KPIT Cummins Infosystems Ltd

May 28, 2013

Initiating Coverage BUY
I ndustry I T
CMP (Rs) 108
FY15E Target Price (Rs) 143
52 Week H/ L (Rs) 142/ 92
Volumes (BSE+NSE)* 2,71,411
Shares O/ S (mn) 192.3
Market Cap (Rs bn) 21.2
Free Float (%) 75.7
Bloomberg KPI T IN
Reuters KPI T.BO
*Three month average

Share Holding Pattern (31/03/2013)
Particulars
Shares
(mn)
% Holding
Promoters 46.7 24.3
FIIs 59.2 30.8
DIIs 22.7 11.8
Others 63.7 33.1
Total 192.3 100.0
Source : BSE

Financial Highlights
(Rs mn) FY13 FY14E FY15E
Sales 22,386 24,781 28,237
EBITDA 3,650 4,143 4,718
EBITDA Margin 16.3 16.7 16.7
PAT 1,990 2,369 2,756
EPS (Rs) 10.3 12.3 14.3
P/E (x) 10.4 8.8 7.5
ROCE (%) 22.7 24.1 23.5
RoE (%) 18.8 18.5 17.9














Analyst: Amit Rane
+91- 22- 40287022
amit@qsmail.com
Investment Arguments
Higher Growth expected from Higher Margin SBU
During FY13, A&E SBU revenues grew 39.3% YoY to Rs 5403mn.
KPIT enjoys 24-25% EBITDA margins (vs 16.3% overall company
margins) from this SBU due to its domain expertise and niche
capabilities. The electronic components (i.e. Hardware + Software)
currently account for 20% of the cost of a vehicle and is expected
to account for 40% of total car production costs. We believe that
KPIT is likely to be direct beneficiary of rising the proportion of
electronic components used in vehicles leading to higher growth
from this SBU in FY14.

Successful integration of SYSTIME driving IES SBU Growth
At the end of Q4FY13, SYSTIME has been able to achieve revenue
of $ 17mn per quarter (vs $ 13mn at time of integration) with
EBITDA margins at 15% (vs 5%), driven by integration benefits
and operational improvements. Thus, despite an average quarterly
de-growth of 8% in revenues from the Cummins Account, the IES
SBU has recorded positive growth. We believe along with the
SYSTIMEs growth in business volume and margin levers such as
utilization improvement and change in the business mix as
SYSTIME has large onsite presence which can be moved offshore,
KPIT will be in a position to maintain current margins in this SBU.

Concerns Overdone
We believe that concerns regarding Cummins account degrowing
are overdone, considering a healthy growth trend achieved by the
non-Cummins accounts. Managements growth guidance of 14-
16% in US $ Revenue in FY14 implies strong growth expectations
from non-SAP SBUs (relatively higher margins) and non-Cummins
accounts, considering that about 48% of the company's revenue
(SAP and Cummins) is expected to remain muted.

There is concern that various acquisitions have strained the
companys cash flows in the recent past, with a total earn out
outgo expected at $ 25-28mn over the next 3 quarters. But since
2010 KPIT has spent ~$ 75mn for acquisitions, which constitutes
40% of FY13 revenue, but it should be noted that due to
acquisitions company has registered 45.2% CAGR growth in the
revenue which is much higher than that of peers during FY10-13.

Outlook and Valuations
We expect KPIT to post a net profit CAGR of 17.7% during FY13-
15E with an average ROE of 18.2%. Our observation of guidance
vs actual performance of the company during FY07-13 suggests
that except for FY09 (missed), the actual performances have
exceeded their guidance. Management has guided for 14-16% $-
Revenue growth with 50bps improvement in EBITDA margins in
FY14. The stock is currently trading at an attractive P/E multiple of
7.5x FY15E EPS of Rs 14.3. We value KPIT at 10x FY15E EPS and
arrive at a target price of Rs 143. We recommend a BUY on KPIT
Cummins Infosystems Ltd.

KPIT Cummins Infosystems Ltd Initiating Coverage Page 2

Quantum Securities
Key Assumptions
Particulars FY13 FY14E FY15E
$ Revenue Growth (%) 35.1 13.9 13.9
Rs/$ Rate 54.5 53.0 53.0

Gross Margins (%) 34.6 34.5 35.8

SG&A/Revenue (%) 18.3 17.8 19.1

EBITDA Margins (%) 16.3 16.7 16.7

Tax Rate (%) 26.9 30.0 30.0

Employee Addition (Net) (Nos) 602 1,107 680

Wage Hike (%)

Offshore 11.5 8.0 11.0
Onsite 3.0 2.0 3.0

EPS Estimate (Rs) 10.3 12.3 14.3

































KPIT Cummins Infosystems Ltd Initiating Coverage Page 3

Quantum Securities
Investment Arguments
Improvement in Demand markets
During the slowdown phase in developed countries, both Auto & Transportation and Manufacturing were
the worst affected sectors. With drop in consumer spending, capacity utilisations of
manufacturing companies slumped and go-to-market plans with new products virtually ceased. This led
to a crash in the budgets of these clients, thus impacting the business of domain-specialist companies such
as KPIT. The recent US market statistics indicate a growing confidence in the economic recovery with major
automakers witnessing growth in sales. KPIT divested its non scalable, BFS division, focusing its entire efforts
towards its strength Auto & Transportation and Manufacturing verticals which contribute 39.3% and 33.7% to
revenue respectively in FY13.

Economic indicators from Key markets US and UK


Source: Bloomberg, QS Research

Thus, to capture market share and to drive cost efficiencies, manufacturing clients are back with
discretionary spending on IT services such as engineering services and enterprise solutions. FY13
performance recorded by the manufacturing vertical of the top IT players highlights the same trend.

Rising contribution of Manufacturing Vertical Geographical Revenue Contribution

Source: Company, QS Research

Improvement in the clients business environment is strengthening the companys deal pipeline. This is
also reflected by an aggressive net employee addition target of 1,000 employees in FY14 on an existing
base of 8,321 employees in FY13.

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PMITMUK Index
20.5
7.8
19.2
32.4
22.0
8.3
19.1
33.7
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10.0
15.0
20.0
25.0
30.0
35.0
40.0
Infosys TCS Wipro KPIT
FY12 FY13
USA
76%
EUROPE
13%
ROW
11%

KPIT Cummins Infosystems Ltd Initiating Coverage Page 4

Quantum Securities
Higher Growth expected from Higher Margin SBU

KPIT primarily focuses on three SBUs viz. auto & engineering, integrated enterprise solutions and SAP.

KPIT- Business Model
SBU What they do? Contribution to Revenue EBITDA margins
Integrated Enterprise
Solutions (IES)
Transformational Ent consulting -
ERP implementation + Follow on
support with specialisation in Auto
and Transportation vertical. Majority
of Cummins revenue is classified
under this SBU.
47.0% 18.0%
Auto & Engineering (A&E)
Primarily Embedded Software and
Auto Electronics - High End reqt of
Auto OEMs
24.1% 24.0%
SAP
Core ERP implementation for Auto,
Manufacturing, Utilities and Energy
verticals. 80% is implementation and
around 15 to 20% is support and
maintenance.
28.9% 5.0%

Source: Company, QS Research

Integrated Enterprise Solutions (IES)
This unit focuses on Oracle and JD Edwards practice (SYSTIME) and provides business process management
(BPM), manufacturing execution systems (MES), enterprise asset management (EAM), supply chain
management (SCM) & warehouse management systems (WMS) to manufacturing and energy utilities
customers. Majority of the revenue from Cummins are classified under this SBU.

Auto & Engineering
This SBUs revenue can be classified into specialized solutions and products developed by KPIT.

Solutions:
- AUTOSAR & In-Vehicle Networks
- Body Electronics
- Chassis, Safety & Driver Assistance
- Engineering Design
- Functional Safety - ISO 26262
- Infotainment
- Instrument Clusters
- Powertrain
- Vehicle Diagnostics

Products:
- AUTOSAR Suite
- Diagnostics Suite
- Infotainment Suite
- Revolo - Plug in Hybrid

SAP
KPIT has been present in SAP practice for 15 years and is a Gold Partner and Services partner with a total of
16 SAP Qualified Industry Specific Solutions and has 7 Global delivery centers, with more than 1500 SAP
consultants.






KPIT Cummins Infosystems Ltd Initiating Coverage Page 5

Quantum Securities
Auto & Engineering SBU (A&E SBU) constitutes 24.1% of FY13 revenues and provides services to Auto
Original Equipment Manufacturers (16+ in number) and Tier I & II vendors (around 50 in number). During
FY13, A&E SBU revenues grew 39.3% YoY to Rs 5403mn. Company enjoys 24-25% EBITDA margins from this
SBU due to its domain expertise and niche capabilities. Companys R&D Investments (forming a good 6% of
the units revenues) and focus on development of non-linear solutions has been reflected by the number of
patents filed by them in the automotive domain. KPIT has deployed 2500+ experienced engineers in this SBU.

Profile of Patents filed
Patent Area No of Patents
Hybrid Technology 16
Automotive 19
Embedded & VLSI 5
High Performance Computing 3
Total 43

Strongest Automotive Focus and Competence

Source: Company Presentation November 2012, QS Research

Automotive Industry R&D Spend Trend

Source: Company Presentation November 2012, QS Research

KPIT Cummins Infosystems Ltd Initiating Coverage Page 6

Quantum Securities
Rising usage of electronics KPIT a direct beneficiary
With automakers relying more heavily on the electronic technology, the proportion of electronic components
used in vehicles has been increasing steeply in the recent years. As per industry sources, the electronic
components (i.e. Hardware + Software) currently account for 20% of the cost of a vehicle and is expected to
account for 40% of total car production costs. Consequently, worldwide sales of automotive electronics
technology are expected to soar from $ 189bn in 2012 to $ 274bn in 2017. This trend is expected to be
positive for Software vendors like KPIT which is largest third-party automotive electronics vendor globally.

SBUBasedRevenueTrend(Rsmn) Q1FY13 Q2FY13 Q3FY13 Q4FY13
IntegratedEnterpriseSolutions 2,389.4 2,604.6 2,742.7 2,790.0
QoQGrowth 17.0% 9.0% 5.3% 1.7%
Auto&Engineering 1,276.2 1,384.0 1,317.0 1,425.8
QoQGrowth 16.0% 8.4% 4.8% 8.3%
SAP 1,717.1 1,683.5 1,573.9 1,482.8
QoQGrowth 10.5% 2.0% 6.5% 5.8%
TotalRevenue 5,383 5,672 5,634 5,699
QoQGrowth 12.1% 5.4% 0.7% 1.2%
Source: Company, QS Research

Successful integration of SYSTIME driving IES SBU Growth
The Integrated Enterprise Solutions (IES) SBU contributed 47.0% of revenues with EBITDA margins of ~18%
in FY13. Majority of Cummins revenues are categorised under this SBU. KPIY is the Global Platinum Partner
to Oracle and provides services like business process management (BPM), manufacturing execution systems
(MES), enterprise asset management (EAM), supply chain management (SCM) & warehouse management
systems (WMS) to manufacturing and energy utilities customers.

KPIT is the third largest partner to Oracle in North America in industrial manufacturing and the eighth largest
partner across industries.

KPITs Oracle consulting & implementation capability was strengthened by the acquisition of:
1) CPG solutions in 2010 for $ 11mn and
2) 76.2% stake in Systime, the worlds largest JD Edwards solution provider.

When SYSTIME started integrating with KPIT from Q4FY12, it had a revenue run rate of roughly $ 13mn per
quarter and an EBITDA margin of 5%. At the end of Q4FY13, SYSTIME has been able to achieve a revenue of
$ 17mn per quarter with EBITDA margins at 15%. This has been largely driven by integration benefits and
operational improvements.

Thus, despite an average quarterly de-growth of 8% in revenue from Cummins Account in last two quarters,
the IES SBU has recorded a positive growth. We believe, along with SYSTIMEs growth in the business volume
and margin levers such as utilization improvement and change in the business mix as SYSTIME has large
onsite presence which can be moved offshore, KPIT will be in a position to maintain current margins.










KPIT Cummins Infosystems Ltd Initiating Coverage Page 7

Quantum Securities
SAP SBU to be back on track gradually
The SAP SBU contributed 28.9% of FY13 revenues and grew by 36.4% YoY to Rs 6457mn. The SBU offers
transformational core ERP implementation and support along with business intelligence. Acquisition of Sparta
Consulting Inc for $38 million in FY10 helped expand the geographical footprint of SAP practice to the US and
to the energy & utilities segment vs India automotive and the industrial segment earlier. Implementation
(mostly onsite) accounts for a majority (~85%) of SBU projects, while maintenance accounts for the rest,
leading to lower than company average EBITDA margins.

FY13 saw a technology reset at SAP post its acquisition of SuccessFactors (SFSF), which led to a change in
business mix of SAP, negatively impacting KPIT during Q2FY13 to Q4FY13. However, from May 1
st
, 2013,
KPIT has added a team of 25 SuccessFactors (SFSF) certified consultants under a business transfer
agreement with a SFSF specialist company Learn 2 Perform (L2P). As a result, we expect the revenues to stop
declining with improvement in profitability from Q1FY14 onwards.

As per the management commentary, KPIT is witnessing strong demand for SAP solutions from Energy &
Utilities vertical in North America and the APAC geographies.

Improving Client Metrics provide growth visibility
During FY13 KPIT added 14 new customers and the number of its active customers increased to 183 from 169
at the end FY12, while the customers with Revenue run rate of USD 1 mn+ have grown significantly from 59
to 78, driven by client mining. Although the Revenue contribution from its top customer Cummins has come
down from 21.5% to 19%, the Revenues contribution from its top 10 clients has increased from 42.2% to
44%. KPIT is well positioned across its businesses with strong relationships with global players in
Manufacturing, Automotive and Energy sectors, that enhances its client mining ability and provides growth
visibility for its business going forward.

Client Metrics Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
(% of Revenue)
Top Client-Cummins 19.5 20.6 19.7 19.1 16.6
Top 5 Clients 33.0 35.3 35.2 36.8 35.2
Top 10 Clients 42.2 44.0 43.7 45.2 44.0
Clients Added (Nos) 4.0 3.0 4.0 2.0 5.0

No of Active Customers 169.0 172.0 176.0 178.0 183.0
Clients with >$ 1mn run-rate (Nos) 59.0 65.0 69.0 72.0 78.0
Source: Company, QS Research

Latest Trend in Top Clients Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
TOP CLIENT-CUMMINS (Rs mn) 935.5 1,107.8 1,117.4 1,075.9 944.8
QoQ Growth 3.2% 18.4% 0.9% -3.7% -12.2%
YoY Growth 49.5% 69.7% 52.3% 18.7% 1.0%

TOP 5 CUSTOMER (Rs mn) 1,584.5 1,897.4 1,997.1 2,074.1 2,005.9
QoQ Growth 11.9% 19.7% 5.3% 3.9% -3.3%
YoY Growth 21.2% 57.8% 58.1% 46.4% 26.6%

TOP 10 CLIENT BILLING (Rs mn) 2,026.6 2,369.5 2,478.1 2,546.7 2,507.4
QoQ Growth 13.6% 16.9% 4.6% 2.8% -1.5%
YoY Growth 23.1% 52.2% 57.6% 42.7% 23.7%
Source: Company, QS Research





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KPIT Cummins Infosystems Ltd Initiating Coverage Page 9

Quantum Securities
There is concern that various acquisitions have strained the companys cash flows in the recent past, with
total earn out outgo expected at $ 25-28mn over the next 3 quarters. Till FY12, the management was able to
deliver between 10-60% cumulative revenue growth in the acquired companies. Since 2010, KPIT has spent
~$ 75mn for acquisitions, which constitutes 40% of FY13 revenue. The validity of the acquisition strategy has
to be seen in light of the growth achieved by the company vs other midcap IT companies. During the period
of FY10-13, KPIT has grown at a revenue CAGR of 45.2% as against average 26.6% growth achieved by
other midcap IT companies.


Source: Company, QS Research

Thus, we believe that company has mastered the art of acquiring small niche companies and scaling the
business by client mining through wider offerings and increasing the offshore leverage. It has successfully
integrated 5 companies in the last five years - Systime, Sparta, CPG, In2Soft and Harita. Incremental growth
through acquisitions, the strategy adopted by the management, has worked for the company. Some examples
of growth in major acquisitions are as follows:

Success in Acquisition-led strategy
Name of Co Acquired Year Size
FY12
Revenue Reason for acquisition
$ mn $ mn
Cummins Infotech 2002 1 66 Manufacturing Vertical focus
Panex Consulting 2003 7.2 25 SAP Practice focus
SolvCentral.com 2005 3.5 20 SAP Practice focus
Pivolis 2005 1.5 5 Business Intelligence Practice
CG Smith Software 2006 6.3 45 Auto Electronics Domain focus
Harita TVS 2008 1 8 MEDS Practice
Sparta Consulting 2009 25 72 SAP Practice/US Presence
In2Soft 2010 4 6 Vehicle Diagnostics & Telematic Expertise
CPG 2010 11 15 Oracle Consulting
SYSTIMe 2011 50 53 Oracle Consulting, JDE Specialist
Source: Company, QS Research

Well-defined Acquisition Criteria
A key acquisition criterion for KPIT is to fill the service line and vertical capability gaps with depth in the
management team of the target company. As per the management, the cash flows from M&A investments is
normally recovered in the form of cash within 2.5 years.
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KPIT Cummins Infosystems Ltd Initiating Coverage Page 10

Quantum Securities
Revolo Update
KPITs in-house built plug-in parallel hybrid solution, Revolo, has been in the process of conducting trials on
40 vehicles, which has been yielding encouraging results, with fuel savings between 30-40%. KPIT is working
to bring the costs down further and also towards attaining regulatory approvals. We have not considered any
revenue from Revolo for our projections, but this could act as a major catalyst to its revenue in the long term.
Revolo is a 50:50 joint venture with Bharat Forge with the boards approval to invest upto Rs 500mn.
















































KPIT Cummins Infosystems Ltd Initiating Coverage Page 11

Quantum Securities
Peer Comparison
Per Employee Analysis KPIT NIIT Tech Persistent Geometric Mindtree
Billed Employees (Nos) 8,321 7,882 6,970 4,623 11,591


Active Clients (Nos) 183 NA 309 99 232
Per Employee (Rs mn) 45.5 NA 22.6 46.7 50.0


Total Revenue (Rs mn) 22,386 20,327 12,945 10,203 23,618
Per Employee (Rs mn) 2.69 2.58 1.86 2.21 2.04


EBITDA (Rs mn) 3,650 3,295 3,352 1,951 4,864
Per Employee (Rs mn) 0.44 0.42 0.48 0.42 0.42


PAT (Rs mn) 1,990 2,132 1,876 688 3,393
Per Employee (Rs mn) 0.24 0.27 0.27 0.15 0.29

Common-size Analysis (FY13) KPIT NIIT Tech Persistent Geometric Mindtree
Reported Sales 100.0 100.0 100.0 100.0 100.0
Cost of Revenue 65.4 65.1 56.5 62.5 60.4
Gross Profit 34.6 34.9 43.5 37.5 39.6
SG&A 18.3 18.6 17.6 18.4 19.0
EBITDA 16.3 16.3 25.9 19.1 20.6
Depreciation 2.1 2.8 6.0 3.1 2.6
EBIT 14.2 13.5 19.8 16.0 18.0
Interest Recd/ (Paid) (0.7) 0.4 - (0.3) -
Exceptional Items (0.6) 0.3 (1.7) (4.6) (1.4)
Operating Profit 13.0 14.2 18.1 11.0 16.5
Other Income (0.2) 0.3 2.2 1.2 1.5
PBT 12.7 14.5 20.3 12.2 18.0
Tax 3.4 3.7 5.8 3.7 3.6
Profit After Tax 9.3 10.8 14.5 8.5 14.4
Minority Interest 0.4 0.3 NA 1.8 NA
Net Profit 8.9 10.6 NA 6.7 NA

Peer Valuations
Company
CMP
(Rs)
Market
Capitalisation
(Rs mn)
FY13
Revenue
(Rs mn)
FY13
EBITDA
(Rs mn)
EBITDA
Margin
(%)
FY14E EPS
(Rs)
P/E
(x)
5Y Avg ROE
(%)
Geometric 109 6,900 10,203 1,951 19.1 13.7 7.9 25.2
Mindtree 808 33,550 23,618 4,864 20.6 92.0 8.8 22.3
NIITTech 264 15,910 20,327 3,295 16.2 43.2 6.1 27.6
Persistent 514 20,550 12,945 3,352 25.9 53.7 9.6 19.8
KPIT 108 20,830 22,386 3,650 16.3 12.3 8.8 23.5
Source: Company, QS Research

Outlook and Valuations
We expect KPIT to post a net profit CAGR of 17.7% during FY13-15E with an average ROE of 18.2%. Our
observation of guidance vs actual performance of the company during FY07-13 suggests that except for FY09
(missed), the actual performances have exceeded their guidance. Management has guided for 14-16% $-
Revenue growth with 50bps improvement in EBITDA margins in FY14. The stock is currently trading at an
attractive P/E multiple of 7.5x FY15E EPS of Rs 14.3. We value KPIT at 10x FY15E EPS and arrive at a target
price of Rs 143. We recommend a BUY on KPIT Cummins Infosystems Ltd.


KPIT Cummins Infosystems Ltd Initiating Coverage Page 12

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Risks

Higher Debtor Days
During FY10-12, debtor days for KPIT have been higher than industry average on account of faster growth in
receivables compared to revenues. During FY12, debtor days increased to 107 from 69 days in FY10.
However, in FY13, debtors days have improved to 76 days driven by management control measures
implemented during FY13.

Global Uncertainty
Eurozone crisis is a cause of concern and any major upheaval can affect the short-term performance of most
of the IT companies. As majority of KPITs business is from the US (76% of revenues in FY13), any downturn
in the US economy can adversely impact its business. KPIT attempts to minimize this risk through
diversification across geographies and better operating efficiencies.

Strategy Risk Based on Focus, Scale and Business Model
Over-reliance on a single vertical (e.g. Automotive) may make KPITs business volatile or cyclical.
Dependence on a few products also ties the company to the fortunes of these products and the companies
that own these products. On the other hand, too much of diversification has the potential to impair KPITs
competitive edge and may spread itself too thin. It should be noted that company does not have any
presence in BFSI, which is most vulnerable in the current global economic scenario.

Foreign Exchange Rate Fluctuations
As KPIT uses India as a major source of manpower, the exchange rate of the Rupee vis-a-vis the US Dollar
and other currencies could affect its ability to compete on the basis of pricing. The movement in the Rupee
exchange rate vis-a-vis US dollar could also result in fluctuation in the companys operating margins and have
short term impact on profitability. Company currently has $ 69.7mn of hedges outstanding as on March 31,
2013 which are maturing in FY14 and have an average rate of Rs 52.07/$. Forex instruments with maturity of
more than 3 months and considered effective hedges in accounting terms, are provided for as adjustment to
the Reserves & Surplus in Balance Sheet, as per companys accounting policy.


























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Company Background
KPIT Cummins (KPIT) was incorporated in 1990 (IPO in 1999) as KPIT Infosystems and was later
merged with Cummins Infotech to form KPIT Cummins Infosystems Ltd. KPIT provides product
engineering solutions and IT & consulting solutions & services to customers across the
manufacturing, automotive, industrial equipment, utilities and semiconductor sectors.
The company focuses on select strategic business units (SBUs, integrated enterprise solutions, auto
& engineering & SAP) and has filed for 40 patents in the automotive and semiconductor domains.
Headquartered in Pune, KPIT has 8321 employees, eight development centres (mainly in Pune and
Bangalore) and offices in 13 countries including in UK, China, Brazil, France, South Africa, Germany, US,
Japan, Singapore and South Korea. In FY13, KPIT earned 75.9% of its revenues from the US, 13.2% from
Europe and 10.9% from the rest of the world.


Revenue by Geography (%) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
USA 73.3 76.2 76.4 74.7 76.3
EUROPE 14.4 14.6 12.9 13.9 11.3
ROW 12.3 9.2 10.7 11.4 12.3

Geography-wise Trend Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
USA (Rs mn) 3,519.9 4,101.6 4,333.5 4,210.1 4,350.3
QoQ Growth (%) 31.7% 16.5% 5.7% -2.8% 3.3%
YoY Growth (%) 73.5% 102.2% 95.7% 57.6% 23.6%
EUROPE (Rs mn) 690.3 785.9 731.7 783.6 646.2
QoQ Growth (%) -4.2% 13.9% -6.9% 7.1% -17.5%
YoY Growth (%) 22.2% 18.2% 11.9% 8.7% -6.4%
ROW (Rs mn) 589.9 495.2 606.9 639.3 702.1
QoQ Growth (%) 48.9% -16.1% 22.6% 5.3% 9.8%
YoY Growth (%) 56.0% 5.8% 58.9% 61.3% 19.0%

Revenue by Vertical (%) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
Auto & Transportation 37.1 39.6 38.8 40.3 38.5
Manufacturing 35.0 32.9 32.4 34.0 35.4
Energy & Utilities 11.6 13.7 15.3 14.2 13.5
Others 16.4 13.8 13.5 11.5 12.7

Vertical-wise Trend Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
Auto & Transportation (Rs mn) 1,780.4 2,133.7 2,200.8 2,270.7 2,192.3
QoQ Growth (%) 10.9% 19.8% 3.1% 3.2% -3.5%
Manufacturing (Rs mn) 1,678.6 1,768.2 1,840.0 1,914.1 2,014.5
QoQ Growth (%) 48.1% 5.3% 4.1% 4.0% 5.2%
Energy & Utilities (Rs mn) 554.4 739.6 868.4 800.4 768.2
QoQ Growth (%) 34.1% 33.4% 17.4% -7.8% -4.0%
Others (Rs mn) 786.7 741.2 762.9 647.8 723.7
QoQ Growth (%) 23.7% -5.8% 2.9% -15.1% 11.7%



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Revenue by Delivery location (%) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
ONSITE 51.5 52.7 53.8 54.7 53.8
OFFSHORE 48.5 47.3 46.2 45.3 46.2

Revenue by Contract type (%) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
T&M 73.6 72.0 72.7 70.1 72.7
FIXED PRICE 26.5 28.1 27.3 29.9 27.3

Debtor Days (Nos) 76.0 75.0 75.0 70.0 75.0

Employee Data (Nos) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
Development Team - Onsite 964 1,031 1,126 1,148 1,139
Development Team - Offshore 5,914 6,074 6,207 6,364 6,486
Onsite FTE 911 977 1,064 1,066 1,074
Offshore FTE 4,393 4,501 4,638 4,637 4,805
Total FTE 5,304 5,478 5,702 5,703 5,879
Development 7,071 7,218 7,447 7,616 7,648
General Mgmt / Support 526 530 536 538 538
Marketing (Subsidiaries) 122 125 128 132 135
Total 7,719 7,873 8,111 8,286 8,321
SG&A Staff 648 655 664 670 673

Utilisation Rate (%) Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
Onsite 94.5 94.7 94.5 92.8 94.3
Offshore 74.3 74.1 74.7 72.9 74.1























KPIT Cummins Infosystems Ltd Initiating Coverage Page 15

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Income Statement
Particulars (Y/E March) (Rs mn) FY11 FY12 FY13 FY14E FY15E
Reported Sales 10,065 15,000 22,386 24,781 28,237
Cost of Revenue 6,437 9,934 14,640 16,219 18,119
Gross Profit 3,628 5,066 7,747 8,562 10,119
SG&A 2,106 2,885 4,096 4,419 5,401
EBITDA 1,522 2,181 3,650 4,143 4,718
Depreciation 411 445 466 544 566
EBIT 1,111 1,736 3,184 3,599 4,152
Interest Recd/(Paid) (34) (78) (154) (92) (92)
Forex Gain/(Loss) - 100 (129) - -
Operating Profit 1,077 1,758 2,901 3,508 4,060
Other Income 26 128 (54) - -
PBT 1,103 1,886 2,847 3,508 4,060
Tax 155 437 766 1,052 1,218
Profit Before Minority Interest 948 1,450 2,082 2,455 2,842
Minority Interest 2 32 86 86 86
Profit/Loss from Associate Co - 35 (5) - -
Net Profit 946 1,454 1,990 2,369 2,756

Balance Sheet
Particulars (Y/E March) (Rs mn) FY11 FY12 FY13 FY14E FY15E
Share Capital 176 356 385 385 385
Reserves 5,856 6,770 10,178 12,390 14,988
Shareholders Funds 6,032 7,126 10,563 12,774 15,373
Minority Interest 9 326 270 356 443
Debt 1,089 2,588 3,213 1,835 1,835
Total Liabilities 7,130 10,040 14,046 14,966 17,651

Gross Block 5,023 8,095 10,421 10,871 11,321
Less: Accumulated Depreciation 1,678 2,155 2,621 3,164 3,730
Net Block 3,345 5,941 7,800 7,706 7,590
Capital Work in Progress 317 185 - - -
Investments 477 582 2,036 2,444 2,932
Current Assets, Loans & Advances

Sundry Debtors 2,289 4,380 4,673 5,431 6,963
Cash and Bank 2,080 1,473 1,921 1,962 2,622
Loans and Advances 579 766 1,417 1,561 2,259
Total Current Assets 4,948 6,619 8,010 8,954 11,843
Less:Current Liabilities & Provisions

Current Liabilities 1,701 2,820 3,658 3,395 3,868
Provisions 200 495 142 743 847
Total Current Liabilities 1,901 3,314 3,800 4,138 4,715
Net Current Assets 3,047 3,305 4,210 4,816 7,128

Deferred Tax Assets (55) 27 - - -

Total Assets 7,130 10,040 14,046 14,966 17,651





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Cash Flow Statement
Particulars (Y/E March) (Rs mn) FY11 FY12 FY13 FY14E FY15E
Net Profit Before Tax 1,103 1,886 2,847 3,508 4,060

Add: Depreciation 411 445 466 544 566
Add: Other Non-Cash Items (47) (186) - - -
Operating Profit Before W.C. 1,467 2,146 3,314 4,051 4,626
Add: Net Changes in Working Capital

Sundry Debtors (901) (2,092) (293) (759) (1,531)
Loans and Advances 98 (187) (651) (145) (698)
Trade & Other Payables 595 1,413 486 338 577

Add: Tax Paid (155) (437) (766) (1,052) (1,218)
Add: Other Non-Cash Items (461) 160 - - -
Operational Cashflows 643 1,005 2,091 2,433 1,756

Cashflow from Investing Activities

Purchase of Fixed Assets (1,559) (3,072) (2,326) (450) (450)
Change in CWIP (31) 132 185 - -
Change in Investments 271 (106) (1,454) (407) (489)

Add: Other Investing Activities (70) 476 - - -
Net Cashflow from Investing (1,389) (2,571) (3,595) (857) (939)
Cashflow from Financing Activities

Change in Debt (19) 1,499 625 (1,378) -
Proceeds from Issue of Share Capital 1,234 65 1,529 - -
Dividend Paid (incl Dividend Tax) (72) (145) (203) (158) (158)
Add: Other Financing Activity 58 (127) - - -
Net Cash from Financing Activities 1,201 1,292 1,952 (1,536) (158)
Opening Cash Balance 1,001 1,457 1,473 1,921 1,962
Change in Cash during the Year 456 (274) 448 41 660
Closing Balance 1,457 1,473 1,921 1,962 2,622













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Key Ratios
Particulars (Y/E March) FY11 FY12 FY13 FY14E FY15E
Growth (%)
Net Sales (Rupee Revenue) 37.6 49.0 49.2 10.7 13.9
Net Sales ($ Revenue) 44.8 36.7 35.1 13.9 13.9
PAT 10.3 53.7 36.9 19.0 16.3
EBITDA (5.7) 43.3 67.4 13.5 13.9

Valuation
EPS (Rs) 10.8 8.2 10.3 12.3 14.3
BVPS (Rs) 68.7 40.0 54.9 66.4 79.9
P/E Ratio (x) 10.0 13.2 10.4 8.8 7.5
P/BV (x) 1.6 2.7 2.0 1.6 1.4
EV/EBITDA (x) 5.6 9.3 6.0 5.0 4.2

Profitability (%)
ROCE 15.6 17.3 22.7 24.1 23.5
ROE 15.7 20.4 18.8 18.5 17.9
EBITDA Margin 15.1 14.5 16.3 16.7 16.7
EBIT Margin 11.0 11.6 14.2 14.5 14.7
PAT Margin 9.4 9.7 8.9 9.6 9.8
Tax/PBT 14.0 23.1 26.9 30.0 30.0

Cost Structure (%)
Cost of Revenue/Sales 64.0 66.2 65.4 65.5 64.2
SG&A/Sales 20.9 19.2 18.3 17.8 19.1

Turnover
Avg. Collection Period (Days) 83 107 76 80 90
Avg. Payment Period (Days) 62 69 60 50 50
Net Working Capital (Days) 21 38 17 30 40














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completeness or correctness. Opinions & theories expressed are based on present circumstances & judgment and are subject to change without notice. Quantum
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mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. If annualized returns are
greater than 15%, then the stock is rated as BUY, between a range of 10-15% is rated as Accumulate. If annualized returns are lower than -15%, then the stock is
rated as SELL, between a range of -10% to -15% is rated as Reduce. In the range of +/ (-) 10%, the stock is rated as Hold. However, within this zone we may choose
to give an Accumulate, Reduce or Hold rating.