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The Company complements its service offerings with specialist support for
clients using its domain competency group that has expertise in areas, such as
securities, insurance, telecommunication, banking and cash management, supply
chain management, manufacturing, retail and distribution, energy and utilities,
healthcare, and travel and tourism. It also uses its software engineering group and
technology lab to create customized solutions for its clients. In addition, it
continually evaluates and trains its professionals in new technologies and
methodologies.
Key people
Activity
Director Activity
Activity
Activity
Activity
Resources, Director
Productivity, Director
CORE SERVICES
The Company provides customized software solutions for its clients. Infosys
creates new applications and enhances the functionality of its clients' existing
software applications. The Company's projects vary in size and duration. The
Company's application development services span the entire range of mainframe,
client server and Internet technologies. An increasing proportion of Infosys'
applications development engagements are related to emerging platforms, such
as Microsoft's .NET or open platforms, such as Java 2 Enterprise Edition (J2EE)
and Linux.
Infosys provides maintenance services for its clients' large software systems that
cover a range of technologies and businesses, and are typically critical to a client's
business. The Company focuses on long-term functionality, stability and
preventive maintenance to avoid problems that typically arise from incomplete or
short-term solutions. While Infosys performs most of the maintenance work at its
global development centers using secure and redundant communication links to
its client's systems, it also maintain a team at the client's facility to coordinate
certain key interface and support function.
Software Re-engineering
Other Solutions
Original Infosys
author(s)
Developer(s) infosys
Development Active
status
Written in Java
Operating Cross-platform
system
Website http://www.infosys.com/finacle/
Finacle
Finacle the universal banking solution from Infosys, helps banks by enabling
them to shift their strategic and operational priorities. It maximizes their
opportunities for growth ,while minimizing the risks that come with large-scale
business transformation Finacle currently powers 91 banks across 54 countries,
helping them serve over 100 million customers, 150 million accounts,
80,000users and supporting over 36 million peak banking transactions per day
spread across multiple installations
Key industries
Infosys serves various industries through its vertical business units, such as:
ABN AMRO
AIRBUS
AETNA INC
Balance sheet
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Sources of funds
Owner's fund
Equity share capital 286 286 286 138 135.29
Share application money - - - - -
Preference share capital - - - - -
Reserves & surplus 17,523.00 13,204.00 10,876.00 6,759.00 5,106.44
Loan funds
Secured loans - - - - -
Unsecured loans - - - - -
Total 17,809.00 13,490.00 11,162.00 6,897.00 5,241.73
Uses of funds
Fixed assets
Gross block 5,986.00 4,508.00 3,889.00 2,837.00 2,182.72
Less : revaluation reserve - - - - -
Less : accumulated
depreciation 2,187.00 1,837.00 1,739.00 1,275.00 1,005.82
Net block 3,799.00 2,671.00 2,150.00 1,562.00 1,176.90
Capital work-in-progress 615 1,260.00 957 571 317.52
Investments 1,005.00 964 839 876 1,328.70
Notes:
Book value of unquoted
investments 1,005.00 964 839 876 1,328.70
Market value of quoted
investments - - - - -
Contingent liabilities 347 603 670 523 289.87
Number of equity shares
outstanding (Lacs) 5728.3 5719.96 5712.1 2755.55 2705.71
Profit loss account
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Income
Operating income 20,264.00 15,648.00 13,149.00 9,028.00 6,859.66
Expenses
Material consumed 20 18 22 16 13.55
Manufacturing expenses 1,822.00 1,549.00 1,378.00 854 603.67
Personnel expenses 9,975.00 7,771.00 6,316.00 4,274.00 3,183.25
Selling expenses 83 89 63 55 82.34
Adminstrative expenses 1,456.00 1,257.00 1,144.00 839 650.65
Expenses capitalised - - - - -
Cost of sales 13,356.00 10,684.00 8,923.00 6,038.00 4,533.46
Operating profit 6,908.00 4,964.00 4,226.00 2,990.00 2,326.20
Other recurring income 874 678 333 221 118.68
Adjusted PBDIT 7,782.00 5,642.00 4,559.00 3,211.00 2,444.88
Financial expenses 2 1 1 1 1.09
Depreciation 694 546 469 409 268.22
Other write offs - - - - -
Adjusted PBT 7,086.00 5,095.00 4,089.00 2,801.00 2,175.57
Tax charges 895 630 352 303 325.3
Adjusted PAT 6,191.00 4,465.00 3,737.00 2,498.00 1,850.27
Non recurring items -372 5 46 -77 54.11
Other non cash adjustments -1 - -5 - -4.59
Reported net profit 5,818.00 4,470.00 3,778.00 2,421.00 1,899.79
Earnigs before appropriation 12,460.00 9,314.00 5,973.00 3,849.00 1,970.30
Equity dividend 1,345.00 1,902.00 649 1,238.00 309.8
Preference dividend - - - - -
Dividend tax 228 323 102 174 42.17
Retained earnings 10,887.00 7,089.00 5,222.00 2,437.00 1,618.33
RATIO ANALYSIS:
Fundamental Analysis has a very broad scope. One aspect looks at the
general (qualitative) factors of a company. The other side considers tangible and
measurable factors (quantitative). This means crunching and analyzing numbers
from the financial statements. If used in conjunction with other methods,
quantitative analysis can produce excellent results.
Ratio analysis isn't just comparing different numbers from the balance
sheet, income statement, and cash flow statement. It's comparing the number
against previous years, other companies, the industry, or even the economy in
general. Ratios look at the relationships between individual values and relate
them to how a company has performed in the past, and might perform in the
future.
MEANING OF RATIO:
A ratio is one figure express in terms of another figure. It is a mathematical
yardstick that measures the relationship two figures, which are related to each
other and mutually interdependent. Ratio is express by dividing one figure by the
other related figure. Thus a ratio is an expression relating one number to another.
It is simply the quotient of two numbers. It can be expressed as a fraction or as a
decimal or as a pure ratio or in absolute figures as “so many times”. As accounting
ratio is an expression relating two figures or accounts or two sets of account heads
or group contain in the financial statements.
MEANING OF RATIO ANALYSIS:
Ratio analysis is the method or process by which the relationship of items
or group of items in the financial statement are computed, determined and
presented.
Ratio analysis is an attempt to derive quantitative measure or guides
concerning the financial health and profitability of business enterprises. Ratio
analysis can be used both in trend and static analysis. There are several ratios at
the disposal of an annalist but their group of ratio he would prefer depends on the
purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section,
we will focus on a technique, which is easy to use. It can provide you with a
valuable investment analysis tool.
However, you must be careful not to place too much importance on one ratio.
You obtain a better indication of the direction in which a company is moving
when several ratios are taken as a group.
1- Operational & Financial Ratios
(a) Earnings Per Share (Rs)
Meaning:
Earnings per Share are calculated to find out overall profitability of the
organization. Earnings per Share represent earning of the company whether or
not dividends are declared. If there is only one class of shares, the earning per
share are determined by dividing net profit by the number of equity shares.
EPS measures the profits available to the equity shareholders on each share
held.
Formula:
NPAT
The higher EPS will attract more investors to acquire shares in the company as
it indicates that the business is more profitable enough to pay the dividends in
time. But remember not all profit earned is going to be distributed as dividends
the company also retains some profits for the business.
For Infosys the variance of EPS ratio for 5 years is -
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05
Formula:
Total equity
CEPS(Rs)
120
100
80
60
CEPS(Rs)
40
20
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(c) DIVIDEND PER SHARE:-
Meaning:
DPS shows how much is paid as dividend to the shareholders on each share
held.
Formula:
50
40
30
Dividend per share
20
10
0
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09
(d)Book NAV/Share(Rs)
An expression for net asset value that represents a fund's (mutual, exchange-
traded, and closed-end) value per share. It is calculated by dividing the total net
asset value of the fund or company by the number of shares outstanding.
Calculated as:
Book NAV/Share(Rs)
350
300
250
200
100
50
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(e) Tax Rate:
An average tax rate is the ratio of the amount of taxes paid to the tax base
(taxable income or spending).
To calculate the average tax rate on an income tax, divide total tax liability by
taxable income:
• Let a be the average tax rate.
• Let t be the tax liability.
Let i be the taxable income.
Tax Rate(%)
16
14
12
10
8
Tax Rate(%)
6
4
2
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
2- Margin Ratios
EBITDA is the acronym for Earnings before Interest, Taxes, Depreciation, and
Amortization.
36.5
36
35.5
Core EBITDA
35 Margin(%)
34.5
34
33.5
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(b)EBIT Margin ratio:
In financial and business accounting, earnings before interest and taxes (EBIT)
or operating income is a measure of a firm's profitability that excludes interest
and income tax expenses.[1]
EBIT = Operating Revenue – Operating Expenses (OPEX) + Non-operating
Income
Operating Income = Operating Revenue – Operating Expenses
EBIT Margin(%)
34
33
32
31
EBIT Margin(%)
30
29
28
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
The Pre tax Margin measures how well a company can generate before-tax
profits at the current level of sales.
The after tax profit margin ratio tells you the profit per sales dollar after all
expenses are deducted from sales. In other words, the after tax profit margin
ratio shows you the percentage of net sales that remains after deducting the cost
of goods sold and all other expenses including income tax expense. The
calculation is: Net Income after Tax /Net Sales.
The profit margin ratio is most useful when it is compared to 1) the same
company’s profit margin ratios from earlier accounting periods, 2) the same
company’s targeted or planned profit margin ratio for the current accounting
period, and 3) the profit margin ratios of other companies in the same industry
during the same accounting period.
28
27.5
27
PAT Margin rate
26.5
26
25.5
25
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09
(e) Cash Profit Margin ratio
This number tells you what the company can do with what it has, i.e. how many
dollars of earnings they derive from each dollar of assets they control. Its a
useful number for comparing competing companies in the same industry. The
number will vary widely across different industries. Return on assets gives an
indication of the capital intensity of the company, which will depend on the
industry; companies that require large initial investments will generally have
lower return on assets.
36
35
34
ROE(%)
33
32
31
30
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09
42
41
40
39
ROCE(%)
38
37
36
35
34
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(d)Asset Turnover:
Asset turnover is a financial ratio that measures the efficiency of a company's
use of its assets in generating sales revenue or sales income to the company.[1]
• "Sales" is the value of "Net Sales" or "Sales" from the company's income
statement
• "Average Total Assets" is the value of "Total assets" from the company's
balance sheet in the beginning and the end of the fiscal period divided by 2.
0.8
0.7
0.6
0.5
0.3
0.2
0.1
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(f)Working Capital/Sales(x)
The Working Capital Productivity Ratio helps explain how well the company is
using its working capital. Historically this has been a useful guide to investors
or stakeholders seeking to assess a company’s ability to manage cash. Any
measure of cash management is important to understand since a business needs
cash to operate, this is the oxygen that businesses need to live. This ratio is
purported to have been established by the US management consultant George
Stalk while working in Japan. The ratio gives a possible indication of the
relationship between financial performance and process improvement.
The Working Capital Productivity ratio can be defined as:
Revenue
Working Capital Productivity Ratio =
(Current Assets – Current Liabilities)
Working Capital/Sales(x)
0.7
0.6
0.5
0.4
Working
0.3 Capital/Sales(x)
0.2
0.1
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
3- Efficiency Ratios
(a)Fixed Capital/Sales(x)
27.5
27
26.5
26
Fixed Capital/Sales(x)
25.5
25
24.5
24
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
(b)Receivable days
Mar- Mar- Mar- Mar- Mar-
09 08 07 06 05
58.39 62.8 52.88 56.02 50.16
Receivable days
70
60
50
40
30 Receivable days
20
10
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
PER(x)
35
30
25
20
PER(x)
15
10
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
Yield Ratio
The return on an investment. This refers to the interest or dividends received
from a security and are usually expressed annually as a percentage based on the
investment's cost, its current market value or its face value.
Yield(%)
2.5
1.5
Yield(%)
1
0.5
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
EV/Net Sales(x)
10
5
EV/Net Sales(x)
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
Total Debt/Equity(x)
1
0.9
0.8
0.7
0.6
0.5
Total Debt/Equity(x)
0.4
0.3
0.2
0.1
0
Mar/05 Mar/06 Mar/07 Mar/08 Mar/09
Current ratio
6
3
Current ratio
0
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09
Quick ratio
6
3
Quick ratio
0
Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 09
Analysis of Financial Ratios:
3- As it is a Service oriented company , it does not have any stock kept with
it. So there is no amount blocked in stock. So the investment required in
working capital is less.
4- Gross Profit Amount increase by approx 15% and Operating Net profit
amount increase by approx 18 %.This means that Operating activities of
Infosys is more efficient as compared to Software development
activities(production activities).
5- But if we see ,ultimately its Operating net profit ratio has still decrease
from 32.13 to 31.72.This is due to a significant increase in Cost of sales
by 22%.
6- Therefore we analyze that its Cost of sales has so much material affect
that it is reducing both GP Ratio & operating profit ratio.
7- As we will see further there is a healthy % increase in Net profit amount
by approx 18% (as compared to Gross Profit Amount by approx 15% ).
This improvement in its performance is majorly due to improvement in
Extra-ordinary items like interest received on deposits from banks
(increase by 257 % ).
8- Funds available with the company has increases by approx 21% . In
2007-08 company has not issued any new equity or debt .Therefore the
company has raised its funds only through its Reserves & Surplus which
is approx 21%.
9- Now the company has employed these funds in following ways:
1) Acquired new fixed assets . This has resulted in more depreciation
charged to profits in P & L a/c. This has ultimately decreases the
Operating profit ratio.
2) used to finance the working capital requirements.
3) has also made some new Investments in the current year(increases by
15 )
10- There is a decreases in Fixed assets turnover ratio. At first look it
may appears that the company has utilized its Fixed assets less
efficiently. However it has acquired New Fixed assets worth Rs 1050
crores in the year 2007-08 which may help the company in Future
growth.
11- Company has no Debt and Preference capital which means that
there is no Capital Gearing ratio, no Debt-Equity ratio and no Interest
Coverage ratio.
SWOT ANALYSIS
STRENGTHS
Infosys has among the best talent in the Indian technology services industry and
are committed to remaining among the industry’s leading employers. We have a
presence in 13 cities in India, allowing us to recruit technology professionals with
specific geographic preferences. We have a diverse workforce which includes
employees from 70 nationalities.
Ability to scale:
A pioneer in the technology services industry. We are one of the first Indian
companies to achieve a number of significant milestones, which has enhanced
our reputation in the marketplace.
WEAKNESSES
Revenues and expenses are difficult to predict and can vary significantly from
period to period, which could cause share Price to decline 26 May not be able to
sustain our previous profit margins or levels of profitability. The economic
environment, pricing pressure and rising wages in India and overseas could
negatively impact revenues and operating results. Revenues are highly dependent
on clients primarily located in the United States and Europe, as well as on clients
concentrated in certain industries. Economic slowdowns or factors that affect the
economic health of the United States, Europe or these industries may affect our
business. Any inability to manage growth could disrupt our business and reduce
our profitability may face difficulties in providing end-to-end business solutions
for our clients, which could lead to clients discontinuing their work. Revenues
are highly dependent upon a small number of clients, and the loss of any one of
our major clients could significantly impact the business
Failure to complete fixed-price, fixed-time frame contracts within budget and on
time may negatively affect our profitability client contracts can typically be
terminated without cause and with little or no notice or penalty, which could
negatively impact our revenues and profitability
The engagements with customers are singular in nature and do not necessarily
provide for subsequent engagements
OPPORTUNITIES
Huge untapped potential for in the global market as IT will become the need of
almost every industry. The IT industry can be the reason for India being a global
leader of tomorrow
THREATS
1- www.infosys.com
2- www.moneycontrol.com
3- www.rediffmoney.com