Equity Analysis of IT Sector

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR
TABLE OF CONTENTS:
CHAPTER CONTENT PAGE

NO. NO.
1 INTRODUCTION:
1.1 Introduction
1.2 Top players in Indian IT sector
1.3: Definition of equity market
1.4 Indian IT sector
1.5 History of Indian IT sector
1.6 Role of IT industry
1.7Contribution of Information Technology in Indian economy 1-16
1.8 Impact of IT sector
1.9 Future of Information Technology
1.10 Meaning of Equity
1.11 Meaning of Technical analysis
1.12 Meaning of Fundamental analysis
1.13 SWOT analysis of the industry
2 REVIEW OF LITERATURE & RESEARCH DESIGN
2.1 Introduction
2.2 Literature Review
2.3 Statement of the problem
2.4 Objective of study
17-30
2.5 Scope of study
2.6 Need of the study
2.7 Limitations
2.8 Research Methodology
2.8.1: Source of Data
2.8.2: Research Method
2.8.3: Sample Size
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2.8.4 Chapter scheme
3 INDUSTRY PROFILE AND COMPANY PROFILE

3.1 Introduction
3.2 IT sectors- an overview
3.3 The Indian IT industry
3.4 Major IT companies
3.5 Nature of competition
3.6 Growth of Indian IT industry
3.7 Market segments and their products 31-57
3.8 Scope of IT industry in India
3.9 Expanding foreign investments by India
3.10 Stock exchanges in India
3.11 List of stock exchanges in India
3.12 Profile of TCS (Tata Consultancy Services)
3.13 Profile of Wipro
3.14 Profile of Infosys
3.15 Profile of Satyam computer services
3.16 Profile of HCL
3.17 Profile of Tech Mahindra
3.18 Profile of Larsen & Toubro limited
4 Results, Analyses & Discussions 58-88
5 Summary of Findings, Conclusions and Suggestions 89-93

Recommendations
Bibliography 94
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LIST OF TABLES:
Table No. Description Page No.
4.1 Table showing Debt to equity ratio of TCS 63

4.2 Table showing EPS of TCS 64
4.3 Table showing Current ratio of TCS 66
4.4 Table showing Debt to equity ratio of Wipro 67
4.5 Table showing Current ratio of Wipro 68
4.6 Table showing EPS of Wipro 69
4.7 Table showing EPS of Infosys 71
4.8 Table showing current ratio of Infosys 72
4.9 Table showing EPS of Satyam computer services 74
4.10 Table showing Debt to equity ratio of Satyam computer 75
services
4.11 Table showing current ratio of Satyam computer services 76
4.12 Table showing Debt to equity ratio of HCL Technologies 78
4.13 Table showing EPS of HCL Technologies 79
4.14 Table showing current ratio of HCL Technologies 80
4.15 Table showing Debt to equity ratio of Tech Mahindra 81
4.16 Table showing EPS of Tech Mahindra 82
4.17 Table showing current ratio of Tech Mahindra 83
4.18 Table showing Debt to equity ratio of L&T InfoTech 85
4.19 Table showing EPS of L&T InfoTech 86
4.20 Table showing current ratio of L&T InfoTech 87
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LIST OF CHARTS:
Chart No. Description Page No.
3.1 Graph showing major trends in Hiring 33

3.2 Graph showing IT market structure 35
4.1 Graph showing Debt to equity ratio of TCS 63
4.2 Graph showing EPS of TCS 64
4.3 Graph showing P/E ratio of TCS 65
4.4 Graph showing current ratio of TCS 66
4.5 Graph showing Debt to equity ratio of Wipro 67
4.6 Graph showing current ratio of Wipro 68
4.7 Graph showing EPS per year of Wipro 69
4.8 Graph Showing P/E ratio of Wipro 70
4.9 Graph showing EPS of Infosys 71
4.10 Graph showing current ratio of Infosys 72
4.11 Graph Showing P/E ratio of Infosys 73
4.12 Graph showing EPS of Satyam computers services 74
4.13 Graph showing Debt to equity ratio of Satyam 75
computer services
4.14 Graph showing current ratio of Satyam computer 76
services
4.15 Graph showing P/E ratio of Satyam computer services 77
4.16 Graph showing Debt to equity ratio of HCL 78
technologies.
4.17 Graph showing EPS of HCL Technologies 79
4.18 Graph Showing Current ratio of HCL Technologies 80
4.19 Graph showing P/E ratio of HCL Technologies. 81
4.20 Graph showing Debt to equity of Tech Mahindra 82
4.21 Graph Showing EPS of Tech Mahindra 83
4.22 Graph showing current ratio of Tech Mahindra 84
4.23 Graph showing P/E ratio of Tech Mahindra 85
4.24 Graph showing Debt to equity of L&T InfoTech 86
4.25 Graph showing EPS of L&T InfoTech 87
4.26 Graph showing current ratio of L&T InfoTech 88
4.27 Graph showing P/E ratio of L&T InfoTech 89
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1.1: INTRODUCTION:
India is a developing country. Now days many people are interested to invest in
financial markets especially on equities to get high returns, and to save tax in honest way.
Equities are playing a major role in contribution of capital to the business from the beginning.
Since the introduction of shares concept, large number of investors are showing interest to
invest in stock market.
In an industry plagued with skepticism and a stock market increasingly difficult to

predict and contend with, if one looks hard enough there may still be a genuine aid for the
day trader and short term investor.
The price of a security represents a consensus. It is the price at which one person
agrees to buy and another agrees to sell. The price at which an investor is willing to buy or
sell depends primarily on his expectations. If he expects the security's price to rise, he will
buy it; if the investor expects the price to fall, he will sell it. These simple statements are the
cause of a major challenge in forecasting security prices, because they refer to human
expectations.
Investor v/s Trader:

People can make money in equity market by investing or trading or both. However, to
avoid disappointment of losing money, customers should make very prudent and informed
decisions.
"Investors" put their money into stocks for a long term. This is under the principle that over
time, the underlying investment will increase in value, and the investment will be profitable.
On the other hand
"Traders" take a proactive approach to their investing. They follow or predict a trend in the
stock and use strategies like buy-low, sell-high and make profits.
Though there is really no right or wrong type of stock trading, it is necessary for investors to
identify which type of trading is right for them. They can make a great amount of money
either way however, they must consider their time frame, risk, and how much work you want
to put into it.
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While traders can make more money much faster, they are required to do more work
and monitoring than the typical investor. Determine what type of trader you want to be, and
then make sure that the people you take guidance from have the same goals as you.
1.2: Top players in Indian IT sector:
No. Name of company Share price

(Rs)
1 TCS 1429
2 Wipro 399.65
3 Infosys 2774
4 Satyam computers services 113.40
5 HCL Technologies 694.6
6 Tech Mahindra 989.10
7 L&T Infotech 1457
1.3: Definition of ‘Equity Market’:
The market in which shares are issued and traded, either through exchanges or over-
the-counter markets also known as the stock market, it is one of the most vital areas of a
market economy because it gives companies access to capital and investors a slice of
ownership in a company with the potential to realize gains based on its future performance.
1.4: Indian IT sector:
The information technology sector can broadly be classified into:-
1.4.1:- IT- Software- These companies help in developing and implementation of different
software for their clients worldwide. These software could be for documentation, security
services, banking software’s etc.
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1.4.2:- ITeS Business Process Outsourcing (BPO) – Major Corporations across the world
outsources their back-office operations to some companies. E.g. Employee payroll for a US
company’s global workforce is maintained by an Indian BPO. Slowly the definition is
expanding to Human resources, accounting, logistics, legal processes etc.
1.4.3:- IT- Hardware and peripherals - The stuff which can be actually seen and touched,
and would likely break if we threw it out, is hardware. This would include laptops, desktops,
Storage devices, Networking devices, LCD, printers etc.
1.4.4:- IT- Education - This segment provides training for employment in the other
segments. This would include companies providing various certification courses, like Java,
Oracle etc. These companies also provide training for employees in corporate sector.
Recently, some companies have also expanded this service to cater to schools and colleges.
1.5: History of Indian IT sector:-
Information Technology (IT) industry in India is one of the fastest growing industries.
Indian IT industry has built up valuable brand equity for itself in the global markets. IT
industry in India comprises of software industry and information technology enabled services
(ITES), which also includes business process outsourcing (BPO) industry. India is considered
as a pioneer in software development and a favorite destination for IT- enabled services.
The origin of IT industry in India can be traced to 1974, when the mainframe
manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to
export programmers for installing system software for a U.S. client. The IT industry
originated under unfavorable conditions. Local markets were absent and government policy
toward private enterprise was hostile. The industry was begun by Bombay-based
conglomerates which entered the business by supplying programmers to global IT firms
located overseas.
During that time Indian economy was state-controlled and the state remained hostile
to the software industry through the 1970s. Import tariffs were high (135% on hardware and
100% on software) and software was not considered an "industry", so that exporters were
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ineligible for bank finance. Government policy towards IT sector changed when Rajiv
Gandhi became Prime Minister in 1984. His New Computer Policy (NCP-1984) consisted of
a package of reduced import tariffs on hardware and software (reduced to 60%), recognition
of software exports as a "delicensed industry", i.e., henceforth eligible for bank finance and
freed from license-permit raj, permission for foreign firms to set up wholly-owned, export-
dedicated units and a project to set up a chain of software parks that would offer
infrastructure at below-market costs. These policies laid the foundation for the development
of a world-class IT industry in India.
Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, and
HCL etc. all are renowned in the global market for their IT prowess.
Some of the major factors which played a key role in India's emergence as key global IT
player are:
i. Indian Education System:

The Indian education system places strong emphasis on mathematics and science,
resulting in a large number of science and engineering graduates. Mastery over quantitative
concepts coupled with English proficiency has resulted in a skill set that has enabled India to
reap the benefits of the current international demand for IT.
ii. High Quality Human Resource:

Indian programmers are known for their strong technical and analytical skills and their
willingness to accommodate clients. India also has one of the largest pools of English-
speaking professional.
iii. Competitive Costs:

The cost of software development and other services in India is very competitive as
compared to the Western countries.
iv. Infrastructure Scenario:

Indian IT industry has also gained immensely from the availability of a robust
infrastructure (telecom, power and roads) in the country.
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In the last few years Indian IT industry has seen tremendous growth. Destinations
such as Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT
parks have come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc. These parks offer
Silicon Valley type infrastructure. In the light of all the factors that have added to the strength
of Indian IT industry, it seems that Indian success story is all set to continue.
1.6: ROLE OF IT INDUSTRY:

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to
information. The use of information technology in the service sector improves operational
efficiency and adds to transparency. It also serves as a medium of skill formation.
I. Economies of scale for the information technology industry are high. The marginal
cost of each unit of additional software or hardware is insignificant compared to the
value addition that results from it.
II. Unlike other common industries, the IT industry is knowledge-based.
III. Efficient utilization of skilled labor forces in the IT sector can help an economy
achieve a rapid pace of economic growth.
IV. The IT industry helps many other sectors in the growth process of the economy
including the services and manufacturing sectors.
1.7: CONTRIBUTION OF INFORMATION TECHNOLOGY IN INDIAN

ECONOMY:
The growth in the service sector in India has been led by the IT–ITES sector,
contributing substantially to increase in GDP, employment, and exports. The sector has
increased its contribution to India's GDP from 1.2% in FY1998 to 7.5% in FY2012.
According to NASSCOM, the IT–BPO sector in India aggregated revenues of US$100 billion
in FY2012, where export and domestic revenue stood at US$69.
The contribution of India's IT industry to economic progress has been quite

significant. The rapidly expanding socio-economic infrastructure has proved to be of great
use in supporting the growth of Indian information technology industry.
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The flourishing Indian economy has helped the IT sector to maintain its
competitiveness in the global market. The IT and IT enabled services industry in India has
recorded a growth rate of 22.4% in the last fiscal year. The total revenue from this sector was
valued at 2.46 trillion Indian rupees in the fiscal year 2007. Out of this figure, the domestic IT
market in India accounted for 900 billion rupees. So, the IT sector in India has played a major
role in drawing foreign funds into the domestic market.
The growth and prosperity of India's IT industry depends on some crucial factors.
These factors are as follows:
i. India is home to a large number of IT professionals, who have the necessary skill and
expertise to meet the demands and expectations of the global IT industry.
ii. The cost of skilled Indian workforce is reasonably low compared to the developed
nations. This makes the Indian IT services highly cost efficient and this is also the
reason as to why the IT enabled services like business process outsourcing and
knowledge process outsourcing have expanded significantly in the Indian job market.
iii. India has a huge pool of English-speaking IT professionals. This is why the English-
speaking countries like the US and the UK depend on the Indian IT industry for
outsourcing their business processes.
The emergence of Indian information technology sector has brought about sea
changes in the Indian job market. The IT sector of India offers a host of opportunities of
employment. With IT biggies like Infosys, Cognizant, Wipro, Tata Consultancy Services,
Accenture and several other IT firms operating in some of the major Indian cities, there is no
scarcity of job opportunities for the Indian software professionals. The IT enabled sector of
India absorbs a large number of graduates from general stream in the BPO and KPO firms.
All these have solved the unemployment problem of India to a great extent.
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1.8: IMPACT OF IT SECTOR:

i. Impact on Society:
A society can also refer specifically to any group of people, other animals and the
interactions within that group. This can be anything from a small neighborhood to the entire
global community. Religion, ethnicity, interests, political opinions or other relating factors
may help form a group of people.
ii. Common Traditions:

In the context of this report it is helpful to highlight a difference between "traditions"
and "activities/interests". Tradition can be defined as the following: “An inherited,
established, or customary pattern of thought, action, or behavior (as a religious practice or a
social custom).Cultural continuity in social attitudes, customs, and institutions."
iii. Cultural Continuity:

Social attitudes have changed in that citizens of a society now expect the various
elements of that society to be better informed than previously. They also expect to be able to
access more information about a specific product, service or organization so that they can
make informed decisions with regard to their interactions with that entity.
iv. Institutions:
The word institutions can incorporate a wide variety of organizations. For the purposes of this
report the institutions will examine:
1. Governments,
2. Commercial businesses,
3. News & media organizations,
4. Educational organizations.
The focus is on how information technology development has improved the processes by
which these institutions accomplish their tasks or goals.
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v. Governments:
The government of a nation is comprised of many varied institutions. However
developments in information technology have helped governments to improve their "service"
to their citizens. Information technology has also had a major impact on the defense
capabilities of governments. This covers both a government’s capability to wage war and
their intelligence gathering capability. Advances in weapons technology and weapons design
have increased the effectiveness of various governments' armed forces. For example it would
have been impossible to design aero planes such as the B2 Bomber if it were not for the
advances made in information technology. The B2bomber relies on a "continuous curvature"
design to minimize radar signature. It would have been impossible to design or build this
machine without the development of computer modeling techniques.
1.9: Future of Information Technology:
IT will continue to gain momentum; telecom and wireless will follow the trend. The
immense expansion in networking technologies is expected to continue into the next decade
also. IT will bring about a drastic improvement in the quality of life as it impacts application
domains and global competitiveness. Technologies that are emerging are Data Warehousing
and Data Mining. They involve collecting data to find patterns and testing hypothesis in
normal research. Software services that are being used in outsourcing will go a long way.
1.10: Meaning of equity:

Equity is the ownership interest of investors in a business firm. Investors can own
equity shares in a firm in the form of common stock. Equity ownership in the firm means that
the original business owner no longer owns 100% of the firm but shares ownership with
others.
On a company’s balance sheet, equity is represented by the common stock and paid-in
capital.
Equity analysis: Equity analysis is researching and analyzing equities, or stocks. These
stocks trade on various stock markets such as the BSE, NSE, New York Stock Exchange, and
NASDAQ, AMEX or foreign stock markets.
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Equity analysts are usually employed by financial firms that have equity research
departments made up of numerous analysts, each of which focuses on being an "expert" on a
particular industry. There are numerous industries within the 10 sectors. Those 10 sectors are
the consumer discretionary, consumer staples, energy, industrials, financials, healthcare,
materials, information technology, and telecommunications and utilities sectors.
On a daily basis, equity research analysis closely "follow", or monitor a number of

stocks. For example, a PC hardware equity research analyst would probably spend a great
deal of time monitoring the business of Dell Computer and any news that may affect dell.
Investors purchase equity shares with two basic objectives:
1. To make capital profits by selling shares at higher prices.
2. To earn dividend income.
These two factors are affected by lots of factors. An investor has to carefully
understand and analyze all these factors. There are basically two approaches to study security
prices and valuation i.e. fundamental analysis and technical analysis.
The value of common stock is determined in large measure by the performance of the
firm that issued the stock. If the company is healthy and can demonstrate strength and
growth, the value of the stock will increase. When values increase then prices follow and
returns on an investment will increase. However, just to keep the savvy investor on their toes,
the mix is complicated by the risk factors involved. Fundamental analysis examines all the
dimensions of risk exposure and the probabilities of return, and merges them with broader
economic analysis and greater industry analysis to formulate the valuation of a stock.
Valuation of Equity:
The methods used to analyze securities and market investment decision falls into two very
broad categories:
 Technical Analysis
 Fundamental Analysis
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1.11 MEANING OF TECHNICAL ANALYSIS:

A method of evaluating securities by analyzing statistics generated by market activity,
such as past prices and volume. Technical analysts do not attempt to measure a security’s
intrinsic value, but instead use charts and other tools to identify patterns that can suggest
future activity.
A Technical analyst believes that share prices are determined by the demand and
supply forces operating in the market. These demand and supply forces in turn are influenced
by a number of fundamental factors as well as certain psychological or emotional factors.
Many of these factors cannot be quantified. The combined impact of all these factors is
reflected in the share price movement. A technical analyst therefore concentrates on the
movement of share prices. He claims that by examining past share price movements future
share prices can be accurately predicted. Technical analysis is the name given to forecasting
techniques that utilize historical share price data.
The rationale behind technical analysis is that share price behavior repeats itself over
time and analysts attempt to derive methods to predict this repetition. A technical analyst
looks at the past share price data to see if he can establish any patterns. He then looks at
current price data to see if any of the established patterns are applicable and, if so,
extrapolations can be made to predict the future price movements. Although past share prices
are the major data used by technical analyst, other statistics such as volume of trading and
stock market indices are also utilized to some extent.
The basic premise of technical analysis is that prices move in trends or waves which
may be upward or downward. It is believed that the present trends are influenced by the past
trends and that the projection of future trends is possible by an analysis of past price trends. A
technical analyst, therefore, analyses the price and volume movements of individual’s
securities as well as the market index. Thus, technical analysis is really a study of past or
historical price and volume movements so as to predict the future stock price behavior.
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1.11.1: Basic principles of technical analysis:

The basic principles on which technical analysis is based may be summarized as follows:
1. The market value of a security is related to demand and supply factors operation in
the market.
2. There are both rational and irrational factors which surround the supply and demand
factors of a security.
3. Security prices behave in a manner that their movement is continuous in a particular
direction for some length of time.
4. Trends in stock prices have been seen to change when there is a shift in the demand
and supply factors.
5. The shifts in demand and supply can be detected through charts prepared specially to
show market action.
6. Patterns are used by analysis to make forecasts about the movement of prices in
future.
1.12: MEANING OF FUNDAMENTAL ANALYSIS:
Fundamental analysis is a method of forecasting the future price movements of a

financial instrument based on economic, political, environmental and other relevant factors
and statistics that will affect the basic supply and demand of whatever underlies the financial
instrument.
Fundamental analysis is the cornerstone of investing. The basic philosophy
underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a
company, how much expected returns from this investment he has. It insists that no one
should purchase or sell a share on the basis of tips and rumors. The fundamental approach
calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of
the information about the company, about the industry, and the economy.
Fundamental analysis is really a logical and systematic approach to estimating the
future dividends and share price. It is based on the basic premise that share prices are
determined by a number of fundamental factors relating to the economy, industry and
company. Hence, the economy fundamentals, industry fundamentals and company
fundamentals have to be considered while analyzing a security for investment purpose.
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Fundamental analysis is, in other words, a detailed analysis of the fundamental factors
affecting the performance of companies.
Each share is assumed to have an economic worth based on its present and future
earning capacity. This is called its intrinsic value or fundamental value. The purpose of
fundamental analysis is to evaluate the present and future earning capacity of a share based
on the economy, industry and company fundamentals and thereby assess the intrinsic value of
the share. The investor can then compare the intrinsic value of the share with the prevailing
market price to arrive at an investment decision. If the market price of the share is lower than
its intrinsic value, the investor would decide to buy the share as it is underpriced. The price of
such a share is expected to move up in future to match with its intrinsic value.
Fundamental analysis thus involves three steps:

1. Economy Analysis.
2. Industry Analysis.
3. Company Analysis.
1.12.1: ECONOMY ANALYSIS:

The performance of a company depends on the performance of the economy. If the
economy is booming, income rise, demand for goods increases, and hence the industries and
companies in general trend to be prosperous. On the other hand, if the economy is in
recession, the performance of companies will be generally bad.
Investors are concerned with those variables in the economy which affect the
performance of the company in which they intend to invest. A study of these economic
variables would give an idea about future corporate earnings and the payment of dividends
and interest to investors.
Here are some of the key economic variables that an investor must monitor as part of his
fundamental analysis:
i. Growth Rates of National Income

ii. Inflation
iii. Interest Rates
iv. Exchange rates
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v. Infrastructure
vi. Monsoon
vii. Economic and Political Stability
1.12.2: INDUSTRY ANALYSIS:
An industry is a group of firms that have similar technological structure of production

and produce similar products and Industry analysis is a type of business research that focuses
on the status of an industry or an industrial sector (a broad industry classification, like
"manufacturing"). Irrespective of specific economic situations, some industries might be
expected to perform better, and share prices in these industries may not decline as much as in
other industries. This identification of economic and industry specific factors influencing
share prices will help investors to identify the shares that fit individual expectations.
Industry Life Cycle:
The industry life cycle theory is generally attributed to Julius Grodensky. The life cycle of the
industry is separated into four well defined stages:
a. Pioneering stage:
The prospective demand for the product is promising in this stage and the technology
of the product is low. The demand for the product attracts many producers to produce the
particular product. There would be severe competition and only fittest companies survive this
stage. The producers try to develop brand name, differentiate the product and create a product
image. In this situation, it is difficult to select companies for investment because the survival
rate is unknown.
b. Rapid growth stage:
This stage starts with the appearance of surviving firms from the pioneering stage.
The companies that have withstood the competition grow strongly in market share and
financial performance. The technology of the production would have improved resulting in
low cost of production and good quality products. The companies have stable growth rate in
this stage and they declare dividend to the shareholders. It is advisable to invest in the shares
of these companies.
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c. Maturity and stabilization stage:
The growth rate tends to moderate and the rate of growth would be more or less equal
to the industrial growth rate or the gross domestic product growth rate. Symptoms of
obsolescence may appear in the technology. To keep going, technological innovations in the
production process and products should be introduced. The investors have to closely monitor
the events that take place in the maturity stage of the industry.
d. Decline stage:
Demand for the particular product and the earnings of the companies in the industry
decline. It is better to avoid investing in the shares of the low growth industry even in the
boom period. Investment in the shares of these types of companies leads to erosion of capital.
1.12.3: COMPANY ANALYSIS:
Company analysis is the final stage of fundamental analysis. The economy analysis
provides the investor a broad outline of the prospects of growth in the economy. The industry
analysis helps the investor to select the industry in which investment would be rewarding.
Now he has to decide the company in which he should invest his money. Company analysis
provides the answer to this question.
Company analysis deals with the estimation of return and risk of individual shares.
This calls for information. Many pieces of information influence investment decisions.
Information regarding companies can be broadly classified into two broad groups: internal
and external. Internal information consists of data and events made public by companies
concerning their operations. The internal information sources include annual reports to
shareholders, public and private statements of officers of the company, the company’s
financial statements, etc. External sources of information are those generated independently
outside the company. These are prepared by investment services and the financial press.
In company analysis, the analyst tries to forecast the future earnings of the company
because there is strong evidence that earnings have a direct and powerful effect upon share
prices. The level, trend and stability of earnings of a company, however, depend upon a
number of factors concerning the operations of the company.
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i. Financial Statements
ii. Analysis of Financial Statements
iii. Leverage ratios and Profitability Ratios
iv. Assessment of Risk
1.13: SWOT Analysis of the Industry:
SWOT analysis:
SWOT analysis represents the strength, weakness, opportunity and threat for an
industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for
instance, increase in demand for the industry’s product becomes its strength, presence of
numerous players in the market, i.e. competition becomes the threat to a particular company.
The progress in R & D in that industry is an opportunity and entry of multinationals in the
industry is a threat. In this way the factors are to be arranged and analyzed.
Strengths Weaknesses
• Highly skilled human resource • Absence of practical knowledge
•Low wage structure

• Dearth of suitable candidates
•Quality of work
•Initiatives taken by the Government (setting • Less Research and Development

up Hi-Tech Parks and implementation of e-
governance projects)
• Contribution of IT sector to India’s GDP is
•Many global players have set-up operations still rather small.
in India like Microsoft, Oracle, Adobe, etc.
• Employee salaries in IT sector are
•Following Quality Standards such as ISO increasing tremendously. Low wages benefit
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9000, SEI CMM etc. will soon come to an end.
•English-speaking professionals
•Cost competitiveness
•Quality telecommunications infrastructure
•Indian time zone (24 x 7 services to the

global customers). Time difference between
India and America is approximately 12hours,
which is beneficial for outsourcing of work
Opportunities Threats
• High quality IT education market • Lack of data security systems
• Increasing number of working age people • Countries like China and Philippines with
• India 's well-developed soft infrastructure qualified workforce making efforts to
• Upcoming International Players in the overcome the English language barrier
market • IT development concentrated in a few cities
only
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2.1: Introduction:
A literature review is an evaluative report of studies found in the literature related to
our selected area. The review should describe, summarize, evaluate and clarify this literature.
It should give a theoretical basis for the research and help us to determine the nature of our
own research. Select a limited number of works that are central to our area rather than trying
to collect a large number of works that are not as closely connected to our topic area.
A literature review goes beyond the search for information and includes the identification and
articulation of relationships between the literature and our field of research. While the form
of the literature review may vary with different types of studies, the basic purposes remain
constant:
a) Provide a context for the research
b) Justify the research
c) Ensure the research hasn't been done before (or that it is not just a "replication study")
d) Show where the research fits into the existing body of knowledge
e) Enable the researcher to learn from previous theory on the subject
f) Illustrate how the subject has been studied previously
g) Highlight flaws in previous research
h) Outline gaps in previous research
i) Show that the work is adding to the understanding and knowledge of the field
j) Help refine, refocus or even change the topic.
2.2: Literature Review:
There is a vast body of literature by eminent scholars and financial experts on

different aspects of the stock market. The literature available on stock market mainly deals
with various aspects such as stock market efficiency, stock pricing, stock valuation and stock
market operations-. This chapter presents an overview of the important studies mid literature
on capital market.
The review of the available literature shows that although there are a number of
studies on the different aspects of capital market, there is no specific comprehensive study on
the attitudes, aspirations and perceptions of individual investors. The present study is an
attempt to fill this gap to a certain extent.
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DOW Theory– Trends: The ideas of Charles Dow, the first editor of the Wall Street
Journal, form the basis of technical analysis. The Dow Theory is a method of interpreting and
signaling changes in the stock market direction based on the monitoring of the Dow Jones
Industrial and Transportation Averages. Dow created the Industrial Average, of top blue chip
stocks, and a second average of top railroad stocks (now the Transport Average). He believed
that the behavior of the averages reflected the hopes and fears of the entire market. The
behavior patterns that he observed apply to markets throughout the world.
Baumol (1965)
In this paper researcher ascertains the importance of contribution to a better understanding of

the performance of the stock market. His book represents a synthesis of past research and
current thinking on the subject. It analyses in considerable detail both the short-run and long-
run price equilibrating processes and points out important departures from the competitive
ideal and the implications of these departures to stock market efficiency. Besides, Baumol
offers his own hypothesis on the pricing of securities, and he sheds new light on the overall
efficiency of the stock market as a mechanism for allocating the nation’s capital resources.
Bhatia (1970)
In this researcher has made an evaluative study of the “New Issue Market (NIM)” for the
period 1958-1973. The role of the financial institutions in the NIM has been described and
evaluated. The study shows that a new class of middle - income individual investors has
emerged as an important supplier of the risk capital.
The growth of joint stock companies played an important role in the development of the new
issue market. Besides, the government also passed various legislations to protect the interests
of the investors. Of the various institutions involved in the organization of the NIM, stock
exchanges are the most important, because they provide a continuous market for issued
securities.
Gupta (1972)
In this researcher he has studied about the working of stock exchanges in India and has
given a number of suggestions to improve its working. The study highlights the need to
regulate the volume of speculation so as to serve the needs of liquidity and price continuity. It
Page 22
suggests the enlistment of corporate securities in more than one stock exchange at the same
time to improve liquidity. The study also wishes the cost of issues to be low, in order to
protect small investors.
Rohatgi (1973)
This research explains that the basic function of the stock market is to provide ready
marketability or liquidity to holdings of securities. The ideal stock market is one that can
provide instantaneous and unlimited liquidity. But it is reasonable to assume that a prudent
long-term investor in equities would provide for his immediate cash needs. This is in
agreement with the three motives of liquidity preference. If so, one would expect not ìnstant'
liquidity, but moderate liquidity. It will be unreasonable for any investor to suppose that his
equity holdings are as good as cash.
Mc Kinnon and Shaw (1973)

This study investigated the advocate liberalization of financial market. Study argues the state
intervention in setting interest rates and quantitative measures of resource allocation
adversely affect, not only allocative efficiency but also depress the aggregate saving rate in
less developed economies.
Khan (1976)
This study of researcher examines the role, and the cost of raising funds from the market. The
study goes on to suggest appropriate measures to enable the NIM to play a part in consonance
with the requirements of the planned growth of industry. The core of the study deals with the
new issues and company finance, the structure of underwriting, and the cost of capital. The
study has important policy implications in terms of its relevance to the national economy. In
the process of industrialization, a developed NIM would be instrumental in forging an
organic link between the collection and distribution of industrial capital.
Blume and Friend (1978)

This study states that the proportion of stock owned by institutional investors in America has
increased sharply, while that owned by individual investors has decreased. They analyze the
effects of the shift in stock ownership from individuals to institutions on the efficiency of
equity market. They also examine, the pros and cons of numerous proposals for improving
Page 23
the securities market. Transactions by individuals have always been regarded as essential to
both liquidity and the efficiency of the market.
Panda (1980)
In this, researcher has studied the role of stock exchanges in India before and after
independence. The study reveals that listed stocks covered four-fifths of the joint stock sector
companies. Investment in securities was no longer the monopoly of any particular class or of
a small group of people. It attracted the attention of a large number of small and middle class
individuals. It was observed that a large proportion of savings went in the first instance into
purchase of securities already issued.
Gupta (1981)
This research is an extensive study titled `Return on New Equity Issues' which states that the
investment performance of new issues of equity shares, especially those of new companies,
deserve separate analysis. The factor significantly influencing the rate of return on new issues
to the original buyers is the `fixed price' at which they are issued. The return on equities
includes dividends and capital appreciation. The study presents sound estimates of rates of
return on equities, and examines the variability of such returns over time.
The findings of this study suggest that the market seems to function largely on a `hit or miss'
basis rather than on the basis of informed beliefs about the long-term prospects of individual
enterprises. The main reason for the market's irrationality appears to be the preponderance of
speculative influences over investment influences.
Gujarathi (1981)
This study of researcher answers the question of the risk - adjusted return in the issue market.
It is a significant work in the field of new issues in India. The difficulty of estimating the risk
(Beta) of newly issued securities forced Guajarathi to use complicated methodology for
arriving at the risk-adjusted return. His conclusion is that investors in the new issue market in
1970s earned an extra normal return of nearly 2 per cent per month.
Chitale (1983)
This research has evaluated the underlying causes of the growing shortage of equity finance
for funding new industrial enterprises in the private sector during the period 1960-1980. The
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available evidence suggests the emerging scarcity of risk finance, despite bullish trend in the
price of select shares and over - subscription to a few issues of good companies. The study
also evaluates the quantum and the kind of returns that investors were able to earn from their
investments in equity shares of new companies.
Gupta (1985)
This study has analyzed share price behavior in India in the context of efficient market
hypothesis. Using data over a period of five years (January 1971 to March 1976) from the
Indian stock market, the author has examined the applicability of Random Walk Hypothesis
in describing share price behavior under the Indian conditions.
Cho (1986)
This study of researcher argues that financial market liberalization may remain, incomplete
without an efficient market for equity capital as a means of spreading risk and reward.
Gupta (1987)
This study emphasis on the geographic distribution of corporate shareholders in India. The
study shows that a process of `securitization' is going on in the Indian capital market. The
spotlight of the study is on equity shareholders. It covers individual holders of industrial
securities in India. It is based on a sample of 1,09,031 security holders drawn from 165
companies distributed over various regions of India.
The study brings out the dominant share of the metropolitan cities. The respective
percentage shares as per data related to 1983- 84 were; Bombay (35.3), Calcutta (10.0), Delhi
(9.5) and Madras (3.9). An important factor for the very meager share of small towns and
villages in the country's share - holding population, according to Gupta, is the lack of
infrastructure needed for facilitating share transactions.
Deva Kumar (1987)

This study reveals that earlier to 1985, there were very few investors and they were
knowledgeable. During the 1985 boom, thousands of new investors invaded the market. The
new investors suffered heavy losses compared to the professionals. A good number of new
investors have walked out of the stock market to safer areas like UTI Units, NSC, etc. There
is a mild shift of investment preferences to mutual funds also.
Page 25
Narayana Rao and Bhole (1990)

This research point out that over longer periods of time, positive rate of return was being
provided by equities, but in the short-run, the real return was often negative. The regression
analysis shows that the nominal total return on equities in India has increased, but not in
proportion to an increase in the rate of inflation. The coefficient of inflation is found to be
nearer to zero than one. The real return on equity has been found negatively related to
inflation throughout all periods. Thus equity share in India may only be a weak or partial
hedge against inflation.
Gupta (1991)
Researcher has made an extensive survey of Indian share-owners, around mid-1990. It
throws light on many unknown aspects of the market for shares and other financial assets.
The study covers a wide range of aspects and has generated much new data on investors, their
investment habits and preferences.
The study involved nearly 6000 households spread over more than 100 cities of
India. According to the study there do around 38 lakh share owning households and about 90
to 95 lakh shares own individuals in India. The number of debenture - owning households is
about 29 lakh and most of them are shareowners also.
The most outstanding development is that share ownership has become a middle class
phenomenon (7501'0). Nearly 6.5 percentages of the Indian households own shares and are
mainly restricted to cities. The analysis reveals that nearly 75% of the share owners are long
term investors.
Anshuman and Chandra (1991)

This study of researcher has trace out the government policy of favoring small shareholders
in terms of allotment of shares. They argue that such a policy suffers from several lacunae
such as higher issue and servicing costs and lesser vigilance about the functioning of
companies because of inadequate knowledge.
Jawahar Lal (1992)

This study presents a profile of Indian investors and evaluates their investment decisions. He
made an effort to study their familiarity with, and comprehension of financial information,
Page 26
and the extent to which this is put to use. The information that the companies provide
generally fails to meet the needs of a variety of individual investors and there is a general
impression that the company's Annual Report and other statements are not well received by
them.
Fama and French, (1992)

This study titled, “The cross section of expected returns”, Journal of Finance identifies that
value stocks (high book/market) significantly outperform growth stocks (low book/market).
The average return of the highest book/market decile is reported to be one per cent per month
higher than the average return for the lowest book/market decile. (www.aims-
international.org).
Mayer (1992)
This research has examined using company balance sheet data, found that internal resources
finance bulk of corporate investment in major OECD countries and the roll of the stock
market is very limited.
Pyare Lal Singh (1993)

This study titled, Indian Capital Market, a functional analysis, depicts the primary market
as a perennial source of supply of funds. It mobilizes the savings from the different sectors of
the economy like households, public and private corporate sectors. The number of investors
increased from 20 lakhs in 1980 to 150 lakhs in 1990 (7. 5 times). In financing of the project
costs of the companies with different sources of financing, the contribution of the securities
has risen from 35.01% in 1981 to 52.94% in 1989. In the total volume of the securities
issued, the contribution of debentures / bonds in recent years has increased significantly from
16. 21 per cent to 30.14 per cent.
Subhash Chander and Ashwani Kansara (1994)

This study has surveyed the perceived significance of the information contained in the
abridged prospectus attached to the application form for shares / debentures of companies.
For an existing company, the information necessary for investment decisions could be
obtained from newspapers, magazines, annual reports, prospectus etc. But for a new
Page 27
company, abridged prospectus is the main important document which provides information
for investment decisions.
The study shows that the majority of investors are casual investors. The investors
regard abridged prospectus as well as the investment journals as the prime source of
information for their investment decisions. Investment decisions also depend upon unofficial
premium quoted in business magazines, expert analysis, market trends, political
considerations, etc.
Bajpai (1994)
This study investigated that, the liquidity aspect is an essential constituent of an efficient
stock market, a sub-system of capital market. The growth of the equity in the 1980s was
supported by the actual experience of the Indian investors. Equity prices between 1978 and
1993 have outperformed other popular avenues of investment.
The chance of lucrative capital gain along with annual return from equity investment
attracted investors in a large scale towards primary and secondary capital markets. It
highlighted the need for liquidity of investment. The fact is that only 6 per cent of the listed
scripts remained on the active trading, and 28 per cent of them were traded once in a year just
to satisfy the requirements of listing agreement.
Bhole (1995)
This study "The Indian Capital Market at Crossroads" finds that various categories of
people in India have become preoccupied, rather obsessed with, the industrial securities
market since the middle of the 1980s, particularly since the launching of the New Economic
Policy (NEP) in the middle of 1991. The stock market has been regarded and projected as the
barometer of the health of the economy. The essentiality of the growth or spread of equity
culture or equity is being constantly stressed. Though the stock market activity has been
subject to wide fluctuations, the long-term trend has been one of steep increase. An
accelerating or exponential increase in new issues has occurred during the 80s and 90s. The
investors' asset preference has somewhat shifted from deposits to industrial securities.
Sahadevan and Thirpal Raju (1995)

This study investigates into the lead-lag relationship between money supply and stock return
in the Indian context. The study has attempted to trace the relationship between stock returns
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and money supply using monthly observation on SENSEX, RBI Index, M1, and M3 for a
period spanning over 14 years ending March 1994. The result reveals that supply variations
in money have a lag effect on stock return and hence, stock market is not found efficient with
respect to monetary data.
Amanulla and Kamaiah (1995)

This research makes an attempt to assess the Indian stock market efficiency by using market
integration approaches. The results show that there is no evidence in favour of market
efficiency of Bombay, Madras and Calcutta Stock Exchanges, while the results confirm the
existence of market efficiency in Ahmedabad and Delhi Stock Exchanges.
Feldman and Kumar (1995)

This research shows the potential benefits of equity markets to developing countries. They
argue that several constraints prevent banks from providing funds for long-term investment.
Improving the functioning of secondary market trading has the added advantage of
facilitating the primary issuance of equity shares.
The combined capitalization of some 38 emerging stock markets had increased
dramatically from less than $ 100 billion in 1983 to nearly $2 trillion by 1993. Information
flows, disclosure requirements, auditing and accounting standards and the existence of credit
rating institutions have an important bearing on the development and operations of capital
markets.
Dowen, R.J. (2001)

This study of researcher extends the Abarbanell and Bushee (1997, 1998) research on topic
“Fundamental Information and Monetary Policy: The Implications for Earnings and
Earnings Forecasts” by including new information developed in finance-related literature as
additional signals in the form of dividend yield, firm size and book-to-market value of equity
ratio. Monetary policy is also identified as a variable that may form the relationship. This is
based on the belief that monetary policy influences equity returns. Similar results were found.
Monetary policy relates both to the observed level of the signals and the level of earnings
change. However, monetary policy “does not alter the degree to which future earnings are
predictable from publicly available information”.
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The Economic Times' study (1995)

This study suggests that the major factors leading to a sustained weakness in stock prices are
excessive supply of equity shares and higher than apparent (P/E) levels of major stocks. Both
imply a failure of the market.
When the Sensex peaked at 4547 on April 2, 1992, the aggregate market
capitalization amounted to Rs. 2,410 billion. And when the Sensex steadily fell to touch a
bottom of 1980 on 27 April 1993, (56.5%) the aggregate market capitalization declined only
by 23% to Rs. 1859 billion. The bulk of this differential (56.5-23 =33.5%) is due to the
increase in the sheer quantity of shares. By September 12, 1994, the Sensex scaled a peak of
4643, up by 134 %. But the aggregate market capitalization rose even more steeply to Rs.
5,518 billion.
A CMIE (1995)
This study on Initial Public Offering (IPO) points out that average annualized returns
obtained from issue date to list date by IPOs was 339%. But these returns fade away with
time, so that after one-month of listing, they drop to 256%. Annualized returns after three
months fell to 206% and subsequently to 120% after one year from listing. Returns on IPOs
are also highly volatile in the first few days of listing. By the end of sixty days from listing,
the volatility drops to 25 % of what it was in the first ten days of listing.
Debojit Chakraborty (1997)

This study of researcher tries to establish a relationship between “major economic
indicators and stock market behavior”. It also analyses the stock market reactions to
changes in the economic climate. The factors considered are inflation, money supply, and
growth in GDP, fiscal deficit and credit deposit ratio. To find the trend in the stock markets,
the BSE National Index of Equity Prices (Natex) which comprises 100 companies was taken
as the index. The study shows that stock market movements are largely influenced by, broad
money supply, inflation and fiscal deficit apart from political stability.
CMIE (1997)
This study explains that the proportion of rights issues was down to 16% during the first
three-quarters of the1996-'97 from 21% in 1995- With an objective to judge, what kind of
issues from the primary market have provided returns to the investors, CMIE analyzed the
Page 30
returns of a random sample of rights issues. This analysis clearly brought out the point that
judicious investments do provide returns. The majority of the rights offerings, which have
given positive returns, outperformed the market.
From the available review of literature mentioned above, there was no article or studies
which is related to my area of interest. Hence in order to bridge the gap between this, I have
selected this topic for my research.
2.3: Statement of the problem:

This study was undertaken to analyze the various economic, industry and company
factors that affect the IT sector. Fundamental analysis is good for long term investment based
on long term trend. The ability to identify and predict long term economic, demographic, and
technological or consumer trends can benefit long term investor who picks the right industry
or company. Again the study also analyzes the performance of the seven IT companies for the
past five years and comparison is made for their performance in different years.
2.4: Objective of the study:

The objective of this project is to deeply analyze our Indian IT sector for investment
purpose by monitoring the growth rate and performance on the basis of historical data. The
main objectives of the Project study are:
i. To analyze the financial health of selected IT companies stock.

ii. To examine the growth of IT sector in Indian capital market.
iii. To prepare comparative study of top IT companies.
iv. The primary objective of equity research is to analyze the earnings persistence.
v. To find out potentiality of selected companies through current ratios.
vi. To check companies performance on the basis of historical data.
vii. To study and examine the relevance of fundamental analysis in investment decisions
making process.
viii. To analyze which company is giving best returns to the shareholders.
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2.5: Scope of the study:

The scope of the study is identified and during the study is conducted. The project is
based on tools like fundamental analysis and ratio analysis. Further, the study is based on
information of last five years.
i. The analysis is made by taking into consideration seven companies i.e. TCS,
Wipro, Infosys, Satyam computers services, HCL Technologies, Tech Mahindra,
L&T Infotech.
ii. The scope of the study is limited for a period of five years.
iii. The scope is limited to only the fundamental analysis of the chosen stocks.
2.6: Need of the study:

To start any business capital plays major role. Capital can be acquired in two ways by
issuing shares or by taking debt from financial institutions or borrowing money from
financial institutions. The owners of the company have to pay regular interest and principal
amount at the end. Stock is ownership in a company, with each share of stock representing a
tiny piece of ownership. The more shares a person own, the more of the company he owns.
The more shares he own, the more dividends he earn when the company makes a profit. In
the financial world, ownership is called “Equity”.
Advantages of selling stock:

• A company can raise more capital than it could borrow.
• A company does not have to make periodic interest payments to creditors.
• A company does not have to make principal payments stock/shares play a major role in
acquiring capital to the business in return investors are paid dividends to the shares they own.
The role of equity analysis is to provide information to the market. An efficient

market relies on information: a lack of information creates inefficiencies that result in stocks
being misrepresented (over or under valued). This is valuable because it fills information
gaps so that each individual investor does not need to analyze every stock thereby making the
markets more efficient.
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2.7: Limitations:
a) This study has been conducted purely to understand Equity analysis for investors.
b) The study is restricted to seven companies based on Fundamental analysis.
c) The study is limited to the companies having equities.
d) Detailed study of the topic was not possible due to limited size of the project.
e) Suggestions and conclusions are based on the limited data of five years.
f) The future is uncertain.
2.8: Research Methodology:

Research design or research methodology is the procedure of collecting, analyzing
and interpreting the data to diagnose the problem and react to the opportunity in such a way
where the costs can be minimized and the desired level of accuracy can be achieved to arrive
at a particular conclusion.
The sample of the stocks for the purpose of collecting secondary data has been
selected on the basis of Random Sampling. The stocks are chosen in an unbiased manner and
each stock is chosen independent of the other stocks chosen. The stocks are chosen from the
IT sector.
The sample size for the number of stocks is taken as 7 for fundamental analysis of
stocks as fundamental analysis is very exhaustive and requires detailed study.
2.8.1: Source of Data:
Sources of data may be classified into primary and secondary sources. Primary sources
are original sources from which the researcher directly collects data from the customer.
Secondary data has been collected from various sources to analyze the fundamentals. The
secondary data are collected from the BSE, NSE, moneycontrol.com, articles, magazine,
journals and various websites etc.
2.8.2: Research Method:
The descriptive method is used for the study.
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2.8.3: Sample Size:
For this study seven IT companies are selected which are listed under Indian stock market.
2.8.4 Chapter scheme:
Chapter 1 Introduction: It contains information of equity analysis and Indian IT sector,

background, concept, overview, meaning of fundamental and technical analysis, role of IT
sector, and impact of IT sector on Indian economy.
Chapter 2 Review of Literature and Research Design: It contains the information about
the introduction, Review of Literature, Statement of problems, Scope of study, Objective of
study, Methodology, Limitation, and chapter schemes.
Chapter 3 Industry profile and Company profile: It contains the information related to the
origin and growth of Indian IT sector and Indian stock market, types of stock market, recent
trends etc. and also the information related to top IT companies working in India and listed in
stock market, and all details about it.
Chapter 4 Results, Analysis, and Discussions: It is the analysis showing the various
opinions of the investors relating to the direct equity investment and investment in IT sector.
Chapter 5 Summary of Finding, Conclusion & Suggestion: It contains the findings,

conclusion, and suggestion related to the various investment avenues. Bibliography.
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3.1: Introduction:
The computer systems design and related services industry is among the economy's
largest and fastest sources of employment growth. Employment increased by 616,000 over
the 1994-2004 periods, posting a staggering 8.0-percent annual growth rate. The projected
2004-14 employment increase of 453,000 translates into 1.6 million jobs, and represents a
relatively slower annual growth rate of 3.4 percent as productivity increases and offshore
outsourcing take their toll. ("Industry output and employment projections to 2014" by Jay M.
Berman, Bureau of Labor Statistics) However, the main growth catalyst for this industry is
expected to be the persistent evolution of technology and business' constant effort to absorb
and integrate these resources to enhance their productivity and expand their market
opportunities. Employment of computer and information systems managers is expected to
grow between 18 to 26 percent for all occupations through the year 2014. (Career Guide to
Industries 2006-07)
The Indian IT sector is growing rapidly and it has already made its presence felt in all
parts of the world. IT has a major role in strengthening the economic and technical
foundations of India. Indian professionals are setting up examples of their proficiency in IT,
in India as well as abroad.
3.2: IT sectors- an overview:
The computer systems design and related services industry is among the economy's
largest and fastest sources of employment growth. Employment increased by 616,000 over
the 1994-2004 periods, posting a staggering 8.0-percent annual growth rate.
The projected 2004-14 employment increase of 453,000 translates into 1.6 million
jobs, and represents a relatively slower annual growth rate of 3.4 percent as productivity
increases and offshore outsourcing take their toll. ("Industry output and employment
projections to 2014" by Jay M. Berman, Bureau of Labor Statistics) However, the main
growth catalyst for this industry is expected to be the persistent evolution of technology and
business' constant effort to absorb and integrate these resources to enhance their productivity
and expand their market opportunities. Employment of computer and information systems
managers is expected to grow between 18 to 26 percent for all occupations through the year
2014. (Career Guide to Industries 2006-07)
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The sector can be classified into these broad categories -

1. IT Services
2. Engineering Services
3. ITES-BPO Services
4. E Business
3.2.1: IT Services:
It can further be categorized into Information Services (IS) outsourcing, packaged software
support and installation, systems integration, processing services, hardware support and
installation and IT training and education.
3.2.2: Engineering Services:

Include Industrial Design, Mechanical Design, Electronic System Design (including
Chip/Board and Embedded Software Design), Design Validation Testing,
Industrialization and Prototyping.
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3.2.3: IT Enabled Services:

These are services that use telecom networks or the Internet. For example, Remote
Maintenance, Back Office Operations, Data Processing, Call Centers, Business Process
Outsourcing, etc.
3.2.4: E Business:
(Electronic business) is carrying out business on the Internet; it includes buying and selling,
serving customers and collaborating with business partners.
Major Trends:
Graph No. 3.1 showing major trends in Hiring
The bar chart shows that the recruitment of engineers and IT professionals in the
industry is growing at the Compound annual rate of 14.5% approximately. In the FY06,
the direct employment in the IT-ITES sector was 1.3 million people and the indirect
employment was 3 million approximately.
A trend in salary hikes along with abundant growth opportunities, IT sector is one of
the highest paying sectors. The average increase in salary in IT sector across the levels was
around 16% and the average increase in the ITeS BPO sector across the levels was in
between16%-18% Requisites for balanced salaries –
 Review of compensation according to the skills
 Developing talent in-house
Page 37
 Entry of talented fresher’s in the industry
IT: Success Factors:

Increasing number of skilled professionals in IT. The demographic factor.
Approximately 60% of the population of India lies in the age group of 15-65. More than
half of the population of India is below the age of 25. So in the future, the number of working
people is going to be more than the number of dependents. In the year 2006, Total enrollment
in colleges was 9.3 million and India produced 441,000 Technical graduates. India has the
second largest English-speaking workforce in the world.
3.3: The Indian IT Industry:

The Information Technology (IT) sector in India holds the distinction of advancing
the country into the new-age economy. The growth momentum attained by the overall
economy since the late 1990s to a great extent can be owed to the IT sector, well supported
by a liberalized policy regime with reduction in telecommunication cost and import duties on
hardware and software. Perceptible is the transformation since liberalization - India today is
the world leader in information technology and business outsourcing. Correspondingly, the
industry’s contribution to India’s GDP has grown significantly from 1.2% in 1999-2000 to
around 4.8% in FY06, and has been estimated to cross 5% in FY07. The sector has been
growing at an annual rate of 28% per annum since FY01. Indian IT companies have globally
established their superiority in terms of cost advantage, availability of skilled manpower
and the quality of services. They have been enhancing their global service delivery
capabilities through a combination of organic and inorganic growth initiatives. Global giants
like Microsoft, SAP, Oracle, and Lenovo have already established their captive centers in
India. These companies recognize the advantage India offers and the fact that it is among
the fastest growing IT markets in the Asia-Pacific region.
Sector structure/Market size:
The Indian information technology industry has played a key role in putting India on
the global map. Thanks to the success of the IT industry, India is now a power to reckon with.
According to the National Association of Software and Service Companies (NASSCOM), the
apex body for software services in India, the revenue of the information technology sector
Page 38
has risen from 1.2 per cent of the gross domestic product (GDP) in FY 1997-98 to an
estimated 5.8 per cent in FY 2008-09.
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.
The government expects the exports turnover to touch US$ 80 billion by 2011,
growing at an annual rate of 30 per cent per annum, from the earlier few million dollars’
worth exports in early 1990s.
Graph No. 3.2 showing IT market structure
Page 39
Functioning of Software segment is explained pictorially in the figure below:
Page 40
3.4: MAJOR IT COMPANIES:
S. NO. COMPANY
1 TCS
2 INFOSYS
3 WIPRO
4 HP
5 IBM
6 SATYAM
7 HCL
8 PATNI
9 POLARIS
10 CISCO
11 KPIT CUMMINS
12 I-FLEX SOLUTIONS
13 MICROSOFT
14 DELL
15 LARSEN & TURBO
3.5: Nature of competition:
Nature of competition is an essential factor that determines the demand for the
particular product, its profitability and the price of the concerned company scripts. The
company’s ability to withstand the local as well as the multinational competition counts
much. If too many firms are present in the organized sector, the competition would be severe.
The competition would lead to a decline in the price of the product. The investor before
investing in the script of a company should analyze the market share of the particular
company's product and should compare it with the top five companies.
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Key Positives & Negatives for the Indian IT Industry:
Positives Negatives
Growth in IT spending Rupee Appreciation
Opening up of newer geographies like Anticipated slowdown in the US economy

Europe
Strong volume growth Wage inflation
Increase in offshore spending Higher attrition rate
M&A to increase reach, clients and Lack of proper infrastructure

offerings
Setting training and development centers to Competition from low cost countries, China,
train fresh entrants Philippines, Vietnam
3.6: Growth of Indian IT industry:
India's IT industry has recorded phenomenal growth over the last decade. During the
period from 1992-2001, the compounded annual growth rate of the Indian IT services
industry has been over 50%. The software sector in India has grown at almost double the rate
of the US software sector.
The statistics of the India's IT industry substantiates the huge momentum acquired by
the IT sector in the recent past. During the financial year 2000-2001, the software industry
in India accounted for $8.26 billion. The corresponding figure was $100 million 10 years
back.
As per the report of a study undertaken by NASSCOM-McKinsey, the software

export from Indian IT industry is likely to reach 50 billion US dollars in the year 2008. This
growth rate of the software sector for the year 2008 has been projected on the basis of the
35% per year growth rate achieved in the last couple of years. Export of software and
services from India is expected to add almost 41 billion US dollars to the annual revenue of
the Indian government in the current year. The share of technology industry in India's GDP is
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expected to reach 5.5% in 2008; while the corresponding figure in 1998 was as small as
1.2%. The study of NASSCOM has revealed that the growth of India's IT industry has
prompted the growth of Indian exports by almost 36%. Another favorable effect of India's IT
boom is the expansion of opportunities of employment. By the end of fiscal year 2008, the IT
sector of India is expected to employ around 2 million skilled Indian youths.
The growth of India's IT sector has brought about many other positive changes in the
Indian economy. The purchasing power of a large section of Indian population has increased
dramatically. This has resulted in an increase in the average standard of living of the majority
of population of the country. The increase in purchasing power of the common people has
propelled the growth rate of the other sectors of the economy as well.
India is now home to a number of IT giants. The operations of IT firms like Wipro,
Infosys, Accenture, Capgemini, Tata Consultancy Services and many more in different
locations of India have changed the entire scenario of the Indian job market. The ITES sector
has also come up to complement the growth of Indian IT sector.
As it can be seen from the table above, researcher has clocked the highest Sales
CAGR of 99% in the past five years, followed by HCL Infosystems (50%), Infosys (24%)
and Wipro (22%). However, the highest margins are enjoyed by the software majors Infosys
(28%), closely followed by Educomp (27%) and TCS (24%).
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Outsourcing:
A research by Gartner forecasts India as the undisputed leader in the outsourcing

space in the year 2008. India's most prized resource is its readily available technical work
force. India has the second largest English-speaking scientific professionals in the world,
second only to the US. It is estimated that India has over 4 million technical workers, over
1,832 educational institutions and polytechnics, which train more than 67,785 computer
software professionals every year. The enormous base of skilled manpower is a major draw
for global customers. According to NASSCOM software and services exports (including
exports of IT services, BPO, engineering services and R&D and software products) reached
US$47 billion in FY 2008-09, contributing nearly 78 per cent to the total software and
services revenue of US$ 59.6 billion.
Domestic Markets:
India's domestic market has also become a force to reckon with, as the existing IT
infrastructure evolves both in terms of technology and depth of penetration.
According to NASSCOM, domestic IT market (including hardware) reached US $24.3 billion

in FY 2008-09 as against US$ 23.1 billion in FY 2007-08, a growth of 5.3 per cent.
India Inc's demand for IT services and products has bolstered growth in the domestic
sector with deal sizes going up remarkably and contracts worth US$ 50 million-US$100
million up for grabs. Such growth in the software and services sector has been achieved
because of spectacular growths in some segments. According to research firm Gartner, India's
personal computer (PC) market is likely to grow by 13.7 per cent to 11.1 million units in
2009, aided by a surge in demand for laptops. The laptop market is expected to grow by 37
per cent from 2009 to 3.69 million units and constitute a third of the total PC market.
The securities market has essentially three categories of participants (i) the investors,
(ii) the issuers, (iii) the intermediaries. 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.
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3.7: 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
mentioned 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 trading in 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.
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Equity Investment:
Why should one invest in equities in particular?
When a person buys a share of a company he becomes a shareholder in that company.

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 around16%.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
needs 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.
3.8: Scope of IT Industry in India:
The IT industry has great scope for people as it provides employment to technical and
non-technical graduates and has the capability to generate huge foreign exchange inflow for
India. India exports software and services to approximately 95 countries in the world. By
outsourcing to India, many countries get benefits in terms of labor costs and business
processes. Also, the Indian companies are broadening the range of services being provided to
the customers, which is resulting in more off shoring. Talent acquisition, development and
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retention initiatives taken by the companies have brought down the employee attrition rates,
thereby providing more stability to the employees and increasing their job commitment.
Many financial institutions are providing funds for the expansion of IT and ITeS
businesses. In order to support IT and ITES, the Indian Government is also taking many
steps. For example:
a) The Govt. has provided incentives including tax holiday up to 2010 and competitive
duty structures.
b) The Govt. is trying to reduce the international communication cost.
c) It is providing infrastructure support through organizations such as software
technology parks. All these factors collectively create a number of opportunities in the
IT sector.
3.9: Expanding Foreign Investments by India:
This year India's investment in US surpassed $ 2 billion. The main reason being the
booming Indian economy which has boosted the confidence of Indian companies. So unlike
the past, now they are willing to take risks. Many Indian companies have acquired several
foreign entities pushing the Indian share in US economy up to $ 2 billion in 2006-07. Out of
total hundred, forty eight deals have been made in the IT-ITeS sector by Indian firms. The
other acquisitions have been in various sectors like pharmaceuticals, hospitality industry,
agro products and automotive industry.
“India Inc. is now well-equipped to acquire overseas companies because of the

regulatory development that has taken place due to the government's adoption of liberal
measures and various monetary relaxations provided by the Reserve Bank of India (RBI)
with the growth of foreign exchange." Stated the study done by the Federation of Indian
Chambers of Commerce and Industry (FICCI) and Ernst & Young.
As a result, Indian companies are opening up units in US and other foreign markets resulting
in mass generation of employment and hence giving rise to the reverse outsourcing trend.
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3.10: STOCK EXCHANGES IN INDIA:
Stock Exchanges are an organized marketplace, either corporation or mutual

organization, where members of the organization gather to trade company stocks or other
securities. The members may act either as agents for their customers, or as principals for their
own accounts. As per the Securities Contracts Regulation Act, 1956 a stock exchange is an
association, organization or body of individuals whether incorporated or not, established for
the purpose of assisting, regulating and controlling business in buying, selling and dealing in
securities.
Stock exchanges facilitate for the issue and redemption of securities and other
financial instruments including the payment of income and dividends. The record keeping is
central but trade is linked to such physical place because modern markets are computerized.
The trade on an exchange is only by members and stock broker do have a seat on the
exchange.
3.11: List of Stock Exchanges in India:
Bombay Stock Exchange
National Stock Exchange
OTC Exchange of India
Regional Stock Exchanges:
1. Ahmedabad
2. Bangalore
3. Bhubaneswar
4. Calcutta
5. Cochin
6. Coimbatore
7. Delhi
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8. Guwahati
9. Hyderabad
10. Jaipur
11. Ludhiana
12. Madhya Pradesh
13. Madras
14. Magadh
15. Mangalore
16. Meerut
17. Pune
18. Saurashtra Kutch
19. Uttar Pradesh
20. Vadodara
3.12: Profile of TCS (Tata Consultancy Services):

TCS is an Indian multinational Information Technology (IT) Services, business
solutions and outsourcing services. Company headquartered in Mumbai, Maharashtra. TCS is
a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange and the National
Stock Exchange of India. It is one of India’s most valuable companies and it is the largest
India-based IT services company by 2012 revenues.
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1968 to 2000
Tata Consultancy Services (TCS) was founded in 1968. Its early contracts included
providing punched card services to sister company TISCO (now Tata Steel), working on an
Inter-Branch Reconciliation System for the Central Bank of India, and providing bureau
services to Unit Trust of India. In 1975, TCS conducted its first campus interviews, held at
IISc, Bangalore. The recruits comprised 12 Indian Institutes of Technology graduates and
three IISc graduates, who became the first TCS employees to enter a formal graduate trainee
programme.
In 1979, TCS delivered an electronic depository and trading system called SECOM
for the Swiss company SIS Sega Inter Settle. TCS followed this up with System X for the
Canadian Depository System and automating the Johannesburg Stock Exchange. TCS
associated with a Swiss partner, TKS Teknosoft, which it later acquired.
In 1981, TCS established India's first dedicated software research and development center,
the Tata Research Development and Design Center (TRDDC) in Pune.[7] In 1985 TCS
established India's first client-dedicated offshore development center, set up for client
Tanedm.
In the early 1990s the Indian IT outsourcing industry grew rapidly due to the
Y2K bug and the launch of a unified European currency, Euro. TCS created the factory
model for Y2K conversion and developed software tools which automated the conversion
process and enabled third-party developer and client implementation.
2000 to present:
By 2004, TCS's e-business activities were generating over US$500 million in annual
revenues. On 25 August 2004 TCS became a publicly listed company.
In 2005 TCS became the first India-based IT services company to enter the
bioinformatics market.
In 2006 TCS designed an ERP system for the Indian Railway Catering and Tourism
Corporation.
In 2008 TCS undertook an internal restructuring exercise which aimed to increase the
company's agility.
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TCS entered the small and medium enterprises market for the first time in 2011, with cloud-
based offerings. On the last trading day of 2011, TCS overtook RIL to achieve the highest
market capitalization of any India-based company.
In the 2011/12 fiscal year TCS achieved annual revenues of over U$10 billion for the first
time.
TCS is the market leader in IT sector in India and other major companies like Wipro,
Infosys, Accenture and IBM are the major market share in the economy. The revenue of TCS
is now US $5.70 billion it is more than the other major companies.
Type Public (BSE: 532540)

Subsidiary of Tata Group
Founded 1968
Headquarters Mumbai, India
Key people Ratan Tata (Chairman)
S Ramadorai (vice chairman)
N Chandrasekaran (CEO & MD)
S Mahalingam (Executive Director & CFO)
Phiroz Vandrevala (Executive Director& Head, Global
Corporate Affairs)
Ajoy Mukherjee (VP& Head, Global Human Resources)
Industry Software services
TCS Bancs
Products Digital Certification Products
Healthcare Management Systems
IT consulting
IT services
Outsourcing
BPO
Software Product
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3.13: Profile of WIPRO:

Wipro Limited (formerly Western India Products Limited is an information
technology (IT) consulting and outsourcing service company located in Bangalore,
Karnataka, India. As of 2012, the company had 140,000 employees in 54 countries. Wipro is
the second largest IT services company in India. Its subsidiary, Wipro Enterprises Ltd., offers
consumer care, lighting, healthcare, and infrastructure engineering.
Wipro Infotech is a leading manufacturer of computer hardware and provider of IT

services in India and the Middle East region. Part of Wipro Ltd, the $6.98 billion
conglomerate and global leader in technology enabled solutions, the company leverages on
the parent's philosophy of 'Applying Thought' to enable business results by being a
transformation catalyst.
Wipro’s vast IT services portfolio includes consulting, systems integration,

application development and maintenance, technology infrastructure services, package
implementation and R&D services among others.
Type Public (BSE 507685)
Founded 1945
Founder(s) M.H. Premji
Headquarters Bangalore, Karnataka, India
Key people Azim Premji
(Chairman)
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Girish Paranjpye
Key people (Joint CEO)
Suresh Vaswani
(Joint CEO)
SA Sudarshan
Industry IT Services
Services IT Consulting
Business Process Outsourcing
Product Engineering Solutions
Technology Infrastructure Services
Revenue US$ 7.3 billion (2012)
Operating income US$ 1.19 billion (2012)
Profit US $1.09 billion (2012)
Total equity US$ 5.62 billion (2012)
Total assets US$ 8.56 billion (2012)
Employees 140569 (2012)
Website www.wipro.com
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3.14: Profile of Infosys:
Infosys Limited (NYSE: INFY) was started in 1981 by seven people with US$250.
Today, they are a global leader in consulting, technology and outsourcing with revenues of
US$ 7.398 billion (FY14). Many of the world’s most successful organizations rely on Infosys
to deliver measurable business value. Infosys provides business consulting, technology,
engineering and outsourcing services to help clients in over 30 countries build tomorrow’s
enterprise.
Our award-winning Infosys Labs and its breakthrough intellectual property can be
leveraged as a co-creation engine to accelerate innovation across the enterprise.
Infosys pioneered the Global Delivery Model (GDM), 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. Continued leadership around GDM enables
Infosys to drive extraordinary efficiencies and free up clients’ resources for strategic
transformation or innovation initiatives.
Infosys has a global footprint with 69 offices and 87 development centers in US,
India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands,
Poland, Canada and many other countries. Infosys and its subsidiaries have 156,688
employees as on March 31, 2013.
Infosys takes pride in building strategic long-term client relationships. 96.5% of our
revenues come from existing customers (Q4 FY 13).
Infosys gives back to the community through the Infosys Foundation that funds
learning and education.
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Type Public (BSE 500209)
Founded July 2, 1981
N R Narayana Murthy
Nandan Nilekani
N. S. RaghavanKris
Founder(s) Gopalakrishnan
S. D. Shibulal
K. Dinesh
Ashok Arora
Headquarter Bangalore, India
N R Narayana Murthy
(Chairman)
Key People Kris Gopalakrishnan
(CEO) & (MD)
S. D. Shibulal
(COO) & (Director)
Industry Software services

Products IT Services
Revenue US $ 7.4 billion (2013)
Total Assets US$ 8.53 billion (2013)
Website www.infosys.com
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3.15: Profile of Satyam Computer Services:
Mahindra Satyam (formerly Satyam Computer Services) is an Indian IT services

company based in Hyderabad, India. It was founded in 1987 by B Ramalinga Raju. Mahindra
Satyam is a part of the Mahindra Group which is one of the top 10 industrial firms based in
India. The company offers consulting and information technology (IT) services spanning
various sectors, and is listed on the Pink Sheets, the National Stock Exchange (India)
and Bombay Stock Exchange (India). In June 2009, the company unveiled its new brand
identity "Mahindra Satyam" subsequent to its takeover by the Mahindra Group's IT arm, Tech
Mahindra on 13 April 2009.
Mahindra Satyam provides services in the following areas:
a) Aerospace
b) Banking, Financial Services & Insurance
c) Energy and Utilities
d) Life Sciences & Healthcare
e) Manufacturing, Chemicals & Automotive
f) Public Services & Education
g) Retail
h) Consumer Packaged Goods
i) Travel, Transport, Logistics
j) Telecom, Infrastructure, Media and Entertainment & Semiconductors
k) Information Technology
Type Public Company
Traded as BSE: 500376
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NSE: SATYAMCOMP
Industry IT services, IT consulting
Founded 1987
Founder(s) Byrraju Ramalinga Raju
Headquarters Hyderabad, India
Key people Vineet Nayyar (Chairman)

C. P. Gurnani (CEO)
Services IT, business consulting and outsourcing services
Revenue 69.23 billion (US$1.3 billion) (2012)
Profit 13.06 billion (US$240 million) (2012)
Owner(s) Mahindra Group
Website www.mahindrasatyam.com
3.16: Profile of HCL:
HCL Technologies is one of more than 3,000 technology companies in the Bloomberg
database. HCL Technologies is one of the seven companies with revenue of more than $4.5
billion, a market capitalization of more than $5 billion, and a compounded annual growth rate
greater than 25 per cent during the past five years.
HCL Technologies is one of three businesses which are separately listed in India –
falling under the corporate umbrella of HCL Enterprise with combined annual 2011 revenues
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of US$6 billion. HCL Enterprise was founded in 1976 and is one of India's original IT garage
startups. HCL Technologies formed in 1991 when HCL's R&D business was spun off to
focus on the growing IT services industry. They have decided to vast their features in
Information Technology all over the world. Over the last 20 years, HCL has expanded its
service portfolio in IT applications (custom applications for industry solutions and package
implementation), IT infrastructure management, and business process outsourcing, while
maintaining and affecting product engineering. HCL Technologies is the first Indian IT
garage startup. It is also the first company to address the needs of Indian Consumer Market.
Type Public
Traded as BSE: 532281

NSE: HCLTECH
Founded on November 12, 1991
Founders Shiv nadir

vineet nayar
Key people Shiv Nadar

(Chairman & CSO)
Vineet Nayar
(VC & Joint Managing Director)
Anant Gupta
(President & CEO)
Services IT, business consulting and outsourcing services
Revenue US$ 4.54 billion (Apr 2013)
Website www.hcltech.com
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3.17: Profile of Tech Mahindra:
Tech Mahindra Limited is an Indian provider of information technology (IT),

networking technology solutions and business support services (BPO) to the global
telecommunications industry. Tech Mahindra is a part of Mahindra Group conglomerate with
headquartered at Pune, India.
On 23 May 2012, Tech Mahindra reported a 3% increase in its revenue for the year
ended March 31, to $1.15 Billion. Its activities spread across a broad spectrum, including
Business Support Systems (BSS), Operations Support Systems (OSS), Network Design &
Engineering, Next Generation Networks, Mobility Solution, and Security consulting and
testing. The “solution portfolio” includes Consulting, Application Development &
Management, Network Services, Solution Integration, Product Engineering, Infrastructure
Managed Services, Remote Infrastructure Management and BSG (comprises BPO, Services
and Consulting). Tech Mahindra is ranked #6 in India's software services firms behind Tata
Consultancy Services, Wipro, Infosys, HCL Technologies and Satyam Computer Services
and overall #161 in Fortune India 500 list for 2011. Tech Mahindra has implemented more
than 15 Greenfield Operations globally and has over 128 active customer
engagements mostly in the Telecom sector.
Its executive management team consists of Vineet Nayyar(Executive Vice Chairman),

CP Gurnani(MD), Sujit Baksi (President – Corporate Affairs & Business Services Group),
Sonjoy Anand (CFO), L. Ravichandran (President - IT Services), Amitava Roy (Chief
Operating Officer), Sujitha Karnad (Senior Vice President - HR & QMG for IT Services).
Type Public (BSE: 532755)
(NSE: TECHM)
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Founded 1986
Headquarters Pune, India
Key people Vineet Nayyar (VC&CEO)
Services IT, Business consulting and outsourcing services
Revenue $1.15 billion (2012)
Net Income $129 million (2012)
Parent Mahindra Group
Website www.techmahindra.com
3.18: Profile of Larsen & Toubro Limited:
Larsen & Toubro Limited, also known as L&T, is an Indian multinational

conglomerate headquartered in Mumbai, India. The company has business interests in
engineering, construction, manufacturing goods, information technology and financial
services.
L&T is India’s largest engineering and construction company, with a dominant

presence in India’s infrastructure, power, hydrocarbon, machinery, shipbuilding and railway
sectors. In recent years, L&T has expanded its global presence and international projects
contributed 9% of its overall order book for the 2010-11 period.
Considered to be the “bellwether of India’s engineering sector”, L&T was recognized

as the company of the year in 2010. L&T has featured four times in Forbes Fab 50 list of the
best public companies in the Asia-Pacific region. In 2012, Forbes magazine ranked L&T the
world’s 9th most innovative company, ahead of Google and Apple Inc.
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Traded as NSE: LT
BSE: 500510
Industry Conglomerate
Founded Mumbai, India (1938)
Founder(s) Henning Holck Larse

Soren Kristian Tobro
Headquarters L&T House, Ballard Estate,

Vadodara, Gujarat, India
Key people K. Venkataramanan(CEO & MD)

A. M. Naik(Executive Chairman)
Products Construction
Heavy equipment
Electrical equipment
Power
Shipbuilding
Financial Services
IT Services
Revenue US$ 13.5 billion (2012)
Operating income US$ 1.488 billion (2012)
Net income US$ 907 million (2012)
Total assets US$ 22.84 billion (2012
Website www.larsentoubro.com
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4. ANALYSIS, RESULTS AND DISCUSSION
4.1 Financial analysis:
The best source of financial information about a company is its own financial
statements. This is a primary source of information for evaluating the investment prospects in
the particular company’s stock. Financial statement analysis is the study of a company’s
financial statement from various viewpoints. The statement gives the historical and current
information about the company’s operations. Historical financial statement helps to predict
the future and the current information aids to analyze the present status of the company. The
two main statements used in the analysis are Balance sheet and Profit and Loss Account. The
balance sheet is one of the financial statements that companies prepare every year for their
shareholders. It is like a financial snapshot, the company's financial situation at a moment in
time. It is prepared at the year end, listing the company's current assets and liabilities. It helps
to study the capital structure of the company. It is better for the investor to avoid a company
with excessive debt component in its capital structure.
From the balance sheet, liquidity position of the company can also be assessed with
the information on current assets and current liabilities.
4.2 Ratio analysis:
Ratio is a relationship between two figures expressed mathematically. Financial ratios

provide numerical relationship between two relevant financial data. Financial ratios are
calculated from the balance sheet and profit and loss account. The relationship can be either
expressed as a percent or as a quotient. Ratios summarize the data for easy understanding,
comparison and interpretations. Ratios for investment purposes can be classified into
profitability ratios, turnover ratios, and leverage ratios. Profitability ratios are the most
popular ratios since investors prefer to measure the present profit performance and use this
information to forecast the future strength of the company. The most often used profitability
ratios are return on assets, price earnings multiplier, price to book value, price to cash flow,
and price to sales, dividend yield, return on equity, present value of cash flows, and profit
margins.
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a) Return on Assets (ROA)
ROA is computed as the product of the net profit margin and the total asset turnover ratios.
ROA = (Net Profit/Total income) x (Total income/Total Assets)
This ratio indicates the firm's strategic success. Companies can have one of two
strategies: cost leadership, or product differentiation. ROA should be rising or keeping pace
with the company's competitors if the company is successfully pursuing either of these
strategies, but how ROA rises will depend on the company's strategy. ROA should rise with a
successful cost leadership strategy because the company’s increasing operating efficiency.
An example is an increasing, total asset, turnover ratio as the company expands into
new markets, increasing its market share. The company may achieve leadership by using its
assets more efficiently. With a successful product differentiation strategy, ROA will rise
because of a rising profit margin.
b) Return on Investment (ROI):
ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in

men, machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI
is 25%. The computation of return on investment is as follows:
Return on Investment (ROI) = (Net profit/Equity investments) x 100
As this ratio reveals how well the resources of a firm are being used, higher the ratio,
better are the results. The return on shareholder’s investment should be compared with the
return of other similar firms in the same industry. The inert-firm comparison of this ratio
determines whether the investments in the firm are attractive or not as the investors would
like to invest only where the return is higher.
c) Return on Equity:
Return on equity measures how much an equity shareholder's investment is actually

earning. The return on equity tells the investor how much the invested rupee is earning from
the company. The higher the number, the better is the performance of the company and
suggests the usefulness of the projects the company has invested in. The computation of
return on equity is as follows:
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Return on equity = (Net profit to owners/value of the specific owner's Contribution to

the business) x 100
The ratio is more meaningful to the equity shareholders who are invested to know
profits earned by the company and those profits which can be made available to pay dividend
to them.
d) Earnings per Share (EPS):
This ratio determines what the company is earning for every share. For many
investors, earnings are the most important tool. EPS is calculated by dividing the earnings
(net profit) by the total number of equity shares. The computation of EPS is as follows:
Earnings per share = Net profit/Number of shares outstanding
The EPS is a good measure of profitability and when compared with EPS of similar
other companies, it gives a view of the comparative earnings or earnings power of a firm.
EPS calculated for a number of years indicates whether or not earning power of the company
has increased.
e) Dividend per Share (DPS):
The extent of payment of dividend to the shareholders is measured in the form of

dividend per share. The dividend per share gives the amount of cash flow from the company
to the owners and is calculated as follows:
Dividend per share = Total dividend payment / Number of shares outstanding
The payment of dividend can have several interpretations to the shareholder. The
distribution of dividend could be thought of as the distribution of excess profits/abnormal
profits by the company. On the other hand, it could also be negatively interpreted as lack of
investment opportunities. In all, dividend payout gives the extent of inflows to the
shareholders from the company.
f) Dividend Payout Ratio:
From the profits of each company a cash flow called dividend is distributed among its
shareholders. This is the continuous stream of cash flow to the owners of shares, apart from
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the price differentials (capital gains) in the market. The return to the shareholders, in the form
of dividend, out of the company's profit is measured through the payout ratio. The payout
ratio is computed as follows:
Payout Ratio = (Dividend per share / Earnings per share) * 100
The percentage of payout ratio can also be used to compute the percentage of retained
earnings. The profits available for distribution are either paid as dividends or retained
internally for business growth opportunities. Hence, when dividends are not declared, the
entire profit is ploughed back into the business for its future investments.
g) Dividend Yield:
Dividend yield is computed by relating the dividend per share to the market price of
the share. The market place provides opportunities for the investor to buy the company’s
share at any point of time. The price at which the share has been bought from the market is
the actual cost of the investment to the shareholder. The market price is to be taken as the
cum-dividend price. Dividend yield relates the actual cost to the cash flows received from the
company. The computation of dividend yield is as follows
Dividend yield = (Dividend per share / Market price per share) * 100
High dividend yield ratios are usually interpreted as undervalued companies in the
market. The market price is a measure of future discounted values, while the dividend per
share is the present return from the investment. Hence, a high dividend yield implies that the
share has been under priced in the market. On the other hand a low dividend yield need not
be interpreted as overvaluation of shares. A company that does not pay out dividends will not
have a dividend yield and the real measure of the market price will be in terms of earnings
per share and not through the dividend payments.
Internally for business growth opportunities. Hence, when dividends are not declared, the
entire profit is ploughed back into the business for its future investments.
h) Price/Earnings Ratio (P/E):
The P/E multiplier or the price earnings ratio relates the current market price of the
share to the earnings per share. This is computed as follows:
Price/earnings ratio = Current market price / Earnings per share
Page 65
This ratio is calculated to make an estimate of appreciation in the value of a share of a

company and is widely used by investors to decide whether or not to buy shares in a
particular company. Many investors prefer to buy the company's shares at a low P/E ratio
since the general interpretation is that the market is undervaluing the share and there will be a
correction in the market price sooner or later. A very high P/E ratio on the other hand implies
that the company's shares are overvalued and the investor can benefit by selling the shares at
this high market price.
i) Debt-to-Equity Ratio:
Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s
assets.
Debt-to-equity ratio = Outsiders Funds / Shareholders Funds
The debt-equity ratio is calculated to measure the extent to which debt financing has
been used in a business. It indicates the proportionate claims of owners and the outsiders
against the firm’s assets. The purpose is to get an idea of the cushion available to outsiders on
the liquidation of the firm.
4.3. TCS (TATA CONSULTANCY SERVICES):
Dividend:
Based on the Company’s performance, the Directors are pleased to recommend for
approval of the members a final dividend of 8 per share and a special dividend of 8 per share
for the financial year 2011-12 taking the total dividend to 25 per share (previous year 14 per
share) on the capital of 1,95,72,20,996 equity shares of 1 each. The final dividend and the
special dividend on the equity shares, if approved by the members would involve a cash
outflow of 3,639.57 crores including dividend tax. For equity shares, the proposed final
dividend (including special dividend), interim dividends already paid and dividend tax for the
financial year 2011-12 would aggregate 5,686.82 crores, resulting in a payout of 51.93% of
unconsolidated profit of the Company (54.75% of consolidated profit).
Page 66
Data analysis of Tata Consultancy Services:
i) Debt to Equity ratio = Long term debts/ Equity share holder fund
ii) EPS = Earnings available to Equity share holder/ No of Equity shares
iii) Current ratio= current assets/ current liability
iv) P/E ratio= Market value per share/ Earning per share (EPS)
i). Debt to Equity ratio = Long term debts/ Equity share holder fund
Table No. 4.1 Showing Debt to equity ratio of TCS
Year Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
Debt to Equity Ratio 0.01 0.01 0.01 0.04 0.05
0.06
0.05
0.04
0.03
0.02
0.01
Graph No. 4.1 Showing Debt to equity ratio of TCS
Analysis: Researcher see that debt to equity ratio in mar 2008 was 0.05 and in mar 09 it was
0.04 and next year in mar 10 it came to 0.01 and still the same.
Interpretation: Debt to equity ratio of company is decreasing from 2008 to 2012 in last 5
years it decreased to 80%. A high debt/equity ratio generally means that a company has been
aggressive in financing its growth with debt. This can result in volatile earnings as a result of
the additional interest expense.
Page 67
For the year ended 2011/2012 = 10523/19572.21 = 53.65
For the year ended 2010/2011 = 9189.79/19572.21 = 46.90
Table No. 4.2 showing EPS of TCS (in Rs. Cr.)
Year Mar 12 Mar 11 Mar 10 Mar 09 Mar 08

EPS 53.65 46.90 36.15 54.20 51.70
ratio
60
50
40
30 ratio
20
10
0
mar'08 mar'09 mar'10 mar'11 mar'12
Graph No. 4.2 Showing EPS of TCS
Analysis: From the above table it can be seen that EPS of company in 2008 was 51.70 and it
is increased in next year in 2008/09 by 4.84%. And there was decrease in EPS in the year
2009/2010 by 49.93%. Again EPS increases by 14.39% in March 2012 as compare to its
previous year.
Page 68
Interpretation: From the above graph it can be seen that EPS of company is increasing from
2008 but there was a small decrease in 2010 because of some factors and again company has
performed well in EPS.
iii) P/E ratio: Market price of share / EPS
(in Rs. Cr.)
P/E ratio
40
35
30
25
20 P/E ratio
15
10
5
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.3 showing P/E ratio of TCS
Analysis: From the above calculation it can be seen that price earnings ratio of company was
decreased from 27.66 in 2007/08 to 26.39 in 2008/09. But in next financial year 2009/10 it
increased to 39.56 and again decreased in next year 30.50 and 26.65 in 2010/11 and 2011/12
respectively.
Interpretation: Researcher sees that there was up and down in P/E ratio of the company
from 2007/08 to 201/12.
Page 69
iv) Current ratio:
Current ratio= current assets/ current liability
Table No. 4.3 showing current ratio of TCS
Year Mar 12 Mar '11 Mar '10 Mar '09 Mar '08
Current 2.69 2.85 1.87 2.22 2.19
ratio
current ratio
3
2.5
1.5 current ratio
0.5
0
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
Graph No 4.4 showing current ratio of TCS
Analysis: The above table shows current ratio of the company which is 2.99:1 in 2007/08 and
increased to 2.22:1 in next year mar 2009. But it decreased to 1.87:1 in mar 2010 and again
increases to 2.69:1 in year 2011-12.
Interpretation: The higher the current ratio, the more capable the company is of paying its
obligations. A ratio under 1 suggests that the company would be unable to pay off its
obligations if they came due at that point. So for TCS, current ratio shows that they have
more current assets than current liability. As graph shows that they have potential to pay its
obligation so short term solvency for TCS is strong.
Page 70
4.4. Data analysis of Wipro:
Table No. 4.4 showing Debt to equity ratio of Wipro
Year 2007-08 2008-09 2009-10 2010-11 2011-12

Debt to equity 0.38 0.42 0.34 0.23 0.21
Debt to equity Ratio
0.45
0.4
0.35
0.3
0.25
Ratio
0.2
0.15
0.1
0.05
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.5 showing Debt to equity ratio of Wipro
Analysis: From the above table researcher has observed that the debt to equity ratio of Wipro
in 2007/08 was 0.38 and increased in 2008/09 to 0.42 and again it decreased to 0.34 in next
2009-10 year and 0.21 in 2011-12.
Interpretation: From the above graph it can be seen that there is decrement after 2008/09 to
2011/12 it may be because of increase in employment of equity capital to its capital structure.
Page 71
ii) Current ratio = current assets/ current liability
Table No. 4.5 showing current ratio of Wipro
Year March 12 March 11 March 10 March 09 March 08

Current 1.83 1.82 1.82 1.45 1.63
ratio
current ratio
2
1.8
1.6
1.4
1.2
1 current ratio
0.8
0.6
0.4
0.2
0
Graph No. 4.6 showing current ratio of Wipro
Analysis: From the table it is analyzed that current ratio of company was decreased from
1.63:1 to 1.45:1 in mar 2009 but later on it is increasing continuously till 1.83 in mar 2012.
Interpretation: Graph shows that the company does not have that much potential to pay its
obligation as they have good current ratio but it should be more than ideal ratio 2:1 and here
ratio has increased to 12.26 % from 2008 to 2012.
iii) EPS = Earnings available to Equity share holder/ No of Equity shares
Page 72
Table No. 4.6 showing EPS of Wipro (in Rs. Cr.)
Year 2007-08 2008-09 2009-10 2010-11 2011-12

EPS 22.25 26.44 31.28 21.45 22.76
EPS
35
30
25
20
eps
15
10
5
0
2007-08 2008-09 2009-10 2010-11 2011-12
Graph No. 4.7 showing EPS per year of Wipro
Analysis: The above table shows EPS of Wipro is 22.25 in 2007-08, in next year 2008-09 it
increased to 26.44 and again in next year 2009-10 it is increased to 31.28. But after it is
decreased to 21.45 in 2010-11.
Interpretation: From the graph shown above it can be said that there is increment in EPS till
2009-10 continuously but after that it is decreased and again continue to grow.
iv) P/E ratio = Market value per share/ Earning per share (EPS) (in Rs. Cr.)
Page 73
P/E ratio
20
15
10 P/E ratio
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.8 Showing P/E ratio of Wipro
Analysis: Table shows P/E ratio which was decreased to 18.91% from 2007-08 to 2008-09
and again it is decreased and comes to 12.79 in 2009-10. In 2010-11 it is increased by
45.74% compare to previous year and again it comes down to 17.57 in 2011-12
Interpretation: Researcher sees that there is decrease in P/E ratio from2007-08 to 2009-10
but after that it is growing.
4.5. Data analysis of Infosys:
Not available
Page 74
ii) Earning per share = Earnings available to Equity share holder/ No of Equity shares
Table No. 4.7 showing EPS of Infosys (in Rs. Cr.)

EPS 164.20 145.10 119.05 109.20 104.53
EPS
eps
Graph No. 4.9 showing EPS of Infosys
Analysis: From above table it is analyzed that in mar 08 EPS of Infosys company was 104.53
and in mar 09 it is increased to 109.20 and again in next year mar 10 it is increased to 119.05
and continue increasing 145.10, 164.20 in year mar’11 and mar’12 respectively.
Interpretation: EPS of Infosys is increasing continuously from mar 08 to mar 12 which is a

good indicator for the growth of the company as well as for investors.
Page 75
iii) Current ratio= Current assets/ Current liability
Table No. 4.8 showing current ratio of Infosys
Year Mar ‘12 Mar '11 Mar '10 Mar '09 Mar '08
Current 4.34 4.65 3.98 4.30 3.13
ratio:
current ratio
5
3
current ratio
2
0
Graph No. 4.10 showing current ratio of Infosys
Analysis: Table shows the Current ratio of Infosys which is 3.13:1 in mar 2008 and increased
to 4.30:1 in mar 09. And in after that it is decreased to 3.98:1 in mar 10 and grows to 4.34:1
in mar 2012. The higher the current ratio, the more capable the company is of paying its
obligations. A ratio under 1 suggests that the company would be unable to pay off its
obligations if they came due at that point. So for Infosys, current ratio shows that they have
more current assets than current liability.
Interpretation: According to researcher company shows a good potential as they have more
than ideal ratio 2:1 in last 5 years. Current ratio is increased from 3.13 to 4.34 in last 5 years.
Page 76
For the year ended 2010/2011 = 2774 /119.05 = 23.30
(in Rs. Cr.)
P/E ratio
35
30
25
20
P/E ratio
15
10
5
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.11 Showing P/E ratio of Infosys
Analysis: From the above table it is analyzed that in 2007-08 P/E ratio was 34.05 and then
after it is decreased to 26.53 in 2008-09 and in next year again it is decreased to 25.40 and
keep on decreasing 23.30 in and 2011-12 to 19.29.
Interpretation: P/E ratio of Infosys is decreasing continuously from 35.05 to 19.12 in

2011/12 to 2007/08.
4.6. Data analysis of Satyam computers services:
i). Calculation of EPS:
EPS = Earnings available to Equity share holder/ No of Equity shares
Page 77
For the year ended 2008/2009 = -8174/6738.95 = -121.30
For the year ended 2009/2010 = -123.90/11761.86 = -1.05
For the year ended 2010/2011 = -140.70/11765.66 = -1.20
Table No. 4.9 showing EPS of Satyam computer services (in Rs. Cr.)
EPS (Rs.) 11.03 -1.20 -1.05 -121.30 25.17
Reported 1,297.60 -140.70 -123.90 -8,174.60 1,687.89
Net Profit
(cr)
EPS
40
20
0
-20 mar'12 mar'11 mar'10 mar'09 mar'08
-40
-60
-80
-100
-120
-140
Graph No. 4.12 showing EPS of Satyam computers services
Analysis: From the above table it shows that the company was performing well till 2008 but
after that EPS of company decreases to -121.30 to in mar 2009 then it is increased to -1.05 in
mar 2010 again it is decreased to -1.20 in mar 2011. And then after EPS has increased up to
11.03 in mar12.
Page 78
Interpretation: EPS of Satyam computers services was in negative as company was not
performing well because of the scandal in Satyam but later on company’s EPS was increased
from -121.30 to 11.03 in mar 2008 to mar 12.
ii). Debt to equity ratio: = Long term debts/ Equity share holder fund
Or Total debt/Net worth
Table No. 4.10 showing Debt to equity ratio of Satyam computer services
Debt to 0.01 0.01 0.02 NA NA
equity ratio
ratio
0.02
0.015
0.01 ratio
0.005
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.13 showing Debt to equity ratio of Satyam computer services
Analysis: Above table shows the debt to equity ratio of Satyam which is decreasing from
0.02 to 0.01 from mar10 to mar 11 and after that in mar 12 in remains same as previous year
to 0.01.
Interpretation: Graph shows the decreasing debt to equity of Satyam computers from
2009/10 to 2011/12.
Page 79
iii). Current ratio:
Current ratio= current assets/ current liability
Table No. 4.11 showing current ratio of Satyam computer services (in Rs. Cr.)

current 4.0 0.84 1.64 1.52 2.16
ratio
CURRENT RATIO
4
3.5
3
2.5
2
1.5 CURRENT RATIO
1
0.5
0
Mar Mar Mar
'12 Mar Mar '09 '08
'11 '10
Graph No. 4.14 showing current ratio of Satyam computer services
Analysis: Calculation in the above table shows the current ratio of Satyam computers which
was 4:1 in 2007/08 then after it decreased to 0.84 in mar 2009.current ratio is increased to
1.64 and again increased in 2011/12 to 2.16.
Interpretation: Researcher analyses in the above graph that current ratio is decreased
suddenly from 4:1 to 0.84:1 in mar 2009 because of scandal and then after it is growing
slowly.
Page 80
iv) P/E ratio = Market value per share/ Earning per share (EPS)
For the year ended 2010/2011 = 113/-1.20 = -94.16
For the year ended 2009/2010 = 113/-1.05 = -107.6
For the year ended 2008/2009 = 113/-121.30 = - 0.93
P/E ratio
20
0
2007/08 2008/09 2009/10 2010/11 2011/12
-20
-40 P/E ratio

-60
-80
-100
-120
Graph No. 4.15 showing P/E ratio of Satyam computer services
Analysis: The above calculation of P/E ratio explains that in 2007-08 P/E ratio was 4.48 but
in next year 2008-09 it was decreased to -0.93 and again in year 2009-10 it decreases to -
107.60 but after it has increased to 10.24 in 2011-12.
Interpretation: Above table shows P/E ratio is decreasing continuously from 2007/08 to
2010/11 and goes in negative but in 2011/12 it has increased to 10.24 because of market
share has increased and EPS of company has also increased.
Page 81
4.7. Data analysis of HCL Technologies:
(i) Debt to Equity ratio = Long term debts/ Equity share holder fund
Table No. 4.12 showing Debt to equity ratio of HCL Technologies (in Rs.)
Year- Jun’12 Jun’11 Jun’10 Jun’09 Jun’08

Ratio 0.16 0.29 0.45 0.64 0.01
ratio
0.7
0.6
0.5
0.4
ratio
0.3
0.2
0.1
0
jun'08 jun'09 jun'10 jun'11 jun'12
Graph No. 4.16 showing Debt to equity ratio of HCL technologies.
Analysis: Above table calculation shows that in 2008/09 debt to equity ratio was 0.01 and in
next year it has increased to 0.64 but after this year ratio starts decreasing every year
continuously till June 2012 to 0.16.
Interpretation: Graph shows continuous decrease in debt to equity after Jun ’2009 till Jun
’12.
(ii) EPS = Earnings available to Equity share holder/ No of Equity shares
Page 82
Table No. 4.13 showing EPS of HCL Technologies (in Rs.)

EPS- 35.01 23.91 18.55 19.69 15.82
eps
40
35
30
25
20 eps
15
10
5
0
june'12 jun'11 jun'10 jun'09 jun'08
Graph No. 4.17 showing EPS of HCL Technologies
Analysis: Above table shows that there was overall increment in EPS of the company. In
jun08 EPS was 15.82 and increased to 19.62 in jun09 but in next year it has decreased to
18.55. Again from jun10 EPS was increased from 18.55 to 35.01 in jun12.
Interpretation: From the above graph researcher sees that EPS of company is good and it is
increasing per year so it is advisable to invest in this company for long term.
Page 83
(iii) Current ratio= current assets/ current liability
Table No. 4.14 showing current ratio of HCL Technologies

Current 1.36 1.78 1.59 0.69 1.48
Ratio
current ratio
1.8
1.6
1.4
1.2
1
current ratio
0.8
0.6
0.4
0.2
0
june'12 jun'11 jun'10 jun'09 jun'08
Graph No. 4.18 Showing Current ratio of HCL Technologies
Analysis: From the above table it shows current ratio of HCL which was 1.48 in jun08 and
decreased to 0.69. Again in next year jun10 it has increased to 1.59 and continues growing to
1.78 in jun11 but in year table shows decrease of 1.36 in jun12.
Interpretation: The above analysis shows the current ratio of HCL from five year which is
increasing and decreasing every year, in June 2011 shows the better position of the company.
The higher the current ratio, the more capable the company is of paying its obligations.
(iv) P/E ratio = Market value per share/ Earning per share (EPS) (in Rs.)
For the year June 2012 = 694/35.01 = 19.82
For the year June 2011 = 694/23.91 = 29.02
Page 84
For the year June 2010 = 694/18.55 = 37.41
For the year June 2009 = 694/19.69 = 35.24
For the year June 2008 = 694/15.82 = 43.86
ratio
45
40
35
30
25
ratio
20
15
10
5
0
jun'08 jun'09 jun'10 jun'11 jun'12
Graph No. 4.19 showing P/E ratio of HCL Technologies.
Analysis: Above table shows P/E ratio of HCL techno. Which was 43.86 in Jun ’08 and
decreased to 35.24 and again it is increased to 37.41 and after that it is decreasing till 19.82 in
jun2012.
Interpretation: The above graph analysis shows that companies P/E is came down in last
few years which were 43.86 in 2008 and falls to 19.82 in 2012.
4.8. Data analysis of Tech Mahindra:
Table No. 4.15 showing Debt to equity ratio of Tech Mahindra
Year- Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
Ratio- 0.28 0.54 0.74 --- 0.02
Page 85
debt to equity
0.8
0.7
0.6
0.5
0.4 debt to equity
0.3
0.2
0.1
0
Graph No. 4.20 showing Debt to equity of Tech Mahindra
Analysis: The above table describes the debt to equity ratio of company which was 0.02 in
2008 and increased to 0.74 in mar10 and after that it decreases to 0.54 in mar11 and in next
year again it falls to 0.28.
Interpretation: Above calculation shows that debt to equity of company’s performance in

year 2010 was good but after that it is decreasing till 2012. But as compare to 2008 company
is performing well now.
Table No. 4.16 showing EPS of Tech Mahindra (in Rs.)
Year- 2011/2012 2010/2011 2009/2010 2008/2009 2007/2008

EPS 46.19 34.58 57.49 83.35 27.14
Page 86
eps
100
80
60
eps
40
20
0
Graph No. 4.21 Showing EPS of Tech Mahindra
Analysis: Above table shows EPS of company which was 27.14 in 2008 and grows to 83.35
in 2010, then it decreases to 57.49 in mar10, again it decreases to 34.58 as compared to last
year and increased to 46.19 in the year 2012.
Interpretation: Above graph shows EPS of company that has given good return to
shareholders and performed well in 2009 but after that it is decreasing for next two years.
Table No. 4.17 showing current ratio of Tech Mahindra
Year- Mar ‘12 Mar '11 Mar '10 Mar '09 Mar '08
Current ratio: 1.09 1.70 1.53 1.98 1.63
Page 87
2
1.8
1.6
1.4
1.2
1 ratio
0.8
0.6
0.4
0.2
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.22 showing current ratio of Tech Mahindra
Analysis: Company’s current ratio in 2008 was 1.63 and then in next year it is raised to 1.98.
In year 2010 current ratio was 1.53 which was less compared to last year but again it has
increased to 1.70 in 2011 and decreased to 1.09 in year 2012.
Interpretation: The ideal ratio for current ratio is 2:1 and company have good ratio as it
shows the potentiality for its obligation.
iv) P/E ratio = Market value per share/ Earning per share (EPS) (in Rs.)
Page 88
40
35
30
25
20 EPS
15
10
0
2007/08 2008/09 2009/10 2010/11 2011/12
Graph No. 4.23 showing P/E ratio of Tech Mahindra
Analysis: From the above data it is analyzed that EPS of Tech Mahindra in 2008 was 36.48
which was decreased to 11.87 in 2009 and again increased to 17.22, 28.62 in 2010, 2011
respectively and it decreases to 21.43 in 2012.
Interpretation: Above data shows that Tech Mahindra has good earnings per share and
performing well after recession time.
4.9. Data analysis of L&T InfoTech: (Larsen and Toubro)
Table No. 4.18 showing Debt to equity ratio of L&T InfoTech
Ratio: 0.39 0.33 0.37 0.53 0.38
Page 89
debt to equity
0.6
0.5
0.4
debt to equity
0.3
0.2
0.1
Graph No. 4.24 showing Debt to equity of L&T InfoTech
Analysis: Above table shows debt to equity ratio of L&T Company which was 0.38 in mar
2008 and then it is increased to 0.53 in 2009 and decreased to 0.37 in 2010 and again
increased to 0.37 in 2012.
Interpretation: Analysis in graph describes debt to equity of company which is showing

good performance of company in last 5 years.
For the year ended 2007/2008 = 2257.82 /2923.27 = 77.24
Table No. 4.19 showing EPS of L&T InfoTech (in Rs.)
Year- 2011/2012 2011/2012 2011/2012 2008/2009 2007/2008

EPS: 76.46 73.05 90.37 50.11 77.24
Page 90
EPS
100
80
60
eps
40
20
0
Mar-12 mar'11 mar'10 mar'09 mar'08
Graph No. 4.25 showing EPS of L&T InfoTech
Analysis: Above data shows EPS of company as 77.24 in mar08 which is decreased to 50.11
in mar09, again EPS is increased to 90.27 in mar’10 and decreased to 73.05 in mar’11 and it
grows to 76.46 in 2012.
Interpretation: According to above data company is good for long term investment as EPS
of company is well in last few years. Company has given good return to shareholders.
Table No. 4.20 showing current ratio of L&T InfoTech
Current 1.20 1.20 1.19 1.22 1.09
ratio:
Page 91
current ratio
1.22
1.2
1.18
1.16
1.14
1.12 current ratio
1.1
1.08
1.06
1.04
1.02
Graph No. 4.26 showing current ratio of L&T InfoTech
Analysis: Above table shows the current ratio of L&T Company which was 1.09 in mar
2008 and 1.22 in 2009 which is decreased to 1.19 in mar’10 and 1.20 in 2011, 2012.
Interpretation: Above graph shows the current ratio of company is not more than 2 but ideal
ratio says it should be 2:1. An ideal current ratio would be 2, indicating that even if the
current assets are to be reduced by half; the creditors will be able to able to get their money in
full.
iv) P/E ratio = Market value per share/ Earning per share (EPS)
Page 92
P/E ratio
30
25
20
ratio
15
10
Graph No. 4.27 showing P/E ratio of L&T InfoTech
Analysis: Above data of P/E ratio of company says that it was 18.86 in 2008 which is
increased to 29.07 (2009) at high in last 45 five years and again falls to 16.12(low in 2010).
Again it starts increasing to 19.94 in 2011 and decreases to 19.05.
Interpretation: Above graph describes that company was performing well in 2009 but after
that P/E ratio of company falls. If P/E ratio is decreasing means growth and market share of
company is also decreasing.
Page 93
5.1. FINDINGS:
From the study equity analysis on IT industry and data analysis and interpretations of
the ratios of seven companies the following findings have been given:
1. IT/ITeS industry has led India's economic growth and this sector's contribution to
the national GDP has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per
cent in 2011-12.
2. These seven companies were performing well till 2008 with a positive trend in the
earnings per share. But there was a downward trend in 2009 in most of companies
because of recession.
3. Infosys is found with more current ratio as compare to other companies. As it
proves that the company is more capable of paying its obligations than others.
4. EPS of Satyam company goes in negative, the reason behind was it because of
scandal in the company in the year 2009.
5. Increasing EPS indicate good earnings.
6. The stock prices always take a correction after a major climb.
7. The P/E ratio of all the selected companies is increasing year after year.
8. The software sector in India has grown at almost double the rate of the US
software sector.
9. From the balance sheet it is found out that the reserve and surplus of the company
is increasing every year.
10. Researcher has found that the ROE of the 7 companies are increasing year after
year.
11. The seven companies have witnessed a low price earnings ratio in 2008 compared
to the previous years. But the ratio increased in 2009 in 7 companies. HCL
Technologies has the highest P/E ratio in 2009 which indicates that it is
overvalued.
12. The overall performance of the companies is good, and there is a continuous flow
of project business. The companies are continuing its drives for volume with a
continuous focus on profitability.
13. By analyzing the current trend of Indian Economy and IT Industry I have found
that being a developing economy there is lot of scope for growth and this industry
still has to cross many levels so there are huge opportunities to invest in.
Page 94
5.2. Suggestions:
By analyzing the IT industry with the help of fundamental analysis, it has been
revealed that this industry has a lot of potential to grow. So recommending investing in IT
industry with no doubt is going to be a good and smart option because this industry is
booming like never before not only in India but all over the world.
 Long term investors can include these top seven IT companies in his portfolio because
the growth rates and earnings are good compared to others stocks. Therefore investors
can include this in their portfolio to earn the higher return on their investment.
 Investing in Wipro for long time could be a good option because they are spreading
their business.
 There are various factors which effects on stock market, so an investor must be aware
of all those.
 Short term investors should look on various support and resistance of stocks to buy or
sell and make profit.
 An investor must take research about stock of company and its previous data before
investing.
 Current ratio must be improved by company and it should be in ideal ratio 2:1 so that
there are possibilities to meet the current obligations for the company.
 Companies which are not much popular in stock market must adopt some strategies
for investors to encourage them to invest in their company.
 Few Suggestions for “Right Stock Selection”
There are three factors which an investor must consider for selecting the right stocks.
• Business: An investor must look into what kind of business the company is doing, visibility
of the business, its past track record, capital needs of the company for expansion etc.
• Balance Sheet: The investor must focus on its key financial ratios such as earnings per
share, price-earnings ratio, debt-equity ratio, dividends per share etc. and he must also check
whether the company is generating cash flows.
Page 95
• Bargaining: This is the most important factor which shows the true worth of the company.
An investor needs to choose valuation parameters which suit its business.
Investment rules:
a) Invest for long term in equity markets.

b) Align your thought process with the business cycle of the company.
c) Set the purpose for investment.
d) Long term goals should be the objective of equity investment.
e) Disciplined investment during market volatility helps attains profits.
f) Planning, Knowledge and Discipline are very crucial for investment.
Page 96
5.3. Conclusion:
Global recession had an effect on the growth of IT industry but it was a short term
phenomenon. The industry is bouncing back. One factor favoring this point is that India has
become a hot destination for companies of diverse nature to invest in.
Inspite of it being a tough year for all the companies across the globe, Indian market
has given good performance as compared to other companies in the world. A continuous
effort at cost cutting and improving productivity will help the companies in making
reasonable profits despite the impact of higher commodity prices and weaker rupee.
The analysis gives an optimistic view about the industry and its growth which recommends
the investors to keep a good watch on the major players to benefit in terms of returns on
their investments.
Page 97
BIBLIOGRAPHY
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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR

CHAPTER CONTENT PAGE

2.8.4 Chapter scheme

3 INDUSTRY PROFILE AND COMPANY PROFILE

5 Summary of Findings, Conclusions and Suggestions 89-93

Table No. Description Page No.

4.1 Table showing Debt to equity ratio of TCS 63

Chart No. Description Page No.

3.1 Graph showing major trends in Hiring 33

In an industry plagued with skepticism and a stock market increasingly difficult to

Investor v/s Trader:

1.2: Top players in Indian IT sector:

No. Name of company Share price

7 L&T Infotech 1457

1.3: Definition of ‘Equity Market’:

1.4: Indian IT sector:

The information technology sector can broadly be classified into:-

1.5: History of Indian IT sector:-

i. Indian Education System:

ii. High Quality Human Resource:

iii. Competitive Costs:

iv. Infrastructure Scenario:

1.6: ROLE OF IT INDUSTRY:

1.7: CONTRIBUTION OF INFORMATION TECHNOLOGY IN INDIAN

The contribution of India's IT industry to economic progress has been quite

1.8: IMPACT OF IT SECTOR:

ii. Common Traditions:

iii. Cultural Continuity:

1.9: Future of Information Technology:

1.10: Meaning of equity:

On a daily basis, equity research analysis closely "follow", or monitor a number of

Investors purchase equity shares with two basic objectives:

1. To make capital profits by selling shares at higher prices.

2. To earn dividend income.

1.11 MEANING OF TECHNICAL ANALYSIS:

1.11.1: Basic principles of technical analysis:

1.12: MEANING OF FUNDAMENTAL ANALYSIS:

Fundamental analysis is a method of forecasting the future price movements of a

Fundamental analysis thus involves three steps:

1.12.1: ECONOMY ANALYSIS:

i. Growth Rates of National Income

1.12.2: INDUSTRY ANALYSIS:

An industry is a group of firms that have similar technological structure of production

Industry Life Cycle:

b. Rapid growth stage:

c. Maturity and stabilization stage:

1.12.3: COMPANY ANALYSIS:

1.13: SWOT Analysis of the Industry:

• Highly skilled human resource • Absence of practical knowledge

•Low wage structure

•Initiatives taken by the Government (setting • Less Research and Development

9000, SEI CMM etc. will soon come to an end.

•Quality telecommunications infrastructure

•Indian time zone (24 x 7 services to the

2.2: Literature Review:

There is a vast body of literature by eminent scholars and financial experts on

In this paper researcher ascertains the importance of contribution to a better understanding of

Mc Kinnon and Shaw (1973)

Blume and Friend (1978)

Deva Kumar (1987)

Narayana Rao and Bhole (1990)

Anshuman and Chandra (1991)

Jawahar Lal (1992)