one invest in equities in particular?

When a person buy a share of a company you become a shareholder in that company.
Shares are also known. Equities have the potential to increase in value over time.
Research studies have proved that the equity returns have outperformed the returns of
most other forms of investments in the long term. Investors buy equity shares or
equity based mutual funds because: -
- Equities are considered the most rewarding, when compared to other investment
options if held over a long duration.
- Research studies have proved that investments in some shares with a longer tenure
of investment have yielded far superior returns than any other investment.
The average annual return of the stock market over the period of last fifteen years, if
one takes the Nifty index, as the benchmark to compute the returns, has been around
16%.
However, this does not mean all equity investments would guarantee similar high
returns. Equities are high-risk investments. Though higher the risk, higher the
potential returns, high risk also indicates that the investor stands to lose some or all
his investment amount if prices move unfavorably. One need to study equity markets
and stocks in which investments are being made carefully, before investing.
Return on Equities in India
If we take the Nifty index returns for the past fifteen years, Indian stock market has
returned about 16% to investors on an average in terms of increase in share prices or
capital. Besides that on average stocks have paid 1.5% dividend annually. Dividend is
a percentage of the face value of a share that a company returns to its shareholders
from its annual profits. Compared to most other forms of investments, investing in
equity shares offers the highest rate of return, if invested over a longer duration.
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Factors that influence the price of a stock
Broadly there are two factors: (1) stock specific and (2) market specific. The stock-
specific factor is related to peoples expectations about the company, its future
earnings capacity, financial health and management, level of technology and
marketing skills.
The market specific factor is influenced by the investors sentiment towards the stock
market as a whole. This factor depends on the environment rather than the
performance of any particular company. Events favorable to an economy, political or
regulatory environment like high economic growth, friendly budget, stable
government etc. can fuel euphoria in the investors, resulting in a boom in the market.
On the other hand, unfavorable events like war, economic crisis, communal riots,
minority government etc. depress the market irrespective of certain companies
performing well. However, the effect of market-specific factor is generally short-term.
Despite ups and downs, price of a stock in the long run gets stabilized based on the
stock- specific factors. Therefore, a prudent advice to all investors is to analyze and
invest and not speculate in shares.
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Fundamental analysis
Fundamental analysis is the process of looking at a business at the basic or

fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock.Many
investors use fundamental analysis alone or in combination with other tools to
evaluate stocks for investment purposes. The goal is to determine the current worth
and, more importantly, how the market values the stock.
Fundamental Analysis Tools
These are the most popular tools of fundamental analysis. They focus on earnings,
growth, and value in the market. They can be studied with ratios.
Earnings per Share EPS
Price to Earnings Ratio P/E
Projected Earning Growth PEG
Price to Sales P/S
Price to Book P/B
Dividend Payout Ratio
Dividend Yield
Book Value
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Return on Equity
Earnings per Share EPS
It makes more sense to look at earnings per share (EPS) for use as a comparison tool.
You calculate earnings per share by taking the net earnings and divide by the
outstanding shares.
EPS = Net Earnings / Outstanding Shares
The EPS is helpful in comparing one company to another, assuming they are in the
same industry, but it doesnt tell you whether its a good stock to buy or what the
market thinks of it. For that information, we need to look at some ratios. Before we
move on, you should note that there are three types of EPS numbers:
Trailing EPS last years numbers and the only actual EPS
Current EPS this years numbers, which are still projections
Forward EPS future numbers, which are obviously projections
Price to Earnings Ratio P/E

The P/E is one of those numbers that investors throw around with great authority as if
it told the whole story.The P/E looks at the relationship between the stock price and
the companys earnings. The P/E is the most popular metric of stock analysis,
although it is far from the only one you should consider.
You calculate the P/E by taking the share price and dividing it by the companys EPS.
P/E = Stock Price / EPS
The P/E gives you an idea of what the market is willing to pay for the companys
earnings. The higher the P/E the more the market is willing to pay for the companys
earnings. Some investors read a high P/E as an overpriced stock and that may be the
case, however it can also indicate the market has high hopes for this stocks future
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and has bid up the price.The P/E is the most popular way to compare the relative
value of stocks based on earnings because you calculate it by taking the current price
of the stock and divide it by the Earnings Per Share (EPS). This tells you whether a
stocks price is high or low relative to its earnings.
Projected Earning Growth PEG
Investors may consider a company with a high P/E overpriced and they may be
correct. A high P/E may be a signal that traders have pushed a stocks price beyond
the point where any reasonable near term growth is probable.However, a high P/E
may also be a strong vote of confidence that the company still has strong growth
prospects in the future, which should mean an even higher stock price.
Because the market is usually more concerned about the future than the present, it is
always looking for some way to project out. Another ratio you can use will help you
look at future earnings growth is called the PEG ratio. The PEG factors in projected
earnings growth rates to the P/E for another number to remember.
You calculate the PEG by taking the P/E and dividing it by the projected growth in
earnings.
PEG = P/E / (projected growth in earnings)
For example, a stock with a P/E of 30 and projected earning growth next year of 15%
would have a PEG of 2 (30 / 15 = 2).
What does the 2 mean? Like all ratios, it simply shows you a relationship. In this
case, the lower the number the less you pay for each unit of future earnings growth.
So even a stock with a high P/E, but high projected earning growth may be a good
value.
Price to Sales P/S
We have a number of tools available to us when it comes to evaluating companies

with earnings. We can add the two others on dividends and the one on return on
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equity to the list as specific to companies that are or have made money in the past.
Does that mean companies that dont have any earnings are bad investments? Not
necessarily, but you should approach companies with no history of actually making
money with caution.
The Internet boom of the late 1990s was a classic example of hundreds of companies
coming to the market with no history of earning some of them didnt even have
products yet. Fortunately, thats behind us.However, we still have the problem of
needing some measure of young companies with no earnings, yet worthy of
consideration. After all, Microsoft had no earnings at one point in its corporate life.
One ratio we can use is Price to Sales or P/S ratio. This metric looks at the current
stock price relative to the total sales per share. You calculate the P/S by dividing the
market capof the stock by the total revenues of the company.
We can also calculate the P/S by dividing the current stock price by the sales per
share.
P/S = Market Cap / Revenues
or
P/S = Stock Price / Sales Price Per Share
When dealing with a young company, there are many questions to answer and the P/S
supplies just one answer.Investors looking for hot stocks arent the only ones trolling
the markets. A quiet group of folks called value investors go about their business
looking for companies that the market has passed by.
Some of these investors become quite wealthy finding sleepers, holding on to them
for the long term as the companies go about their business without much attention
from the market, until one day they pop up on the screen, and some analyst
discovers them and bids up the stock. Meanwhile, the value investor pockets a hefty
profit.
Price to Book P/B

30
Value investors look for some other indicators besides earnings growth and so on.
One of the metrics they look for is the Price to Book ratio or P/B. This measurement
looks at the value the market places on the book value of the company.
You calculate the P/B by taking the current price per share and dividing by the book
value per share.
P/B = Share Price / Book Value Per Share
Like the P/E, the lower the P/B, the better the value. Value investors would use a low
P/B is stock screens, for instance, to identify potential candidates.
Dividend Payout Ratio
The Dividend Payout Ratio (DPR) is one of those numbers. It almost seems like a
measurement invented because it looked like it was important, but nobody can really
agree on why.
The DPR (it usually doesnt even warrant a capitalized abbreviation) measures what a
companys pays out to investors in the form of dividends.
You calculate the DPR by dividing the annual dividends per share by the Earnings Per
Share.
DPR = Dividends Per Share / EPS
For example, if a company paid out $1 per share in annual dividends and had $3 in
EPS, the DPR would be 33%. ($1 / $3 = 33%)
The real question is whether 33% is good or bad and that is subject to interpretation.
Growing companies will typically retain more profits to fund growth and pay lower or
no dividends.
Companies that pay higher dividends may be in mature industries where there is little
room for growth and paying higher dividends is the best use of profits (utilities used
to fall into this group, although in recent years many of them have been diversifying)
Dividend Yield
if we are value investor or looking for dividend income then there are a couple of
31
measurements that are specific for us. For dividend investors, one of the telling
metrics is Dividend Yield.
This measurement tells you what percentage return a company pays out to
shareholders in the form of dividends. Older, well-established companies tend to
payout a higher percentage then do younger companies and their dividend history can
be more consistent.
You calculate the Dividend Yield by taking the annual dividend per share and divide
by the stocks price.
Dividend Yield = annual dividend per share / stock's price per share
For example, if a companys annual dividend is $1.50 and the stock trades at $25, the
Dividend Yield is 6%. ($1.50 / $25 = 0.06)
Book Value
Another way to determine a companys value is to go to the balance statement and

look at the Book Value. The Book Value is simply the companys assets minus its
liabilities.
Book Value = Assets - Liabilities
In other words, if you wanted to close the doors, how much would be left after you
settled all the outstanding obligations and sold off all the assets.A company that is a
viable growing business will always be worth more than its book value for its ability
to generate earnings and growth.
Book value appeals more to value investors who look at the relationship to the stock's
price by using the Price to Book ratio.
To compare companies, you should convert to book value per share, which is simply
the book value divided by outstanding shares.
Return on Equity
Return on Equity (ROE) is one measure of how efficiently a company uses its assets
32
to produce earnings. You calculate ROE by dividing Net Income by Book Value. A
healthy company may produce an ROE in the 13% to 15% range. Like all metrics,
compare companies in the same industry to get a better picture.
While ROE is a useful measure, it does have some flaws that can give you a false
picture, so never rely on it alone. For example, if a company carries a large debt and
raises funds through borrowing rather than issuing stock it will reduce its book value.
A lower book value means youre dividing by a smaller number so the ROE is
artificially higher. There are other situations such as taking write-downs, stock buy
backs, or any other accounting slight of hand that reduces book value, which will
produce a higher ROE without improving profits.
It may also be more meaningful to look at the ROE over a period of the past five
years, rather than one year to average out any abnormal numbers.
Given that you must look at the total picture, ROE is a useful tool in identifying
companies with a competitive advantage. All other things roughly equal, the company
that can consistently squeeze out more profits with their assets, will be a better
investment in the long run.
33
Technical analysis
Technical analysis takes a completely different approach; it doesn't care one bit about
the "value" of a company or a commodity. Technicians (sometimes called chartist) are
only interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical analysis really just studies
supply and Demand in a market in an attempt to determine what direction, or trend,
will continue in the future. In other words, technical analysis attempts to understand
the emotions in the market by studying the market itself, as opposed to its
components. If you understand the benefits and limitations of technical analysis, it
can give you a new set of tools or skills that will enable you to be a better trader or
investor
The field of technical analysis is based on three assumptions:

1. The market discounts everything.
2. Price moves in trends.
3. History tends to repeat itself.
The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement,
ignoring the fundamental factors of the company. However, technical analysis
34
assumes that, at any given time, a stock's price reflects everything that has or could
affect the company - including fundamental factors. Technical analysts believe that
the company's fundamentals, along with broader economic factors and market
psychology, are all priced into the stock, removing the need to actually consider
these factors separately. This only leaves the analysis of price movement, which
technical theory views as a product of the supply and demand for a particular stock
in the market.
Price Moves in Trends

In technical analysis, price movements are believed to follow trends. This means that
after a trend has been established, the future price movement is more likely to be in
the same direction as the trend than to be against it. Most technical trading strategies
are based on this assumption.
History Tends To Repeat Itself Another important idea in technical analysis is that
history tends to repeat itself, mainly in terms of price movement. The repetitive nature
of price movements is attributed to market psychology; in other words, market
participants tend to provide a consistent reaction to similar market stimuli over time.
Technical analysis uses chart patterns to analyze market movements and understand
trends. Although many of these charts have been used for more than 100 years, they
are still believed to be relevant because they illustrate patterns in price movements
that often repeat themselves.
Fundamental vs. Technical Analysis

Technical analysis and fundamental analysis are the two main schools of thought in
the financial markets. As we've mentioned, technical analysis looks at the price
movement of a security and uses this data to predict its future price movements.
Fundamental analysis, on the other hand, looks at economic factors, known as
fundamentals. Let's get into the details of how these two approaches differ, the
criticisms against technical analysis and how technical and fundamental analysis can
be used together to analyze securities.
35
The Differences Charts vs. Financial Statements At the most basic level, a technical
analyst approaches a security from the charts, while a fundamental analyst starts
with the financial statements.
RESEARCH METHOLOGY
Research is often described as an active, diligent and systematic process of inquiry

aimed at discovering, interpreting and revising facts. This intellectual investigation
produces a greater understanding of events, behavior or theories and makes practical
applications through laws and theories. The term research is also used to describe a
collection of information about a particular subject, and is usually associated with
science and scientific method.
BASIC RESEARCH:
Basic research is also called as fundamental or pure research. Its primary objective is
the advancement of knowledge and the theoretical understanding of the relations
among the variables. It is exploratory and often driven by researchers curiosity or
interest. It is conducted without any practical end in mind. Basic research often lays
down the foundation for further applied research.
APPLIED RESEARCH:
Applied research is done to solve specific, practical questions. Its primary objective is
not to gain knowledge for its own sake. It is usually descriptive in nature. It is almost
always done on the basis of basic research.
As far as equity research is concerned there are two types of research methods that are
followed:
Fundamental analysis
Technical analysis
Financial statement analysis is the biggest part of Fundamental analysis also known as
quantitative analysis, it involves looking at historical performance data to estimate the
future performance of stocks whereas Technical analysis does not care one bit about
the value of the company, it is only interested in the price movements of the company
36
s share in the market.

[15]This project deals with the fundamental analysis aspect of the equity research.
The researcher in this project has tried to look into the details of the financial
statements of the companies, the environment surrounding the telecom sector, the
latest developments in this regard, the management discussions on the part of every
company and the government policies concerned with the telecom sector.
DATA COLLECTION:
Primary data for a project is the first hand information regarding the project
being studied. In this regard the primary data for this project would be getting the
necessary information from the company management by an interview, telephonic
conversation or direct mail.
Secondary data for a project would be the collection of information that has a
bearing on the outcome of the project from secondary sources like news, press
releases, internet etc.
The data collected for this project was from a secondary source. The data was
complied with the help of sources like News articles, Internet, Capitaline software. In
this research, primary data could not be gathered as the company officials could not
be contacted for a one to one interview or a telephonic interview.
Research objective: to do analysis IT companies for the purpose of investment in

equity
Type of research design: conclusive
Data collection method:
Primary data: unavailable
Secondary data: the company site and various financial news sites
Research design: it is based on historical performance data.
37
ANALYSIS
Macroeconomic analysis
Analysis of IT industry: PEST analysis
IT INDUSTRY IN INDIA
The Indian information technology sector has been instrumental in driving the
nation's economy onto the rapid growth curve. According to the Nasscom-Deloitte
study, the IT/ITES industry's contribution to the country's GDP has increased to a
share of 5.2 per cent in 2007, as against 1.2 per cent in 1998. Further, the IT and BPO
industries are poised to clock revenues worth US$ 64 billion by the end of fiscal year
2008, registering a growth of 33 per cent with exports expected to cross US$ 40
billion and the domestic market estimated to clock over US$ 23 billion, according to a
study. Simultaneously, the Indian IT services market is estimated to remain the fastest
growing in the Asia Pacific region with a CAGR of 18.6 per cent, as per a study by
Springboard Research. India's IT growth in the world is primarily dominated by IT
software and services such as Custom Application Development and Maintenance
(CADM), System Integration, IT Consulting, Application Management, Infrastructure
Management Services, Software testing, Service-oriented architecture and Web
services. A report by the Electronics and Software Export Promotion Council (ESC)
estimates software exports to register a 33 per cent growth in the current financial
year with export figures during FY 2008 expected to reach US$ 45 billion. The
country's IT exports have, in fact, come quite far, starting from a few million dollars
in the early 1990s. The Government expects the exports turnover to touch US$ 80
billion by 2011, growing at an annual rate of 30 per cent per annum.
POLITICAL FACTORS:-
38
This is a political factor, which affects a business, which can be government rules and
regulation toward that particular business environment. For IT industry the Indian
political structure is stable, but there are fears of hung parliament due to a lack of
clear majority in parliament creating fear of wrong investing in the minds of investor
thereby reducing capital. U.S government has declared that U.S firm that outsource IT
works outside the U.S will not get tax benefits, this has caused reduction in U.S BPO
contract from the U.S in the last fiscal year thereby reducing revenue from the U.S.
Indian government has decided to contract IT job to Indian IT companies creating
more opportunities for the company and the industry at large. In software
development different countries are configuration rules and regulations are considered
since client demand differs because of different system requirement. NASSCOM and
DELIOTTE study (impacting economy and society 2007/2008), states that Indian
government has strengthened the IT act, 2000 to provide a sound legal environment
for companies to operate related to security of data in transmission and storage etc
this has served as a positive factor. Infosys has to put Indian relationship with
different countries of business into consideration before investing. Other factors to be
considered are customer protection law, competitive regulations, and terrorist attacks.
POLITICAL STABILITY: _
India suffered political instability for a few years due to the failure of any party to win
an absolute majority in Parliament. However, political stability has returned since the
previous general elections in 1999. However, political instability did not change
India's economic course though it delayed certain decisions relating to the economy.
The political divide in India is not one of policy, but essentially of personalities.
Economic liberalization (which is what foreign investors are interested in) has been
accepted as a necessity by all parties including the Communist Party of India
(Marxist).
Thus, political instability in India, in practical terms, posed no risk to foreign direct
investors because any successive government has reversed no policy framed by a past
government so far. You can find a comparison in Italy, which has had some 45
governments in 50 years yet, overall economic policy remains unchanged. Even if
political instability is to return in the future, chances of a reversal in economic policy
are next to nil.
As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for
39
Kashmir in the north and parts of the northeast, terrorist activity is either non- existent
or too weak to be of any significance. It would take an extreme stretching of the
imagination to visualize a Bangladesh-type state-disrupting revolution in India or a
Kuwait-type annexation of India by a foreign power.
Hence, political risk in India is practically non-existent.
Likewise the IT sector does not have any influence of political stability on
industry. And if the govt. changes there is little effect on the industry of that
political step.
ECONOMICAL FACTORS
These include factors affecting IT industry ranging from rising working pay, global
recession, competition, contract availability and fee. Domestic IT spending grew by
20% and reached $20 billion in 2009. Currency fluctuations caused by the devaluation
of the dollar has affected the industry during the last global recession. Real estate
prices decline resulted in rental expenditure forcing customer to leave luxuries goods
such as electronic and computers that need software to work. Recession cause low
attribute rate due to job layouts and job cuts. India economic attraction has helped in
convincing investors due to low cost advantage. With Indias global IT spending yet
to decline due to entry of new IS companies and the cause of the recession. With
clients industry faced with reduction of work force due to job layoffs and unsuitable
balance sheet most companies have decided not to make much expenditure in
purchase, but make optimum use of existing facilities to make
profits. Most debtors with financial crisis have been granted more time to pay up
causing large debt deficit. With the decline of banking and financial sectors, the
revenue from there is expected to decline, hurting the bottom line of IT majors
DOMESTIC IT SPENDING:-
India's domestic IT market will grow around 14% this year, showing a minor decline
as compared to last year's growth of 16-18%. Hence, it is expected that the country
will see a minor decline in IT budget coming from its domestic market. "Compared to
other countries, India is in a better position. Its domestic market is expected to grow
around 14% this year. We also expect that IT spend in India will see a minor decline
as compared to last year. There could be some 2-3% decline as compared to last year's
budget," commented Arup Roy, senior research analyst at Gartner.
40
GLOBAL IT SPENDING:-
Indian enterprises spending on information communications and technology (ICT) in
2005 are expected to grow at more than twice the rate in the Asia Pacific region.
Enterprise spending in the Asia Pacific (APAC) on hardware next year will rise 6.3
per cent to $36.9bn, with software increasing 12.4 per cent to $5.6bn while telecom
will grow 7.5 per cent to $132.5bn and IT services will gain 8.4 per cent to $33.6bn.
In India, of the $22.88bn spend in 2005 on enterprise ICT, $3.34bn is the projected
spend on hardware, an increase of 21.1 per cent over 2004; $0.52bn (16.4 per cent
increase) on software; $16.7bn (15.5 per cent increase) on telecom and $2.32bn (18.3
per cent increase) on IT services. India will remain the highest growth market for
telecommunications with around 35 million new subscribers in 2005, an 18 per cent
increase from 2004, with the growth occurring in selected technologies mainly
mobile. This accounts for almost one fourth of the new subscribers forecasted in Asia
Pacific. Consumer segment is rapidly gaining importance, driven by adoption of
mobile services. This is reflected in their increased contribution towards spending for
telecommunication services, from 35 per cent in 2002 to 43 per cent in 2005. By 2008
the consumer segment will account for more than half of telecommunications
spending, the report said. Gartner also said that open source and offshore IT services
will continue to grow, while it warned global IT vendors to take emerging
competition from China seriously with at least three Chinese IT companies becoming
significant global competitors by 2010. The growth in offshore BPO services
outpaces the growth in global sourcing of IT services. Offshore component of global
BPO services spend is expected to grow from $3 billion (2.4 per cent of total markets
spend of $124 billion in 2004) to $24 billion (15 per cent of the total markets spend of
$161 billion in 2007).
REAL STATES PRICES: -

Decline in real estate prices has resulted reducing the rental expenditure thus the
industry will grow if the real estate price goes down.
ATTRITION:-\
Almost every sector in India is facing high rates of attrition these days. A recent
study revealed that employees leave either because of compensation reasons or due to
better growth opportunities. According to NASSCOM, Indian IT-ITES industry
41
recorded US$ 39.6 billion in revenues in 2006-07. The revenue of US$ 49-50 billion
has been projected in 2007-08 at a growth rate of 24-27 per cent. The IT industry's
contribution to GDP was 4.8 per cent in 2005-06
Though the IT/ITES sector is booming, it is constantly facing high attrition rates of
25% - 30%. Even the big brands are also facing the same problem. Below are the
details of attrition rates of various players
in IT sector. According to the survey conducted by BES and Data Quest, Sierra
Atlantic recorded highest attrition rate (29%) followed by Kanbay with 25% and
Accel Frontline with 20 per cent.
ECONOMIC ATTRACTION:-
There is a lot of economic attraction towards IT sector due to low cost advantage
and other factors. India, with its low cost advantage and emergence of several
private players, represents the fastest growing market. Further the geographical
location of India serves it the advantage of being exactly halfway round the world
from the US west coast, which is another reason why India is preferred destination of
many big brands. Indias development and contribution in worlds information
technology sector is of highest reputation. Cities like Bangalore have become the
favorite(most preferred) destinations of all the big banners like HSBC, Dell,
Microsoft, GE, Hewlett Packard, and several Indian multi national firms like Infosys
Technologies, Wipro, and Micro land who have set up their offices in the city. It is
because the city offers good infrastructure, with large floor space and great telecom
facilities. This can be judged on the basis of the high growth statistics of India and the
changing outlook of the companies towards India.
It is because of this growth many popular brands that have not yet build up there rigid
offices in the country are making it fast to have a destination in India too. For
example, Sun Microsystems, a global IT major, announced in Bangalore to double the
present workforce of the company's Sun India Engineering Center (IEC) from the
present 1000 to 2000 in the next two years time. IEC, which is the largest R&D center
for Sun outside the US, would also focus on developing products in India to suit the
needs of the Indian market, which would be benchmarked globally.
Also, the presence of a large number of Indians, especially engineers, in the US gave
India an easy entry into the US software market.
42
SOCIAL FACTORS
These are social factors affecting IT industry, which ranges from employee right,
language barriers, race nationality of company or other issues. English language being
widely spoken in India has help in fostering the industrys relationship and interaction
in India and on the global stage. India is one of the few countries to have an
increasing share of working population; since there is great availability of both skilled
and unskilled labor force. Great number of institute and universities offer IT
Course creating room for availability of IT professional at lower cost since there is
job competition. India has to produces great numbers of IT professional each year to
meet its demand. India continue to produce IT professionals each year, this has help
industry for IT professionals inwards. Industries have to consider the type of services
the software is meant for, age difference of users, life style of the different countries
of supply. It should be noted that there will always be difference in client behaviours
which is supported by the fact that different customers have different taste.
SOCIAL ISSUES;-
Should Industry be concern with the issue of global warming? Yes it is affected by
many government laws regarding it like in china, where company with great amount
of carbon emission are charge great amount of tax. Likewise being a major player in
the global IT market Infosys has introduces measure to help in the reduction of carbon
emission by trying to reduce its water consumption, electricity utilization, carbon
emission and partnering with other companies in troubleshooting this global dilemma
EDUCATION:-
There are large number of universities and institutes in India offering IT education.
And there are large numbers of students which ever year passed these courses and
join the IT industry. The Indian labor is not only cheap but is technically skilled too to
the world-class level. It is due to the Indian Education System that includes in its
course curriculum the practical knowledge of the latest technology that is developed
in world along with the fluency in English Language that imparts compatibility in an
Indian technician to communicate and work throughout the world.
CAREER PROSPECTS
In the year 2006-07, the industry hired approximately 3, 80,000 people. Out of these,
43
the ITeS sector hired 2, 00,000 people and the rest were taken by IT sector. The
recruitment trends of some IT giants are given below: TCS- 35,000 Infosys- 30,000
Wipro-28,000 Satyam-20,000 Some of the areas of specialization in the IT Industry
are-
Designing Research and Development in Peripheral Integration Product Quality
Control and Reliability Testing Computer Manufacturing Maintenance Service
System Developing /Programming /Software Engineering Networking Application
Programming EDP/ E- Commerce Enterprise Resource Planning (ERP) Database
Warehousing and Management
Operating jobs, Computer operators, Data Entry WORKING AGE POPULATION:-
Working age population also affects the industry a lot because every person has
different value, lifestyle, attitude, and also the satisfaction level.
TECHNOLOGICAL FACTORS;-
TELEPHONY
Cellular mobile telephony tariffs in India are the lowest in the world. A
comparison of Indian cellular tariffs vis--vis the tariffs prevailing in comparative
emerging economies in South America & Asia-Pacific region, clearly brings out the
affordability of Indian cellular mobile telephone services.
NEW IT TECHNOLOGY:-
With the evolution of SOA and semantic web services, enterprise solution heeds to
the limitations of conventional enterprise systems by providing data convergence and
concept reutilization with intelligence. Web2.O represents the next transition in the
evolution of web applications; they promise to restore the richness, interactivity and
usability lacking in many web applications.
CAD:-
Computer-aided design (CAD) is the use of a wide range of computer-based tools that
assist engineers, architects and other design professionals in their design activities. It
is the main geometry authoring tool within the Product Lifecycle Management
process and involves both software and sometimes special-purpose hardware. Current
packages range from 2D vector based drafting systems to 3D solid and surface
modellers.
LEGAL ASPECTS AND POLICIES
This speedy growth of IT Sector is undoubtedly due to the efforts of Indian
44
government and the other developments that took in the other parts of the globe.
IT Act 2000:
India became the 12th nation in the world to adopt a cyber law during 2000.
From the perspective of e-commerce in India, the IT Act 2000 and its provisions
Contain many positive aspects. Firstly, the implications of these provisions for the e-
businesses would be that email would now be a valid and legal form of
communication in our country that can be duly produced and approved in a court of
law.
Companies shall now be able to carry out electronic commerce using the legal
infrastructure provided by the Act.
Digital signatures have been given legal validity and sanction in the Act.
The Act throws open the doors for the entry of corporate companies in the business
of being Certifying Authorities for issuing Digital Signatures Certificates.
The Act now allows Government to issue notification on the web thus heralding e-
governance.
The Act enables the companies to file any form, application or any other document
with any office, authority, body or agency owned or controlled by the appropriate
Government in electronic form by means of such electronic form as may be
prescribed by the appropriate Government.
The IT Act also addresses the important issues of security, which are so critical to
the success of electronic transactions. The Act has given a legal definition to the
concept of secure digital signatures that would be required to have been passed
through a system of a security procedure, as stipulated by the Government at a later
date.
Under the IT Act, 2000, it shall now be possible for corporate to have a statutory
remedy in case if anyone breaks into their computer systems or network and causes
damages or copies data. The remedy provided by the Act is in the form of monetary
damages, not exceeding Rs. 1 crore.
Indian Copyright Act:

The copyright of computer software is protected under the provisions of Indian
Copyright Act 1957. Major changes to Indian Copyright Law were introduced in 1994
and came into effect from 10 May 1995. Copyright Act clearly explained:
The rights of a copyright holder
45
Position on rentals of software

The rights of the user to make backup copies
Most importantly the amendments imposed heavy punishment and fines for
infringement of copyright of software.
Income Tax
Deduction under sections 10A/ 10B of Income tax Act, 1961 (IT Act) in respect of
profits derived from export of computer software. Following undertakings are eligible
to claim deduction in respect of profits derived from export of computer software
under the provisions of sections 10A/ 10B of the IT Act:
Existing units which commenced operations prior to April 1, 2000 and claimed
deduction under the provisions of erstwhile sections 10A/ 10B, can continue to claim
such deduction under the provisions of newly substituted sections 10A/ 10B for the
unexpired period of ten consecutive assessment years. Deduction would continue to
be available in case of corporate re-organizations by way of amalgamation or
demerger.
Depreciation on computers and computer software at 60 percent As per the provisions
of the IT Act, annual depreciation on computers and computer software can be
claimed at the rate of 60 percent of written down value at the beginning of the
relevant financial year for income tax purposes. Therefore, under the written down
value method, 84 percent of cost of computers and software can be depreciated in first
2 years.
46
THE GROWTH STORY
India is a preferred destination for companies looking to offshore there IT and back-
office functions. It also retains its low-cost advantage and is a financially attractive
location when viewed in combination with the business environment it offers and the
availability of skilled people.
India's top technology firms like TCS, Infosys, Wipro and HCL are readying plans to
gain a bigger share of their largest market, US, by aggressively chasing contracts
being served by multinational rivals. Analysts expect the top IT firms to grow
between 23-27 per cent in the FY2012 on the back of more number of discretionary
projects, improved pricing, and robust business volumes.
INVESTMENTS
Between April 2000 and February 2011, the computer software and hardware sector
received cumulative foreign direct investment (FDI) of US$ 10,705 million,
according to the Department of Industrial Policy and Promotion. The total
investments of EMC Corporation, a leading global player of information
infrastructure solutions in India, will touch US$ 2 billion (over US$ 2.01 billion) by
2014.
Russian IT security software provider, Kaspersky Lab, will be investing US$ 2

million in its India operations at Hyderabad during2011.
On the back of 40 per cent revenue growth, Cognizant will invest more than US$ 500
million till 2014 to expand its campuses to add over 8 million square feet to house
over 55,000 employees.
Chennai-based Polaris Software Lab has announced that it is buying an 85 per cent
47
stake in San Francisco-based digital identity authentication services provider Iden-

Trust for US$ 20 million. The acquisition will mark Polaris' entry into the cloud
computing space for financial technology solutions, the company said in a filing to
the Bombay Stock Exchange.
MARKET TRENDS:
The Information Technology (IT) sector in India is amongst the fastest growing in the
country and the world. It is expected that by the year 2008, IT software and services
industry will account for 7 per cent of Indias GDP and 35 per cent of total exports.
The Indian domestic IT market grew by 29% in the financial year 2007-08 to report
revenues of Rs 288, 810 crore.
The revenue of the information technology sector has grown from 1.2 per cent of the
gross domestic product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2008.
The net value added by this sector, to the economy, is estimated to be 3.3 to 3.9 per
cent for FY 2008.
Contribution of it sector to the economy
2007 2008 2009 2010 2011 2012 CAGR

07-12
Domestic 90,014 110,177 133,100 158,053 182,991 209,698 18.4%
IT/ ITeS
Market
IT/ ITeS 156,594 186,142 218,107 250,087 284,666 320,278 15.4%
Exports
Revenue
India IT/ 246,609 296,319 351,207 408,139 467,657 529,976 16.5%
ITeS
Industry
Size
FOREIGN DIRECT INVESTMENT (FDI) POLICY:

48
100% FDI is permitted in the Electronic hardware sector and the Software
development sector under the automatic approval route.
Industrial Licensing has been virtually abolished in the Electronics and Information
Technology sector except for manufacturing electronic aerospace and defense
equipment.
IT / ITES EXPORT TRENDS:
The Software exports are projected to grow by $9 billion to $50 billion in fiscal 2008-
09 from $41 billion in fiscal 2007-08 and $32 billion in fiscal 2006-07.
Exports contribute nearly 65% of the Indian IT sector revenue.
The United States and Britain are the biggest markets for India's booming software
exports, accounting for about 80 percent of the country's $12-billion- exports per year.
Key Players:
The following are Indias Tier 1 companies in the IT sector:
Tata Consultancy Services Ltd.
Wipro Technologies Ltd.
Infosys Technologies Ltd.
The other key players include the following:

IBM
HCL
Patni
Polaris
Cisco
KPIT Cummins
Kanbay
i-Flex Solutions
49
In order to find out which company among the selected are good choice of investment
we have to perform two type of analysis that is fundamental analysis and technical
analysis.
First we will be performing fundamental analysis on the profit and loss statement of
the company for last four year.
The companies we have chosen are the IT giants of Indian IT industry; they are TCS,
INFOSYS & WIPRO. We will be analyzing this company on their profit and loss
statements and various investors ratios.
50
TCS COMPANY profile

Tata Consultancy Services started in 1968. Mr.F.C Kohli who is presently the Deputy
Chairman was entrusted with the job of steering TCS. The early days marked TCS
responsibility in managing the punch card operations of Tisco. The company, which
was into management consultancy from day one, soon felt the need to provide
solutions to its clients as well. TCS was the first Indian company to make forays into
the US market with clients ranging from IBM, American Express, Sega etc. TCS is
presently the top software services firm in Asia.
During the Y2K buildup, TCS had setup a Y2Kfactory in Chennai as a short-term
strategy. Now, with E-business being the buzzword, the factory is developing
solutions for the dotcom industries. Today, about 90 percent of TCS' revenue comes
from consulting, while the rest from products. TCS has great training facilities. In
addition to training around 5 percent of the revenue is spent upon its R&D centre like
the Tata Research Design and Development Centre at Pune, along with a host of other
centre at Mumbai and Hyderabad.
It benchmarked its quality standing, invested heavily in software engineering
practices and built intellectual property-in terms of patents, code and branded
products. At the same time, it expanded its relationships with technology partners
and organizations, increased linkages with academic institutions and incubated
technologies and ideas of people within TCS and outside. TCS has already patented
12 E-Commerce solution product packages and has filed six more applications for
patent licenses.
Over $25 million were spent on enhancing hardware and software infrastructure. The
company now has 72 offices worldwide. As many as seven centre were assessed at
SEI CMM Level 5 last year(3.4 mistakes in a million opportunities).These include
Chennai, Mumbai, Bangalore, Calcutta, Hyderabad and Lucknow.Several business
51
and R&D relationship with global firms like IBM, General Electric, Unigraphics
Solutions have been made.
The present CEO of the company is Mr.S.Ramadorai. The companies strength is
about 14,000.
52
Balance sheet of TCS

Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 295.72 295.72 197.86 197.86
Equity Share Capital 195.72 195.72 97.86 97.86
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 100.00 100.00 100.00 100.00
Reserves 19,283.77 14,820.90 13,248.39 10,806.95
Revaluation Reserves 0.00 0.00 0.00 0.00
Networth 19,579.49 15,116.62 13,446.25 11,004.81
Secured Loans 35.87 29.25 32.63 9.27
Unsecured Loans 5.25 6.49 7.74 8.98
Total Debt 41.12 35.74 40.37 18.25
Total Liabilities 19,620.61 15,152.36 13,486.62 11,023.06
Mar '11 Mar '10 Mar '09 Mar '08
Application Of Funds
Gross Block 6,030.16 4,871.21 4,359.24 3,240.64
Less: Accum. Depreciation 2,607.98 2,110.69 1,690.16 1,300.11
Net Block 3,422.18 2,760.52 2,669.08 1,940.53
Capital Work in Progress 1,345.37 940.72 685.13 889.74
Investments 5,795.49 7,893.39 5,936.03 4,509.33
Inventories 5.37 6.78 16.95 17.19
Sundry Debtors 4,806.67 3,332.30 3,717.73 3,747.01
Cash and Bank Balance 224.77 212.31 479.93 402.24
Total Current Assets 5,036.81 3,551.39 4,214.61 4,166.44
Loans and Advances 5,063.51 4,101.84 3,910.85 3,104.74
Fixed Deposits 5,379.75 3,183.85 1,125.33 125.28
Total CA, Loans & Advances 15,480.07 10,837.08 9,250.79 7,396.46
Deferred Credit 0.00 0.00 0.00 0.00
Current Liabilities 3,932.39 3,352.74 3,604.18 2,525.56
Provisions 2,490.11 3,926.61 1,450.23 1,187.44
Total CL & Provisions 6,422.50 7,279.35 5,054.41 3,713.00
Net Current Assets 9,057.57 3,557.73 4,196.38 3,683.46
Miscellaneous Expenses 0.00 0.00 0.00 0.00
Total Assets 19,620.61 15,152.36 13,486.62 11,023.06
Contingent Liabilities 3,938.76 3,292.50 2,924.33 2,726.11
Book Value (Rs) 99.53 76.72 136.38 111.43
Profit and loss of TCS Mar '11 Mar '10 Mar '09 Mar '08
Income
Sales Turnover 29,275.41 23,044.84 22,404.00 18,536.55
Excise Duty 0.00 0.39 2.08 2.83
Net Sales 29,275.41 23,044.45 22,401.92 18,533.72
Other Income 486.44 182.10 -456.24 440.45
53
Stock Adjustments -0.87 -1.38 1.73 -0.04

Total Income 29,760.98 23,225.17 21,947.41 18,974.13
Expenditure
Raw Materials 17.75 23.75 53.67 45.81
Power & Fuel Cost 240.00 183.62 164.34 135.57
Employee Cost 10,190.31 7,882.43 7,370.09 6,015.19
Other Manufacturing Expenses 8,135.57 6,446.99 6,947.60 5,687.82
Selling and Admin Expenses 1,097.52 1,268.03 1,218.41 991.43
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00
Total Expenses 20,502.72 16,375.90 16,382.82 13,508.07
Mar '11 Mar '10 Mar '09 Mar '08
Operating Profit 8,771.82 6,667.17 6,020.83 5,025.61
PBDIT 9,258.26 6,849.27 5,564.59 5,466.06
Interest 20.01 9.54 7.44 3.42
PBDT 9,238.25 6,839.73 5,557.15 5,462.64
Depreciation 537.82 469.35 417.46 458.78
Other Written Off 0.00 0.00 0.00 0.00
Profit Before Tax 8,700.43 6,370.38 5,139.69 5,003.86
Extra-ordinary items 0.00 -13.98 -103.11 -37.52
PBT (Post Extra-ord Items) 8,700.43 6,356.40 5,036.58 4,966.34
Tax 1,130.44 737.89 340.37 457.58
Reported Net Profit 7,569.99 5,618.51 4,696.21 4,508.76
Total Value Addition 20,484.97 16,352.15 16,329.15 13,462.26
Preference Dividend 11.00 17.00 7.00 0.08
Equity Dividend 2,740.10 3,914.43 1,370.05 1,370.05
Corporate Dividend Tax 450.82 657.51 234.02 232.85
Per share data (annualised)
Shares in issue (lakhs) 19,572.21 19,572.21 9,786.10 9,786.10
Earning Per Share (Rs) 38.62 28.62 47.92 46.07
Equity Dividend (%) 1,400.00 2,000.00 1,400.00 1,400.00
Book Value (Rs) 99.53 76.72 136.38 111.43
54
Key financial ratios Mar '11 Mar '10 Mar '09 Mar '08
Investment Valuation Ratios
Face Value 1.00 1.00 1.00 1.00
Dividend Per Share 14.00 20.00 14.00 14.00
Operating Profit Per Share (Rs) 44.82 34.06 61.52 51.35
Net Operating Profit Per Share (Rs) 149.58 117.74 228.92 189.39
Free Reserves Per Share (Rs) 97.95 75.24 134.37 110.22
Bonus in Equity Capital 79.65 79.65 59.30 59.30
Profitability Ratios
Operating Profit Margin(%) 29.96 28.93 26.87 27.11
Profit Before Interest And Tax 27.67 26.62 24.75 24.42
55
Margin(%)
Gross Profit Margin(%) 28.12 26.89 25.01 24.64
Cash Profit Margin(%) 27.21 26.44 26.09 25.29
Adjusted Cash Margin(%) 27.21 26.44 26.09 25.29
Net Profit Margin(%) 25.44 24.13 20.74 24.11
Adjusted Net Profit Margin(%) 25.44 24.13 20.74 24.11
Return On Capital Employed(%) 44.38 42.46 43.27 42.92
Return On Net Worth(%) 38.80 37.30 35.13 41.34
Adjusted Return on Net Worth(%) 38.74 37.75 41.06 39.16
Return on Assets Excluding
99.53 76.72 136.38 111.43
Revaluations
Return on Assets Including
99.53 76.72 136.38 111.43
Revaluations
Return on Long Term Funds(%) 44.38 42.46 43.27 42.96
Liquidity And Solvency Ratios
Current Ratio 2.41 1.49 1.83 1.98
Quick Ratio 2.40 1.48 1.83 1.97
Debt Equity Ratio 0.01 0.01 0.01 0.01
Long Term Debt Equity Ratio 0.01 0.01 0.01 0.01
Debt Coverage Ratios
Interest Cover 435.25 674.43 784.41 1,383.58
Total Debt to Owners Fund 0.01 0.01 0.01 0.01
Financial Charges Coverage Ratio 462.13 723.63 840.52 1,517.73
Financial Charges Coverage Ratio Post
406.19 639.14 688.32 1,453.50
Tax
Management Efficiency Ratios
Inventory Turnover Ratio 5,451.66 3,398.94 1,321.77 1,137.21
Debtors Turnover Ratio 7.19 6.54 6.00 5.66
Investments Turnover Ratio 5,451.66 3,398.94 1,321.77 1,137.21
Fixed Assets Turnover Ratio 4.91 4.74 5.15 5.74
Total Assets Turnover Ratio 1.50 1.52 1.66 1.68
Asset Turnover Ratio 4.91 4.74 5.15 5.74
Average Raw Material Holding 92.90 72.97 93.98 98.28

Average Finished Goods Held 0.01 0.04 0.07 0.03
Number of Days In Working Capital 111.38 55.58 67.44 71.55
Profit & Loss Account Ratios
Material Cost Composition 0.06 0.10 0.23 0.24
Imported Composition of Raw
80.35 78.67 79.74 80.43
Materials Consumed
Selling Distribution Cost Composition 0.05 0.03 0.09 0.14
Expenses as Composition of Total Sales 91.08 92.38 93.01 90.51
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit 42.21 81.61 34.20 35.55
Dividend Payout Ratio Cash Profit 39.40 75.30 31.41 32.26
Earning Retention Ratio 57.73 19.37 70.74 62.47
Cash Earning Retention Ratio 60.54 25.53 72.81 66.11
Adjusted Cash Flow Times 0.01 0.01 0.01 0.00
56
Mar '11 Mar '10 Mar '09 Mar '08

Earnings Per Share 38.62 28.62 47.92 46.07
Book Value 99.53 76.72 136.38 111.43
Chart Title
1
2
3
4
the earning per share has decreased due todecrease in the no of share but theere
is increase in the value of share hence the earning is increasing after a dip.
Chart Title
1
2
3
4
This ratio tells about the how much dividend is increased per share. Where we can see
that company did not have increase in dividend for two years then they increased in
57
one year again that felled off in next year because they were retaining that cash for
further implementation in business in order to secure future investments.
Trend analysis
The chart of price to volume of TCS stock shows the growing rate of share due to
growth in the off shore business hence the stock price show appositive trend till April
2011 then due to debt crises of US cause the market price of IT stock to fall due to
withdrawal of money by FIIs and increase in inflation.
58
INFOSYS COMPANY Profile

Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people
with US$ 250. Today, we are a global leader in the next generation of IT and
consulting with revenues of over US$ 4 billion.
Infosys defines, designs and delivers technology-enabled business solutions that help
Global 2000 companies win in a Flat World. Infosys also provides a complete range
of services by leveraging our domain and business expertise and strategic alliances
with leading technology providers.
Our offerings span business and technology consulting, application services, systems
integration, product engineering, custom software development, maintenance, re-
engineering, independent testing and validation services, IT infrastructure services
and business process outsourcing.
Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive
force in the industry leading to the rise of offshore outsourcing. The GDM is based on
the principle of taking work to the location where the best talent is available, where it
makes the best economic sense, with the least amount of acceptable risk.
Infosys has a global footprint with over 50 offices and development centers in India,
China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys and
its subsidiaries have 105,453 employees as on September 30, 2009
Infosys takes pride in building strategic long-term client relationships. Over 97% of
our revenues come from existing customers.
Infosys
Balance sheet Mar '11 Mar '10 Mar '09 Mar '08
59

Sources Of Funds
Reserves 24,214.00 21,749.00 17,523.00 13,204.00
Networth 24,501.00 22,036.00 17,809.00 13,490.00
Secured Loans 0.00 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00
Total Debt 0.00 0.00 0.00 0.00
Mar '11 Mar '10 Mar '09 Mar '08
Gross Block 6,934.00 6,357.00 5,986.00 4,508.00
Less: Accum. Depreciation 2,878.00 2,578.00 2,187.00 1,837.00
Net Block 4,056.00 3,779.00 3,799.00 2,671.00
Capital Work in Progress 499.00 409.00 615.00 1,260.00
Investments 1,325.00 4,636.00 1,005.00 964.00
Inventories 0.00 0.00 0.00 0.00
Sundry Debtors 4,212.00 3,244.00 3,390.00 3,093.00
Cash and Bank Balance 641.00 929.00 805.00 657.00
Fixed Deposits 13,024.00 8,868.00 8,234.00 5,772.00
Deffered Credit 0.00 0.00 0.00 0.00
Provisions 2,473.00 2,035.00 1,798.00 2,248.00
Total Assets 24,501.00 22,036.00 17,809.00 13,490.00
Contingent Liabilities 1,013.00 295.00 347.00 603.00
Book Value (Rs) 426.73 384.02 310.90 235.84
Profit and loss statement of infosys Mar '11 Mar '10 Mar '09 Mar '08
Income
Sales Turnover 25,385.00 21,140.00 20,264.00 15,648.00
Excise Duty 0.00 0.00 0.00 0.00
Net Sales 25,385.00 21,140.00 20,264.00 15,648.00
Other Income 1,147.00 967.00 502.00 683.00
60
Stock Adjustments 0.00 0.00 0.00 0.00

Total Income 26,532.00 22,107.00 20,766.00 16,331.00
Expenditure
Raw Materials 23.00 22.00 20.00 18.00
Power & Fuel Cost 0.00 0.00 125.00 106.00
Employee Cost 12,464.00 10,356.00 9,975.00 7,771.00
Other Manufacturing Expenses 2,613.00 1,993.00 1,697.00 1,443.00
Selling and Admin Expenses 1,834.00 992.00 1,367.00 1,214.00
Total Expenses 16,970.00 13,778.00 13,356.00 10,684.00
Mar '11 Mar '10 Mar '09 Mar '08
PBDIT 9,562.00 8,329.00 7,410.00 5,647.00
Interest 1.00 2.00 2.00 1.00
PBDT 9,561.00 8,327.00 7,408.00 5,646.00
Depreciation 740.00 807.00 694.00 546.00
Extra-ordinary items 0.00 0.00 -1.00 0.00
Tax 2,378.00 1,717.00 895.00 630.00
Equity Dividend 3,445.00 1,434.00 1,345.00 1,902.00
Equity Dividend (%) 1,200.00 500.00 470.00 665.00
Book Value (Rs) 426.73 384.02 310.90 235.84
Key financial ratios of infosys Mar '11 Mar '10 Mar '09 Mar '08
Face Value 5.00 5.00 5.00 5.00
Free Reserves Per Share (Rs) 420.79 378.08 305.80 230.74
61
Operating Profit Margin(%) -- -- -- --

Profit Before Interest And Tax
-- -- -- --
Margin(%)
Gross Profit Margin(%) -- -- -- --
Cash Profit Margin(%) -- -- -- --
Adjusted Net Profit Margin(%) -- -- -- --
Return On Capital Employed(%) -- -- -- --
Return On Net Worth(%) -- -- -- --
426.73 384.02 310.90 235.84
Revaluations
426.73 384.02 310.90 235.84
Revaluations
Current Ratio 5.11 4.28 4.71 3.30
Quick Ratio 5.02 4.20 4.67 3.28
Debt Equity Ratio -- -- -- --
Long Term Debt Equity Ratio -- -- -- --
Interest Cover -- -- -- --
Total Debt to Owners Fund -- -- -- --
Financial Charges Coverage Ratio 9,523.00 4,116.50 3,891.00 5,642.00
7,184.00 3,306.00 3,257.50 5,017.00
Tax
Inventory Turnover Ratio -- -- -- --
Investments Turnover Ratio -- -- -- --
Fixed Assets Turnover Ratio -- -- -- --
Total Assets Turnover Ratio -- -- -- --
Average Raw Material Holding -- -- -- --

Average Finished Goods Held -- -- -- --
Imported Composition of Raw
-- -- -- --
Materials Consumed
AdjustedCash Flow Times -- -- -- --
62
Mar '11 Mar '10 Mar '09 Mar '08

Book Value 426.73 384.02 310.90 235.84
Chart Title
1
2
3
4
In Infosys the earning per share is increasing every year with a steady trend this in
order to lure more investors to invest in the shares of the company, and generate more
and more financing through equity.
Chart Title
1
2
3
4
initially Infosys increased its DPR by retaining less and giving out more, for next 2
years they retained the earnings in order to attract more investors and then in next
year they increased the DPR to retain the intrest of investors in order to get more
finance from equity.
Trend analysis
63
There is not very steady growth in the market price of Infosys shares, there are many
ups and downs but there is growth after every trough which makes this type of
investment as investors choice. Person holding the stocks of this type of company can
get unexpected return on favorable market condition. For this the patient investor is
required.
64
WIPRO COMPANY PROFILE
Wipro Technologies is the No.1 provider of integrated business, technology and

process solutions on a global delivery platform.
Wipro Technologies is a global services provider delivering technology-driven
business solutions that meet the strategic objectives of our clients. Wipro has 40+
Centers of Excellence that create solutions around specific needs of industries.
Wipro delivers unmatched business value to customers through a combination of
process excellence, quality frameworks and service delivery innovation. Wipro is the
World's first CMMi Level 5 certified software services company and the first outside
USA to receive the IEEE Software Process Award.
Wipros complete range of IT Services addresses the needs of both technology and
business requirements to help organizations leverage leading-edge technologies for
business improvement.
Wipro takes charge of the IT needs of the entire enterprise. The gamut of services
extends from Enterprise Application Services (CRM, ERP, e-Procurement and SCM),
to e-Business solutions. Wipros enterprise solutions have served and continue to
serve clients from a range of industries including Energy and Utilities, Finance,
Telecom, and Media and Entertainment.
Wipros TIS is the largest Indian IT infrastructure service provider

Wipros Technology Infrastructure Services (TIS) is the largest Indian IT
infrastructure service provider in terms of revenue, people and customers with more
than 200 customers in US, Europe, Japan and over 650 customers in India. It is
powered by the expert skills of over 6,500 technical specialists and state-of-the-art BS
15000 certified infrastructure for operations support.
A phased approach towards process standardization, process optimization and process

re-engineering.
Wipro BPO provides a broad range of services from customer relationship
management, back office transaction processing to industry-specific solutions. The
65
key element of services delivery is an integrated approach towards providing

increasing value over the entire course of our client relationships. This involves a
phased approach towards process standardization, process optimization and process
re-engineering
True value from technology requires an in-depth understanding of business strategy.

Todays businesses need partners who can talk about strategy and technology in the
same conversation. At Wipro, we believe true value from technology requires an in-
depth understanding of business strategy. Our cross-industry consulting services help
you craft a vision for your organization and then provide a specific, practical business
and technology framework that will make that vision a reality. Our consulting
competencies spread across business, process, quality and technology consulting.
We've developed a model called "Extended Engineering that leverages synergies
across the value chain
As product manufacturers and platform vendors across the world strive to make better
products with shorter development cycles and reduced total cost of ownership, we at
Wipro Technologies partner with them to provide comprehensive solutions in product
lifecycle management and product realization. At Wipro, we've developed a model
called "Extended engineering" that allows you to leverage synergies across the value
chain and progress swiftly from concept to market. We are now the world's largest
contract R&D house for telecom, auto and electronics
66
Wipro
Balance sheet of wipro Mar '11 Mar '10 Mar '09 Mar '08
Sources Of Funds
Reserves 20,829.40 17,396.80 12,220.50 11,260.40
Networth 21,320.90 17,692.20 12,515.00 11,610.70
Secured Loans 0.00 0.00 0.00 4.00
Unsecured Loans 4,744.10 5,530.20 5,013.90 3,818.40
Total Debt 4,744.10 5,530.20 5,013.90 3,822.40
Mar '11 Mar '10 Mar '09 Mar '08
Gross Block 7,779.30 6,761.30 5,743.30 2,282.20
Less: Accum. Depreciation 3,542.30 3,105.00 2,563.70 0.00
Net Block 4,237.00 3,656.30 3,179.60 2,282.20
Capital Work in Progress 603.10 991.10 1,311.80 1,335.00
Investments 10,813.40 8,966.50 6,895.30 4,500.10
Inventories 724.90 606.90 459.60 448.10
Sundry Debtors 5,781.30 5,016.40 4,446.40 3,646.60
Cash and Bank Balance 2,334.20 1,938.30 1,902.10 3,732.10
Fixed Deposits 2,869.10 3,726.00 2,507.10 0.00
Deffered Credit 0.00 0.00 0.00 0.00
Provisions 2,764.80 2,230.80 1,810.70 1,380.70
Total Assets 26,065.00 23,222.40 17,528.90 15,433.10
Contingent Liabilities 707.30 778.00 1,045.40 749.90
Book Value (Rs) 86.86 120.49 85.42 79.05
Profit and loss of wipro Mar '11 Mar '10 Mar '09 Mar '08
Income
67
Sales Turnover 26,401.20 23,006.30 21,612.80 17,658.10

Excise Duty 100.70 84.30 105.50 165.50
Net Sales 26,300.50 22,922.00 21,507.30 17,492.60
Other Income 603.30 866.70 -480.40 326.90
Stock Adjustments 31.60 111.00 -3.80 187.00
Total Income 26,935.40 23,899.70 21,023.10 18,006.50
Expenditure
Raw Materials 3,805.60 3,768.80 3,438.80 3,139.30
Power & Fuel Cost 199.70 141.40 154.00 0.00
Employee Cost 10,937.40 9,062.80 9,249.80 7,409.10
Other Manufacturing Expenses 2,780.20 2,145.30 1,687.80 299.80
Selling and Admin Expenses 1,703.30 1,491.40 1,523.00 557.80
Miscellaneous Expenses 1,145.00 921.80 691.40 2,558.00
Total Expenses 20,571.20 17,531.50 16,744.80 13,964.00
Mar '11 Mar '10 Mar '09 Mar '08
PBDIT 6,364.20 6,368.20 4,278.30 4,042.50
Interest 58.60 99.80 196.80 116.80
PBDT 6,305.60 6,268.40 4,081.50 3,925.70
Depreciation 600.10 579.60 533.60 456.00
Extra-ordinary items 0.00 0.00 0.00 0.00
Tax 861.80 790.80 574.10 406.40
Equity Dividend 981.80 880.90 586.00 876.50
Equity Dividend (%) 200.00 300.00 200.00 300.00
Book Value (Rs) 86.86 120.49 85.42 79.05
68
Mar '11 Mar '10 Mar '09 Mar '08

Face Value 2.00 2.00 2.00 2.00
Free Reserves Per Share (Rs) 84.28 116.54 81.06 --
Operating Profit Margin(%) 21.90 24.00 22.12 21.24
Profit Before Interest And Tax
19.14 21.07 19.22 18.29
Margin(%)
Gross Profit Margin(%) 19.62 21.47 19.64 18.63
Cash Profit Margin(%) 20.40 21.60 20.27 19.74
Adjusted Net Profit Margin(%) 17.96 20.97 13.53 17.19
Return On Capital Employed(%) 22.34 23.06 26.77 23.23
Return On Net Worth(%) 20.41 27.68 23.76 26.51
86.86 120.49 85.42 79.05
Revaluations
86.86 120.49 85.42 79.05
Revaluations
Current Ratio 1.45 1.33 1.10 2.54
Quick Ratio 2.20 2.26 1.76 2.44
Debt Equity Ratio 0.22 0.31 0.40 0.33
Long Term Debt Equity Ratio -- 0.01 0.01 0.33
Interest Cover 99.37 53.67 23.85 30.71
Total Debt to Owners Fund 0.22 0.31 0.40 0.33
Financial Charges Coverage Ratio 109.61 59.48 26.56 34.61
93.90 55.89 18.82 31.13
Tax
Inventory Turnover Ratio 43.12 45.40 56.15 39.41
Investments Turnover Ratio 43.12 45.40 56.15 39.41
Fixed Assets Turnover Ratio 3.45 3.47 3.85 7.81
Total Assets Turnover Ratio 1.02 0.99 1.24 1.14
Average Raw Material Holding 73.15 53.39 66.55 --

Average Finished Goods Held 5.34 6.20 4.13 --
Imported Composition of Raw 35.34 36.83 45.00 --
69
Materials Consumed
1.09
AdjustedCash Flow Times 0.86 1.10 1.13
Mar '11 Mar '10 Mar '09 Mar '08

Important ratios of wipro
Book Value 86.86 120.49 85.42 79.05
Chart Title
1
2
3
4
In case of Wipro earning per share is declining due to high retention of earnings to
write off the debt on the cost of dividend paid to share holders due to which the
earning per share is decreasing. Which is not an investor will want.
70
Chart Title
1
2
3
4
In Wipro due to high earning retention and less dividend policy they give less
percentage of profit to equity share holders and retain that profit as reserve and
surplus for business activity.
Chart Title
1
2
3
4
By lucking at the year on decrease in debt to equity ratio it is understood that the
company wants to reduce the equity capital and raise money more by debt, long term
loans and saved earnings.
Trend analysis
71
Here you can see there is growth in the price of shares but not steady there are many
trough and crests in the trend of market price which indicates a stagnant growth in the
value of stock i.e. the company has reached at the maturity level and the stock value
will only fluctuate there.
72
CONCLUSION
From the above three companies analysis we can conclude that all the three
companies are choice of investment of different investors
TCS is a stable and sturdy growth company, which mostly rely on equity
capital hence they will perform on a regular basis to provide good return to
investors. Hence people who dose not want to worry about his investment he
has a choice to invest in TCS.
INFOSYS is a value driven company who are known by the innovative
methods business hence they try to keep the investors happy by giving good
returns but with a risk .a person dose not worry about the risk and aim for
high returns is ideal choice of investor.
WIPRO is also a top company in regards of investment but they does not give
much consideration to investors of equity shares. They are very careful while
using there resources in order to. Safeguard there future
73
RECOMMENDATION
As from trend of TCS we can see that the there is sturdy up trend but there is
no substantial crest so the investor does not have choice to bye shares at low
market price and if the market crash then the old investor would not suffer
much losses, but an early investor will suffer heavy losses. Hence
recommended that investor should wait for the right opportunity for
investment i.e. wait for prices to fall.
As from the trend analysis of INFOSYS we conclude that the right choice for
the investor to in vest in this company is at the time of drop in market price
and retain till the period of substantial time as company provides good
dividend to its share holders.
From the trend of market price of WIPRO it is conclusive that the company
does not stress heard on market trends but they stress on profit making with
much consideration of equity share holders so this company is a choice of
people who like to hold the stocks for a larger lime then compared to the other
74
two companies which stress on increasing the market value. Hence long term
investors choice is this company
LIMITATIONS
Limitations of this study are
Future changes are largely unpredictable; more so when the economic and
business environment is buffeted by frequent winds of change. In an
environment characterized by discontinuities, the past record proves to be a
poor guide to future performance.
The market behavior if irrational may give rise to under-valuations for
extended periods; over-valuations from unjustified optimism and misplaced
enthusiasm for unreasonable lengths of time. The slow correction of under or
over valuation poses a threat to the analysis.
While conducting the research I was unable to collect data from primary source,
which I feel would have had a bearing on the outcome of the research. Through
interviews with the concerned authorities I could have got first hand information
about the company and this could have certainly given me a broader perspective
75
on the companys future plans.
BIBLIOGRAPHY
WEBSITES:
www.rathi.com
www.investopedia.com
www.bseindia.com
www.nseindia.com
www.moneycontrol.com
www.indiastudychannel.com
BOOKS:
Investment Analysis and Portfolio Management- Prasanna Chandra.

PROJECT REPORT On Equity Analysis IT Sector

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1

EQUITY RESEARCH AND ANALYSIS OF IT SECTOR

Project Submitted in fulfillment of

ROBIN ANIL AWATHARE

Roll No. M1001

Under the guidance of

Mrs. MAHALAKSHMI SUBRAMANIAN

Signature of the student: ________________________

My grateful thanks to Mr.Shasank Ajoy, manager who in spite of being

Robin Anil Awathare

for a period of two months from 16/05/2011 to 16/07/2011.

Internal Guide Director

Mrs. Mahalakshmi Subramanian Mr. Biswa B. Das

2 Company profile/company background 8

AnandRathi is a leading full service investment bank, founded in 1994 offering a

Anand Rathi, Founder & Chairman

Pradeep Gupta, Co- founder & Vice chairman

Amit Rathi, Managing Director

Board of Directors Independent

Dr. S A Dave, Director

Ajit Bhushan, Director

Set up in 1994,19.9% stake held by Citigroup Venture Capital International (CVC)

Wealth Investment Brokerage &

Institutions Equity Capital Equities

2001: Initiated Wealth Management Services

2010:AnandRathi Private Wealth adjudged Best Domestic Private Bank (India) by

Key behind Anand Rathi success:

INVEST CORRECTLY (RIGHT ASSET CLASS)+INVEST REGULARLY

Proficiency in rendering consistent high quality value added services

Dedicated fundamental Research team for corporate guidance.

SCOPE OF THE STUDY

Role of the Primary Market

Face Value of a share/debenture

Premium and Discount in a Security Market

Why do companies need to issue shares to the public?

The different kinds of issues

Primarily, issues can be classified as a Public, Rights or Preferential issues (also

A follow on public offering (Further Issue) is when an already listed company

A Preferential issue is an issue of shares or of convertible securities by listed

Introduction to Secondary market

Role of the Secondary Market

Market Capitalization mean

Products and Participants

or other marketable securities of like nature in or of any incorporate company or body

Market Segments and their Products

(iii)Futures & Options (F&O) Segment: This segment provides trading in

(iv)Currency Derivatives Segment (CDS) Segment: This segment at NSE

trading in US Dollar-Indian Rupee (USD-INR). Trading in other currency pairs like

why should one invest in equities in particular?

Return on Equities in India

Factors that influence the price of a stock

Fundamental analysis is the process of looking at a business at the basic or

Fundamental Analysis Tools

Earnings per Share EPS

Price to Earnings Ratio P/E

Projected Earning Growth PEG

Price to Sales P/S

Price to Book P/B

Dividend Payout Ratio

Earnings per Share EPS

EPS = Net Earnings / Outstanding Shares

Price to Earnings Ratio P/E

P/E = Stock Price / EPS