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“POWER OF TALENT”

“Our Core Corporate Walk Out Every Evening. It is Our


Duty To Make Sure That these Assets return the next
Morning, Mentally And Physically Enthusiastic And
Energetic. ”

Presented By:
Saurabh Sharma
Saurav kumar
Sreelal M.S.
Sandeep Sahu
Fact File of Infosys

ØInfosys Technologies Ltd . delivers IT -


enabled business solutions to enable Global
2000 companies win in a Flat World .
Ø
ØInfosys has a global footprint with sales
offices in 30 countries and development
centres in India , US , China , Australia , UK ,
Canada , Japan and many other countries .
Ø
ØInfosys has over 105 , 000 employees of 73
nationalities .
Fact File of Infosys..

Financial Summary* (LTM Sep 09)

Total Income : Rs. 22,478 crore

Net profit after taxes : Rs. 6,321 crore

Earnings per share (Rs. 5) : Rs. 110.34 (basic)

Total assets : Rs. 20,757 crore

Cash and cash equivalents : Rs. 13,796 crore

* Indian GAAP
Ratio Analysis
of
Financial Statements
Financial Ratios..

Financial ratios are tools for interpreting financial


statements to provide a basis for valuing securities
and appraising financial and management
performance.
In general, there are 4 kinds of financial ratios
that a financial analyst will use most frequently,
these are:

ØPerformance ratios
ØWorking capital ratios
ØLiquidity ratios
ØSolvency ratios
Liquidity Ratios

Can the company continue to pay its


liabilities and debts?
Current Ratio

Current Ratio = Total Current Assets/ Total


Current Liabilities

ØThe ratio is regarded as a test of liquidity


for a company.
Ø
ØIt expresses the 'working capital' relationship
of current assets available to meet the company's
current obligations.
Current Ratio..

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09


2.8 2.75 4.96 3.3 4.71

By Industry norm current ratio for service industry is around 1.2


Current Ratio..

Inferences

ØIn current scenario Infosys has Rs. 4.71 to pay


Rs. 1 i.e. it has 370% more capacity to repay its
short term liabilities.
Ø
ØThis depicts a sound financial heath of the
company as far as repaying short term obligations
are concerned.
Ø
ØCurrent ratio decreased from 4.96 in Mar-07 to
3.3 in Mar-08.
Ø
ØReason??
Quick Ratio

Quick Ratio = (Cash + Account receivables +


short term investments)/ Current
liabilities
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
4.67 3.28 4.91 2.73 2.77
Profitability Ratio
Return on Assets: ROA

The return on assets (ROA) percentage shows how


profitable a company's assets are in generating
revenue.

Net Income
ROA :=
Total Assets
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
32.14 32.06 32.34 31.35 31.66
Return on Equity: ROE

•It measures a firm's efficiency at generating profits from


every unit of shareholders' equity (also known as net
assets or assets minus liabilities).
•ROE shows how well a company uses investment
funds to generate earnings growth.

Net Income
ROE :=
Total Common Equity
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
32.67 33.14 33.89 35.1 36.32
Return on Capital Employed (ROCE)

Return on Capital Employed (ROCE) is used in finance


as a measure of the return that a company is realising
from its capital employed.

net profits
Return on Capital Employed =
Capital employed
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05
37.71 37.81 37.05 39.51 42.54
§ The Return on Equity (ROE) &
Return on Equity (ROE) both
has .
§ It shows that the company
has utilize the shareholders
funds less efficiently.
§ This is unfavorable for
Company's image as it may
result in decrease in the
confidence in the investor’s
mind for company’s
performance.
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.
Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

0.77 0.79 0.69 0.67 0.62


Working Capital/Sales
The Working Capital Productivity Ratio helps explain how well the company is
using its working capital.

Working Capital Productivity Ratio = Revenue / (Current Assets – Current Liabilities


Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

0.61 0.54 0.54 0.42 0.35


• 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.

• Gross Profit Amount approx 15% and


Operating Net profit amount
approx 18 %.
This means that Operating
activities of Infosys is more efficient as
compared to Software development
activities(production activities) .


Operational & Financial
Ratios
Earnings Per Share
• Earnings per Share are calculated to
find out overall profitability of the
organization.

• 

• NPAT
•Earnings per share =

• Number of equity share


• 


Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

101.65 78.15 66.14 87.72 70.52


DIVIDEND PER SHARE
• DPS shows how much is paid as dividend
to the shareholders on each share held.

•  
• Dividend Paid to Ordinary
Shareholders
Dividend per Share =

• Number of equity share


•  

Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

23.5 33.25 11.5 45 11.5


• The Company is currently paying approx
17% of its Current Earnings as Dividend
( D/P ratio is 16.93% ). From
shareholders Long term point of view it is
good that company is retaining its
approx 83% of its present earnings for its
future growth.

• Therefore (through Fixed Assets turnover


ratio & D/P ratio) it seems
that company is retaining significant
amount for its future .


Book NAV/Share
• An expression for net asset value that
represents a fund's (mutual,
exchange-traded, and closed-end) or
a company's value per share
• 

 


Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

311.35 235.84 195.14 249.89 194.15


Tax Rate
• An average tax rate is the ratio of the
amount of taxes paid to the tax base
(taxable income or spending).
•  •Let a be the average tax rate.
•Let t be the tax liability.
• •Let i be the taxable income.

 


Mar-09 Mar-08 Mar-07 Mar-06 Mar-05

13.33 12.35 8.51 11.12 14.58


Analysis of Financial Ratios
• Sales amount 19% but Cost of sales
22% (bcoz salaries paid
to software development employees
26% ). This has resulted in a less
proportionate in Gross profit (15%)

• Sales 19% but debtors - significant
35%.
• It is due to the in Debtors collection
period from 64 to 72 days i.e. debtors are
given more credit period.
This has resulted in
Contd….
• But if we see ,ultimately its
Operating net profit ratio has
still from 32.13 to 31.72.

This is due to a
significant increase in
Cost of sales by 22%.
• Therefore we analyze that its Cost of
sales has so much material affect that it is
reducing both GP
Ratio & operating profit ratio.

• 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
( by 257 % ).
• Funds available with the company has
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%.

• 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 the Operating
profit ratio.

Contd….

• 2) used to finance the working capital


requirements.
• 3) has also made some new Investments in
the current year ( by 15 % )

• There is a 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
• 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
• As Infosys is a Debt Free company , it has certain
Advantages and Disadvantages
• ADVANTAGES :
• Not dependent on External Borrowers
• No Interest burden , therefore higher
profits.
• No burden of Loan Repayment
• Can Get Loans easily in Future
• DISADVANTAGE:
• Gives lower E.P.S. for Shareholders.


SUGGESTIONS
1.
2.Company needs to reduce its cost of
sales i.e. Software Development
related expenses, to increase its
Gross Profit ratio and
Operating net ratio.
3.
4.Company needs to have stringent
credit policy, to reduce the funds
required for working capital.

Contd….

3.Do efficient utilization of


shareholders funds to improve its
ROI & ROE to maintain its
goodwill in investors mind.
4.
•4. May go for some Debt borrowing
to increase E.P.S. for shareholders.

References
• www.infosys.com
• http://finapps.forbes.com
• www.moneycontrol.com


• Thank You.