2011

ITM EEC: Batch (20-21) Ms. Bhakti Mr. Chetan Ms. Prameela

Specialization Finance (Group 4)

Ms. Rekha & Mr. Hemanta forecast from InfosysFuture Sahu Investment Banking perspective
[Type the company name] 12/18/2011

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Contents
Introduction:..............................................................3 Conclusion:

Introduction: We are presenting our case study on Infosys, in a scenario of the class room being the Top Management of Infosys and we the team representing an Investment Banker. The main purpose of our presentation is to deliver the audiences on the various options for the both Organic & Inorganic growth/expansion of the company. This can be considered as a part of our Corporate Counseling program that we are
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engaged with Infosys. At the end of our presentation, we shall evaluate & conclude on what would be the best probable option for Infosys to achieve the above. If I quote the words of the then Chairman-Emeritus & Chief Mentor of the company Infosys Mr Narayana MurthyPosterity will not excuse you if you did not dream big. You owe it to your customers, your colleagues, your investors, and the society. Every major civilization, every great advance in science and technology, and every great company is built on a big dream. The above statement of Mr Murthy shows Infosys is an ever growing organization. As you all know, Infosys has given the IT industry many ideas like GDM, and concept of Human Capital. Infosys has grown substantially in last 30 years. Now to give an accelerated boost to the company, we are presenting here what are the best options available and suggest you as our preliminary point of view. We have tried to keep our research work confidential and whatever we present here are based on the traceable facts & figures. 30 years of Infosys
Turning thirty is a good time to reminisce. And reflect. And look ahead. Thirty is one of those rare junctures when you have both youth and experience on your side. Thus, as Infosys completes thirty, we talk about the pleasures and pains of starting small; the genesis of a value-based organization culture; personal goals turning into company milestones; sharing wealth and caring for society; learning and educating; building infrastructure for one and all; agreeing to disclose and refusing to compromise on quality; and above all, believing in a vision and leading by example to see it become reality. Thirty is also the time to

break new ground. Infosys Company Overview: Infosys Limited (NASDAQ: INFY) was started in 1981 by seven people with US$ 250. Today, we are a global leader in the "next generation" of IT and consulting with revenues of US$ 6.604 billion (LTM Q2-FY12). Infosys defines designs and delivers technology-enabled business solutions for Global 2000 companies. Infosys also provides a complete range of services by leveraging our domain and business expertise and strategic alliances with leading technology providers.
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Our offerings span business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, re-engineering, independent testing and validation services, IT infrastructure services and business process outsourcing. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk. Infosys has a global footprint with 64 offices and 65 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 141,822 employees as on September 30, 2011. Infosys takes pride in building strategic long-term client relationships. 98.5% of our revenues come from existing customers (Q2 FY 12). Vision "We will be a globally respected corporation." Mission "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large."

Values We believe that the softest pillow is a clear conscience. The values that drive us underscore our commitment to: Client Value: To surpass client expectations consistently Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves

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Integrity and Transparency: To be ethical, sincere and open in all our transactions Fairness: To be objective and transaction-oriented, and thereby earn trust and respect Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and products to become the best Management Profiles N. R. Narayana Murthy Chairman Emeritus K. V. Kamath Chairman of the Board S. Gopalakrishnan Co-Founder, Executive Co-Chairman S. D. Shibulal Co-Founder, Chief Executive Officer and Managing Director V. Balakrishnan Senior Vice President , Member of the Board, Chief Financial Officer

Infosys: Financials
Infosys Ltd Quarterly Results of Infosys ------------------- in Rs. Cr. ------------------Sep '11 Jun '11 Mar '11 Dec '10 Sep '10 7,470.00 383 7,853.00 5,111.00 6,905.00 415 7,320.00 4,831.00 6,668.00 387 7,055.00 4,469.00 6,534.00 275 6,809.00 4,357.00 6,425.00 248 6,673.00 4,249.00

Particulars Sales Turnover Other Income Total Income Total Expenses

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Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value

2,359.00 --------2,742.00 -2,742.00 201 -2,541.00 719 1,822.00 -----31.74 -287 26,692.00 5

2,074.00 --------2,489.00 -2,489.00 191 -2,298.00 644 1,654.00 ---

2,199.00 --------2,586.00 -2,586.00 189 -2,397.00 667 1,730.00 ---

2,177.00 --------2,452.00 -2,452.00 184 -2,268.00 627 1,641.00 ---

2,176.00 --------2,424.00 -2,424.00 187 -2,237.00 596 1,641.00 ---

------------28.82 30.14 28.59 28.59 ----287 287 287 287 25,871.00 24,214.00 23,808.00 22,156.00 5 5 5 5

Infosys Ltd Balance Sheet of Infosys ------------------- in Rs. Cr. ------------------Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 12 mths 12 mths 12 mths 12 mths 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves 287 287 0 0 24,214.00 0 287 286 286 286 287 286 286 286 0 0 0 0 0 0 0 0 21,749.00 17,523.00 13,204.00 10,876.00 0 0 0 0

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Net worth Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

24,501.00 0 24,501.00 6,934.00 2,878.00 4,056.00 499 1,325.00 0 4,212.00 641 4,853.00 5,273.00 13,024.00 23,150.00 0 2,056.00 2,473.00 4,529.00 18,621.00 0 24,501.00 1,013.00 426.73

22,036.00 17,809.00 13,490.00 11,162.00 0 0 0 0 22,036.00 17,809.00 13,490.00 11,162.00 6,357.00 5,986.00 4,508.00 3,889.00 2,578.00 2,187.00 1,837.00 1,739.00 3,779.00 3,799.00 2,671.00 2,150.00 409 615 1,260.00 957 4,636.00 1,005.00 964 839 0 0 0 0 3,244.00 3,390.00 3,093.00 2,292.00 929 805 657 680 4,173.00 4,195.00 3,750.00 2,972.00 4,201.00 3,303.00 2,804.00 1,241.00 8,868.00 8,234.00 5,772.00 4,827.00 17,242.00 15,732.00 12,326.00 9,040.00 0 0 0 0 1,995.00 1,544.00 1,483.00 1,162.00 2,035.00 1,798.00 2,248.00 662 4,030.00 3,342.00 3,731.00 1,824.00 13,212.00 12,390.00 8,595.00 7,216.00 0 0 0 0 22,036.00 17,809.00 13,490.00 11,162.00 295 384.02 347 310.9 603 235.84 670 195.41

Infosys Ltd Profit & Loss account of Infosys ------------------- in Rs. Cr. ------------------Mar '11 12 mths Income Sales Turnover Excise Duty 25,385.00 0 21,140.00 0 20,264.00 0 15,648.00 0 13,149.00 0 Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths Mar '07 12 mths

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Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend

25,385.00 1,147.00 0 26,532.00

21,140.00 967 0 22,107.00

20,264.00 502 0 20,766.00

15,648.00 683 0 16,331.00

13,149.00 379 0 13,528.00

23 0 12,464.00 2,613.00 1,834.00 36 0 16,970.00 8,415.00 9,562.00 1 9,561.00 740 0 8,821.00 0 8,821.00 2,378.00 6,443.00 16,947.00 0 3,445.00

22 0 10,356.00 1,993.00 992 415 0 13,778.00 7,362.00 8,329.00 2 8,327.00 807 0 7,520.00 0 7,520.00 1,717.00 5,803.00 13,756.00 0 1,434.00

20 125 9,975.00 1,697.00 1,367.00 172 0 13,356.00 6,908.00 7,410.00 2 7,408.00 694 0 6,714.00 -1 6,713.00 895 5,819.00 13,336.00 0 1,345.00

18 106 7,771.00 1,443.00 1,214.00 132 0 10,684.00 4,964.00 5,647.00 1 5,646.00 546 0 5,100.00 0 5,100.00 630 4,470.00 10,666.00 0 1,902.00

22 88 6,316.00 1,290.00 1,050.53 156.47 0 8,923.00 4,226.00 4,605.00 1 4,604.00 469 0 4,135.00 -5 4,130.00 352 3,783.00 8,901.00 0 649

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Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs)

568

240

228

323

102

5,741.52 112.22 1,200.00 426.73

5,738.25 101.13 500 384.02

5,728.30 101.58 470 310.9

5,719.96 78.15 665 235.84

5,712.10 66.23 230 195.41

Infosys Ltd Key Financial Ratios of Infosys ------------------- in Rs. Cr. ------------------Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital Profitability Ratios Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Asset Turnover Ratio Number of Days In Working Capital Profit & Loss Account Ratios 5 60 146.56 442.13 420.79 93.26 26.96 24.31 26.13 426.73 426.73 35.84 5.11 5.02 -9,523.00 7,184.00 -6.81 3.67 264.08 5 25 128.3 368.4 378.08 93.26 29.59 26.36 25.89 384.02 384.02 33.69 4.28 4.2 -4,116.50 3,306.00 -6.37 3.33 224.99 5 23.5 120.59 353.75 305.8 93.58 32.57 27.52 34.76 310.9 310.9 39.8 4.71 4.67 -3,891.00 3,257.50 -6.25 3.39 220.11 5 33.25 86.78 273.57 230.74 93.58 30.69 27.37 33.09 235.84 235.84 37.77 3.3 3.28 -5,642.00 5,017.00 -5.81 3.47 197.74 5 11.5 73.98 230.2 190.3 93.58 31.19 28.05 33.47 195.41 195.41 36.64 4.96 4.91 -4,559.00 4,253.00 -6.9 3.38 197.56

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Material Cost Composition Selling Distribution Cost Composition Expenses as Composition of Total Sales Cash Flow Indicator Ratios Dividend Payout Ratio Net Profit Dividend Payout Ratio Cash Profit Earning Retention Ratio

0.09 0.12 94.38 62.28 55.86 37.34

0.1 0.41 99.69 28.84 25.32 70.67

0.09 0.4 97.88 27.03 24.15 74.6

0.11 0.56 92.59 49.77 44.35 50.17

0.16 0.47 92.44 19.85 17.66 79.91

Infosys Fundamental Analysis: India's second-largest software services exporter, Infosys, aims to double the revenue share from Europe to 40% of its total sales by the end of its 2014 financial year, as cost-strapped global companies step up outsourcing. The company, a pioneer in India's IT services sector, has grown rapidly by employing thousands of engineers in low-cost Indian centres and catering to overseas firms, mainly based in the United States. "Our target is by 2014, our business will be 40% from Americas, 40% from Europe and 20% from Asia," Ashok Vemuri, Head of Americas and member of the company's board Vemuri, who heads Infosys' financial services and insurance business said the company sees Asia, which contributes around 12% of its revenue, as a region where the next big wave in technology spending will take place. Infosys earned 65.3% of its revenue in the second quarter from the United States versus 65.8% from a year ago, while Europe accounted for 20.5% of its revenue, down from 21.8% a year ago. The firm, which counts Goldman Sachs and BT among its clients, reported a 9.7% rise in quarterly profit last week, and cut its full-year sales outlook by less-thanexpected, easing market worries of a sharp slowdown KV Kamath, the newly appointed Chairman of Infosys, has also said the company needs to diversify beyond banking services, which contribute 35.4 percent to its revenue. So far, Infosys has made small tuck-in acquisitions, which gave it a platform for entry into new service lines.
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In 2009, Infosys acquired Atlanta-based McCamish for $58 million, which gave it access to the insurance BPO segment. Perhaps the only big ticket acquisition made by Infosys so far has been that of Citicorps stake in Progeon for $115.13 million in 2006. As of 30 September, 2011, Infosys cash and cash-equivalents, including investments in available-for-sale financial assets and certificates of deposits, stood at Rs 18,601 crore Conclusion: With the above facts & Figures and our analysis, we see that more that 36% of Revenue comes from Finance, Banking & Insurance Sectors. Also 86% of Infosys business comes from NA and Europe. Also Infosys have a healthy cash reserve & surpluses. With the above fact, we recommend that Infosys management to consider diversifying into a new domain of Public Service & Health Care Space. The suggested domain is emerging for IT applications. So this will definitely help Infosys to expand their business to other developing & emerging countries. Also, this will reduce the present Business Risk of generation revenue from Finance & Insurance sectors and dependency on US and Europe market. Also we shall read out a press release on Economic Times on 11th October 2011 as below; There has been speculation that Infosys is at an advanced stage of talks to buy a US firm operating in the public services and healthcare space and has revenues of over $300 million for $450-500 million.

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