fundamental analysis final

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STUDY OF FUNDAMENTAL ANALYSIS- A QUALITATIVE AND QUANTITATIVE

APPROCH

Research Report submitted to Entrepreneurship Development Institute

of India in partial fulfillment of the requirements for the award of

Post Graduate Diploma in Business Management

Submitted by

Dhananjay Kumar

Register No.: 10AJEPG1028

Under the guidance of

Balaji Rao

Faculty

SBM Jain College

Bangalore

Entrepreneurship Development Institute of India

Ahmadabad

2011

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DECLARATION

I hereby declare that the research entitled STUDY OF FUNDAMENTAL ANALYSIS- A

QUALITATIVE AND QUANTITATIVE APPROCH submitted to Entrepreneurship Development

Institute of India in partial fulfillment of the requirements for the award of the PGDBM, is a record of

independent research work carried out by me under the supervision and guidance of Balaji Rao,

Faculty, SBM Jain College, Bangalore. This work has not formed the basis for the award of any

Degree and has not been submitted previously to any other College/University.

Bangalore

August ___, 2011 Dhananjay Kumar

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Balaji Rao

Faculty

SBM Jain College

Bangalore

CERTIFICATE

I certify that this research entitled STUDY OF FUNDAMENTAL ANALYSIS- A QUALITATIVE AND

QUANTITATIVE APPROCH submitted to Entrepreneurship Development Institute of India in partial

fulfillment of the requirements for the award of PGDBM, is a record of independent research work

carried out by Mr. Dhananjay Kumar under my supervision and guidance. This work has not formed

the basis for the award of any Degree and has not been submitted previously to any other

College/University.

Bangalore Balaji Rao

August ___, 2011 Research Mentor

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EXECUTIVE SUMMARY

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Executive summary

The report " Fundamental Analysis of Five Major Companies in the Information Technology Sector"

is a study to analyze the strength and weakness of the scrip's of five major companies in the IT

industry. The five major companies include Tata Consultancy Services, Infosys, Oracle, HCL and

Wipro. The primary objective of the study to suggest the investors, whether to buy the scrip or not,

based on the valuation (Under priced or Over priced) of shares. The secondary objective of the study

is Analyze the company's performance, Understand the capital market and its functioning, and to

compare theoretical knowledge with actual industry practice.

To analyze the scrip, Fundamental analyses used. In the fundamental analysis the method of intrinsic

value of calculation is used and the intrinsic value is compared with the current market value to

suggest the investor to buy or sell the share

Interpret whether to buy sell or hold the share.

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1. INRODUCTION

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1. Introduction

An investor means people who invest savings. Investment is an activity, which is different from

savings. Savings are generated when a person abstains from present consumption for a future use.

Savings kept as cash are barren and do not earn anything. Hence the saver has to find a temporary

for his savings until they are required for his future. This results in investment.

Today, investment has become a household word and is very popular with people from all walks of

life. It is because of increase in working population, higher family incomes and consequent savings,

availability of large and attractive investment alternatives, increase in investment related publicity and

so on.

Fundamental analysis is the process of looking at a business at the basic or fundamental financial

level. This type of analysis examines key ratios of a business to detuning its financial health and gives

you an idea of the value its stock. Many investors use fundamental analysis alone or in combination

with other tools to evaluate stocks for investment purpose. The goal is to determine the current wealth

and more importantly, how the market values the stock. The Return on Equity (ROE) is one measure

of how efficiently a company uses its assets to produce earnings . The fundamental forecast stock

prices on the basis of economic industry and company statistics. So this study also analyses theeconomy, the industry and company analysis to know the behavior of stock performance of the IT

industry.

One of the primary assumptions of the fundamental analysis is the price of the stock market does not

fully reflect a stocks real value. In the financial jargon, this true value is known as the intrinsic value. If

the market price is less than intrinsic value, then such shares are considered to be under priced and

are suitable for investment. Thus the shares have to be held in hand or if necessary more shares can

be brought as the share sis expected to move up in the future to match with its intrinsic value. If the

market price is greater than the intrinsic value then such shares is considered to be overpriced and it

is not suitable for investment. The market price of such shares may come down in future and the

investors will sell such a share. This leads us to the second major assumptions of fundamental

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analysis: in the long run, the stock market will reflect the fundamentals. There is no point in buying a

stock based on intrinsic value if the price never reflected that value.

1.1 Objectives of the study

1.1.1 Primary Objective

To carry out the fundamental analysis for five selected companies in the IT sector and to suggest

whether to buy the scrip or not to invest based on the valuation(under priced or over priced) of

shares.

1.1.2 Secondary Objectives

Analyze the companies performance

Understand the capital market and its functioning

To compare theoretical knowledge with actual industry practice

1.2 Scope of the study

The stock market is a major source of investment. The risk associated with the investment is

relatively high compared to bank deposit and real estate, with high yield. Cochin stock exchange

limited(CSE) is one of the premier stock exchange of India established in the year 1978. CSE:introduced the facility for computerized trading- Cochin Online Trading(COLT). CSE was one of the

promoters of interconnected stock exchange of India(ISE). CSE promoted a 100% subsidiary called

the Cochin stock brokers ltd(CSBL) and started trading in the national stock exchange(NSE) and

Bombay Stock Exchange(BSE).

Due to time restriction and resource constraints the study has been confined to only one sector i.e., IT

sector. The period of the study covers only 5 years starting from 2007 to 2011. This study will cover

% companies from the IT sector selected based on the highest market capital in the industry. The

most suitable company to be invested and the performance of the company will be analyzed.

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1.3 Limitations of the Study

The data collected is secondary in nature

Only 5 widely traded securities of the IT sector were taken for the study

The accuracy and correctness of the tools used depends on the accuracy of the published

accounts

A detailed study was not possible due to shortage of time

The inherent limitations of the fundamental analysis also exist here

1.4 Statement of the problem

Indian has a well developed capital market which provides huge investment opportunity for investors.

Indian IT sector is the centre of attraction for many investors residing within and outside India. These

days IT index is highly volatile. So it is inevitable to evaluate the performance of each security before

investing. This study is an attempt to guide the investor to identify the best performing security in the

IT sector. The study includes the analysis of financial statement of 5 major companies in IT sector,

evaluation of the shares that it posses.

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2. PROFILE

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2.1Industry Profile

2.1.1 Indian capital market an overview

Indian stock market is one of the oldest market in Asia. Its history dates back to nearly 200 years ago.

The earliest record of security dealing in India is merger and obscure. The east Indian company was

dominant institution in those days and business in its loan security used to be transacted towards

close of the eighteenth century.

By 18~0s business on stock rates and shares initiated in Bombay. Though the trading list was

broader in 1839, there were only half a dozen brokers recognized by banks and merchants during

1840s. The 1850s witnessed a rapid development in commercial enterprise and brokerage business

attracted many men into the field and by 1860s, the number of brokers increased into 60. In 1860-61,

the American civil war broke out and cotton supply from United States to Europe was stopped. This

increased the brokers in India to about 200 to 250. However by the end of the American Civil war in

1965, disastarous slumps begain( for example, Bank of Bombay share that had reached Rs.2850

could only be sold at Rs. 87).

At the end of Mexican civil war the brokers who thrived out of civil war in 1874 found a place in astreet( now called the Dalal street) where they would conveniently assemble and transact business.

In 1887, they finally established in Bombay, The Native Share and stock Brokers Association( which

is attractively known as The Stock Exchange).

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2.1.2 Stock Exchange

Stock Exchange means any body of individuals whether incorporated or not, consolidated for the

purpose of assisting, regulating and controlling the business of buying, selling and sealing with

securities. It is a market where stocks, shares and other securities are bought and sold and also to

provide avenue for disposal of securities, when owners feel like. It is an essential component of the

economy and indispensable for the proper functioning of corporate enterprise.

The business is done using a screen based trading technology through dually authorized members of

the exchange. The stock exchange is opened to anyone big or small with money to invest or

securities to sell. In modern capitalized economy almost all commodities even in small are produced

in large scale and large scale means large amount of capital. The joint stock company or corporate

fund of organization is ideally suited for large amount of capital from all those who have surplus fund.

When a joint company issues stock and bonds, surplus fund employed profitably in either of them

according to convince and temperament. The stock exchange enables the investigating to shift from

one business to another without any difficulty. An investor, who put his saving in a companyby buying

its securities, cannot get the amount back from the company directly. The only way in which the

capital invested in stock and shares of a joint stock company may be realized by its owner is through

the sale of those stock and shares to others. The stock changes , but it circulates within the market

only.

2.1.3 National stock exchange

National stock exchange(NSE) of India became operational in the capital market segment on 3rd

November 1994 in Mumbai. The genesis ot the NSE lies in the recommendation of the Pherwani

Committee. Apart from the NSE, it had recommended for the establishment of the National Stock

Market System.

The main objectives of NSE is

To establish a nation wide trading facility for equities, debt and hybrids.

To ensure equal access to investors all over the country through appropriate communication

network.

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To provide fair, efficient and transparent security market to investors by using an electronic

communication network.

To enable shorter settlement cycle and book entry system.

To meet current international standards of securities market.

2.1.4 Promoters of NSE

IDBI, ICICI, IFCI, LIC, OIC, SBI, Bank of Baroda, Canara Bank, Corporation bank, Indian bank,

Oriental bank of commerce, Union bank of India, Punjab national bank, Infrastructure leasing and

financial service, Stock holding corporation of India and SBI capital market.

2.1.5 Membership criteria

Membership is based on factor such as capital adequacy, corporate structure, track record,

education, experience etc. Admission is a two stage process with the applicant need to go through a

written examination followed by an interview. The exchange admits members separately to WDM

segment and the Capital market segment. Corporate members are admitted on the debt market

segment whereas individual and firms are also eligible on the capital market segment.

2.1.6 Trading SystemThe software in the NSE trading system is known as National Exchange for automated

trading(NEAT). The trade takes place through computers. The trading members computer is

connected with the central computer at NSE through leased lines and VSAT, which are small dish

antenna. Communication is carried out with the help of satellites. Network management centre is

setup to enable remote diagnosing and solving problems related to network through out the day. This

helps the traders to carry out their activities with minimum interruption.

2.1.7 Stock market indices

An Index is used to give information about the price movement of products in the financial,

commodities or any other markets. Financial Indices are constructed to measure the price movement

of stocks, bonds, T bills and other forms of investments. Stock market indices are meant to capture

the overall behavior of equity market. A stock market is created by selecting a group of stocks that

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are representative of the whole market or a specified sector or segment of the market. An indices is

calculated with reference to a base period and a base index value.

2.1.8 Important Indian stock market Indices

S&P CNXNIFTY

BSE Sensex

CNXMIDCAP

BSE 100

BSE 200

NYSE Indexes

Dow Jones Industrial average

NASDAQ Index

2.2 Company Profile

2.2.1 Introduction

COCHIN STOCK EXCHANGE LTD, Is one of the premier stock exchanges in India, established in

the year 1978. The exchange had a humble beginning with just 5 companies listed in 1978~79 and

had only 4 members. Today the exchange has more than 508 members and 240 listed companies. In

1980 the exchange computerized its offices. In order to keep pace with the changing scenario in the

capital market, CSE took various steps including trading in dematerialized shares. CSE introduced

the facility for computerized trading Cochin Online Trading (COLT) on March 17, 1997. CSE was

one of the promoters of Interconnected Stock Exchange of India (ISE). The objective was to

consolidate the small, fragmented and less liquid markets into a national level liquid market. With

enforcement of efficient margin system and surveillance, CSE has successfully prevented defaults.

Introduction of the fast track system made CSE the stock exchange with the shortest settlement cycle

in the country at that time. By the dawn of the new century, the regional exchanges faced a serious

challenge from the NSE and BSE. To face this challenge CSE promoted a 100% subsidiary called the

Cochin Stock Brokers Ltd. (CSBL) and started trading in the National Stock Exchange and Bombay

stock Exchange.

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CSBL is the first subsidiary of a stock exchange to get membership in both NSE and BSE. CSBL also

became a depository participant in the Central Depository Services Ltd. The CSE has been playing a

vital role in the economic development of the country in general and Kerala in particular and striving

hard to achieve the following goals:

Providing investors with high level of liquidity whereby the cost and time involved in the entry

and exit from the market are minimized.

Bringing in high tech solution and making all operations transparent.

Building infrastructure for capital market by turning CSE into a financial supermarket

Serve the investors of the region.

Professional stock broking and management.

Imparting capital market knowledge to all intermediates on a continuous basis.

The CE is directly under the control and supervision of Securities and Exchange Board of India

(SEBI) and is today a demutualized entity in accordance with the CSE (Demutualization)

scheme and notified by SEBI on 29th of august 2005. Demutualization essentially means de-

linking and separation of ownership and trading rights and restructuring the board in

accordance with the provision of the scheme. The exchange has been demutualized and the

notification thereof published in the Gazette.

2.2.2 Management of CSE Ltd.

The policy decisions of the CSE are taken by the Board of Directors. The board is constituted with 12

members of whom less than one-fourth are elected from amongst the trading members of CSE,

another one-fourth are public interested directors selected by SEBI from the panel submitted by the

exchange and the remaining are share holder directors. The board appoints the executive director

who functions as an ex-officio member of the board and takes charge of the administration of theExchange.

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3.2.3 Organizational structure

2.2.4Various departments at CSE

Membership

The membership department screens application from prospective members to ensure that they are

eligible to be members of exchange as per provisions of the Securities Contracts Regulations Act. It

is also verified they are Fit and Proper persons eligible to be member as per SEBI Regulation 2004.

The eligible application are processed and forwarded to SEBI for the purpose of obtaining registration

with SEBI. The department continuously follows up the status of the applications with SEBI and

provides necessary data if any required by SEBI. The members are informed of their fee liability as

and when information in this regard is obtained from SEBI. The membership department also assist

SEBI by ensuring proper delivery of notices and letters issued by SEBI to the concerned members.

The changes in the status and constitution of the brokers are send for the approval of the governing

Board of Directors

Systems SettlementLegal Surveillance

Executive director

AdministrationPersonal

Legal and

SecretarialListing

Marketing &Public Relations

Finance

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board of the Exchange and thereafter send to SEBI and members are given necessary directions

wherever required. Changes in address and contact information are updated in the finance and

accounting system and SEBI intimated.

System

The system department is the heart of the various operations of the CSE. The department provides

the necessary technical support for the screen based trading and the computerized functioning of all

to other department.

The activities of the department includes:

Development of software needed for the functions of the Exchange.

Maintenance of Multex software, which enables online trading with NSE and BSE.

Maintenance of an efficient computer network for the smooth working of the exchange.

Providing the necessary services to the settlement and surveillance departments.

The support for maintenance of the depository participants accounts with the CSBL DP.

The major office system softwares used are NESS and BOSS respectively for NSE and BSE trades

calculations. These softwares are developed in-house by software professional at the exchange and

are used to maintain the entire records of all trades that occur each day.

It also does all the required calculations for the deductions and also generates the reports required by

the brokers and their clients.

The trading software used in CSBL is Multex, developed by CMC. The advantage of using it is that

both BSE and NSE scrips can be traded using this facility.

CSBL has trading facility in equities through Multex to a large number of their clients over the WAN.

Currently, the clients are connected by VPN, VSAT etc.

Legal

Guided by the Officer-Legal, the Legal Department is primarily responsible for advising themanagement about the merits and demerits of legal issues involving the Exchange. The department

consistently monitors the compliance parameters in the terms of Companies Act, SEBI Act, Securities

Contracts Regulation Act, and other related statutes. Listing guidelines and related criteria stipulated

by SEBI, and the rules, regulations, directives and circulars issued by SEBI with regards to trading in

the capital market are consistently scrutinized and necessary directions are given to the concerned

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departments to ensure strict and continued compliance. Relevant developments are brought to the

notice of the members and the investing public. Officer-Legal is the Compliance officer as per the

provision of SEBI regulations and also functions as Secretary to the Board of Directors. Other major

activities undertaken by the department relate to Investor Grievance Services, arbitration and

Resolution of issue pertaining to declare defaulters.

Listing

The listing department guides prospective companies desirous of being listed on the exchange by

providing the knowledge base and information on the statutory requirements that have to be compiled

with. The major functions undertaken by the department include post-listing monitoring and

compliance with the listing agreement, monitoring the listing agreement and reviewing the provisions

of the listing agreement from time to time with specific reference to SEBI regulation/circulars that are

in force. The department also ensures diligence in scrutinizing listing applications and adhering t the

listing norms.

Finance

The finance department controls the financial transactions of the exchange and is the life line of the

organization. The department is headed by a Finance Officer.

The activities of the department includes:

Fund management

Interaction with bankers

Maintaining general account of the exchange

Preparation of various financial statements

Maintaining payrolls and cash registers

Coordinating accounting transactions of different branches and departments

Taxations Budgeting and expense research

Settlement

Settlement Department is a key department of the exchange, dealing with cash and securities. It

assist the brokers in settling the matters related to their pay-in and payout, recovery of dues and

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settlement issues related to bad deliveries. This department is headed by a Deputy Manager assisted

by two Senior Officer who take care of the operations involved in the settlement activities in CSE. The

Exchange follows the T+2 settlement system.

Marketing

The Marketing Department interacts with the brokers of the exchange, trading both within the state

and outside and collects their opinion and suggestions. These are brought to the notice of the

committee constituted for the purpose and decisions of the committee are placed for approval of the

governing of the exchange. The efforts are aimed at improving the quality and efficiency of the

services offered. I addition the department conducts extensive surveys and campaigns in remote

areas ad wherever necessary, conducts awareness programs about Capital Market. Experts with

sufficient experience in the trade brief the participants and address their queries. Talk shows and

interviews are conducted on television channels, clipping are displayed in theatres all with an

intension to increase public awareness and motivate their interest in capital market. The marketing

wing also coordinates the of campus programmes of CSE. Institutes and organizes regular classes

at authorized centers after verifying the availability of suitable infrastructure and facilities.

Surveillance

The exchange has set up the surveillance department to keep a close watch on price movement of

scrip and to detect market abuse like price rigging, monitor abnormal prices and volumes which are

not consistent with the normal trading patterns etc. The main objective of the department is to ensure

a free and fair market, to avoid manipulation and to manage risk. The surveillance functions at the

exchange has assumed greater importance in the last few years. SEBI has directed the exchange to

set up a separate surveillance department with staff exclusively for this function.

The surveillance department

Keeps a close watch on the price movement of the scrips

Detects market manipulations like price riggings

Monitors abnormal changes in price and volumes which are not consistent with normal trading

pattern

Monitors the member brokers position to ensure that defaults do not occur

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The department conducts in-depth investigation based on preliminary enquires made into trading of

the scrip as also at the instance of SEBI. Conducting investigation involves the following stages:-

Identification of scrip based on the alerts thrown by the online system and offline reports

Identification of members from whom the client details have to be called for.

Preparation of company profile including Corporate news and Financial results.

Compilation of Client details

Preparation of reports

2.3 PROFILE OF THE SELECTED IT COMPANIES

2.3.1 INFOSYSInfosys technologies limited, is a public limited and India's second largest software exporter company

incorporated in the year 1981 as Infosys consultants private limited by Mr.N.R.Narayana Murthy at

karnataka, who is chairman and chief mentor of the company. It became public limited company in

the year 1992. It has received CMM-5 status and it functioning collaborated with ANALOG DEVICES

INC of USA. Infosys is a groundbreaking company in the field of information technology and it enjoys

the privilege of being a dept free company. It's only the company to be part of the major global index.

Company offers the services of consulting, process re-engineering, modular global sourcing and

Business Process Outsourcing services. It has developed finacle, a universal banking solution to

large and medium size banks across India and oversees. The company has entered in marketing and

technical alliance with FileNet, IBM, Intel, Microsoft, Oracle and System Application Products. Infosys

is listed in BSE, NSE

and NASDAQ.

Infosys, the country's second-biggest IT/ITES services companies, which was the first Indian

company to be listed on the NASDAQ at the year 1999. Infosys also forms a part of the NASDAQ-100

index. Continuously the year 2001, 2002 and 2003 company wins the National award for excellence

in corporate governance conferred by the Govt of India. In the year 2003 it acquired Expert

Information Services in Australia for $22.9 million. Its has five wholly owned subsidiaries namely as

Infosys technologies China, Infosys technologies Australia, Infosys consultancy INC, Infosys BPO

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SRO and Infosys BPO Ltd previously known as progeon. CRISIL assigned the ' CRISIL GVC level 1'

rating for corporate governance. In the year 2004 company crosses US $ 1 billion in revenue. 2005

was the year the largest international equity offering of US $ 1 billion from India by Infosys and in

2006 company celebrated 25th year. Infosys selected as 'Best Outsourcing Partner' by the readers of

Waters, a publication covering the needs of chief information officers in the capital market firms. In

2007 it increased stake value in progeon to 98.9 % after acquiring shares from Citicorp International

Financial Company and a subsequent buy back offer to its share holders. Infosys had taken over

Philips' finance and administration business process outsourcing (BPO) centers spread across India,

Poland and Thailand for $28 million. A Finacle from Infosys completes Phase 1 of implementation in

Stroyvestbank subsidiary structure of URALSIB BANK.

Infosys Technologies has 47% of core business assets stagnating. The company scanning the

markets of Europe and Japan for acquisitions in the price band of $200-$300 million to energies its

non-linear business strategy as well as to expand its geographic reach. Infosys set up various Special

Economic Zone that for the company has an additional tax benefit. It set up another Special

Economic Zone unit in Chandigarh which will be eligible for 100 % deduction of profit from exports tax

calculation for the first five years followed by 50% deduction for next five years. Infosys has been

pursuing its expansion plans over the past few years. As of March 2007 it has a capital expenditure

commitment of Rs 655 crs, it is in the process of expanding its operations by adding amount 32,967

seats to its completed 58.488 seats. The entire capital expenditure was funded out of internal cash

flows. The future enhancement of the company is to emerge the developing economies changing the

business landscape with help of accessible talent pools and the adoption of non-linear growth model,

it is a long term strategy. Infosys Technologies Ltd has partnered with ACDI/VOCA for promotes

broad-based economic growth and to develop information and communication technology- enabled

application to improve efficiencies in the agro supply chain in India. As of April 2008 the company

acquired Internet Protocol (IP) from an Australian company to add more functionality to finacle. The

IP, that provides a comprehensive set of financial tools to company's existing product line. As on May

2008 the company ranked third in the largest 2008 Global Outsourcing 100, compiled by the

International Association of Outsourcing Professionals (IAOP).

2.3.2 TCS

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Established in 1968, Tata Consultancy Services has grown to its current position as the largest IT

services firm in Asia based on its record of outstanding service, collaborative partnerships,

innovation, and corporate responsibility. TCS is headquartered in Mumbai, and operates in more than

50 countries and has more than 170 offices across the world. In the year 1979 it established its first

office in New York City. It is the world's first organization to achieve an enterprise-wide Maturity Level

5 on quality improvement models, CMMI and P-CMM, using the most rigorous assessment

methodology, SCAMPISM. TCS Division of Tata Sons Ltd was transferred to TCS as on April 2004

for a consideration of Rs.2300 crores and the company went to public in the same year 2004.

The company's major areas of business are comes under five services, such as Consulting,

Information Technology Services, Business Process Outsourcing, Infrastructure Outsourcing,

Engineering and Industrial Services which covers the industries namely Banking and Financial

Services, Energy and Utilities, Government, Healthcare and Life Sciences, Hi Technology, Insurance,

Manufacturing, Retail, Telecom, Travel and Hospitality.

During the year 2004-05 the company has acquired WTI Advanced Technology LTD and TCS

Business Transformation Solutions Ltd (Previously, Phoenix Global Solutions (India) LTD),

subsequently these two companies have turned as the subsidiaries of the company. In between

2005-06, the year covers the acquisitions of three companies Comicrom S.A., Chile, Financial

Network Services (Holdings) Pty Ltd, Australia (FNS) and Swedish Indian IT Resources AB (SITAR).

Tata Infotech Limited and three wholly owned subsidiaries of the company, viz Airline Financial

Support Services (India) Ltd (AFSL), Aviation Software Development Consultancy India Ltd (ASDC)

and TCS Business Transformation Solutions Ltd (TCS BTS) have amalgamated with the company on

April 2005. Apart from this the company made strategic alliances during the year with Diligenta

Limited for Life Insurance business and entered into a Joint Venture Agreement with the State Bank

of India (SBI). The new company was formulated and named C-Edge Technologies Limited (C-Edge)

to provide advanced technology solutions and world-class domain consulting for the banking and

financial services sector.

In the year of 2006, TCS formed a company as MP Online Limited, partnership with the Government

of Madhya Pradesh, offering a wide range of computer enabled services in the State of Madhya

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Pradesh. The company, through its wholly owned subsidiaries Tata Consultancy Services Asia

Pacific Pte Ltd and Tata Consultancy Services Malaysia Sdn Bhd, subscribed to 100% share capital

of PT Tata Consultancy Services, Indonesia, a Company formed to provide consulting and IT related

services in Indonesia. Through its wholly owned subsidiary Tata Consultancy Services Netherlands

B.V., acquired 75% equity interest in Switzerland based TKS - Teknosoft S.A., for a consideration of

Rs. 368.06 crores The company, through its wholly owned subsidiary TCS FNS Pty Limited, acquired

100% equity interest in an Australia based company TCS Management Pty Ltd., for a total

consideration of Rs. 15.75 crores. TCS's share capital of Tata Consultancy Services (China) Co., Ltd

leads the company to frame a partnership with Chinese companies to provide IT outsourcing services

and solutions. The Company, through its wholly owned subsidiaries Tata Consultancy Services BPO

Chile S.A. and TCS Inversiones Chile Limitada, subscribed to 100 % share capital of Tata solution

Center S.A., a Company formed to provide BPO services in Ecuador. Another one of its wholly owned

subsidiary TCS FNS Pty Limited, subscribed to 100% share capital of Financial Network Services

Beijing Co. Ltd., a company formed to provide consulting and IT related services in China and the

company has increased its investment in TCS Iberoamerica to Rs. 165.23 crore as on March 31,

2007

The company received International Credit Rating from Moody's Investors Service and has assigned

an investment-grade issuer rating of A3 as well an indicative foreign currency debt rating of Baa1.

TCS gathered various awards and recognitions, significant amongst which are Special Award by the

UK Prime Minister, Tony Blair 'Outstanding Contribution to UK Knowledge Industry' in 2005,

Company of the Year - 2006 from the Economic Times, Dataquest Best IT Employer for 2006, CII-

EXIM Bank Award for Business Excellence 2006, Golden Peacock Global Award for Corporate Social

Responsibility, Ranked among the Top 10 US application management services vendors India's

largest e-governance initiative of the Ministry of Company Affairs, which is implemented by TCS,

Most Distinguished Achievement Award in Information Management (APAC) - 2006' from IBM and

Verizon's Supplier Excellence Award for the third consecutive year. Eaton Premier Supplier Award

2007 for the Indirect Supplier for Information Technology Services category honored by Eaton

Corporation.

As on 2008 TCS has signed a new multi-year contract with Chrysler LLC to provide a comprehensive

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portfolio of IT services, in March 2008 opened its North America Delivery Center called TCS Seven

Hills Park. Located in Milford, Ohio, a suburb of Cincinnati, the facility sits on 220 wooded acres and

is the largest TCS facility in North America. As on May 2008 the company ranked sixth in the largest

2008 Global Outsourcing 100, compiled by the International Association of Outsourcing Professionals

(IAOP). In June of the year 2008, the company gets $11.5 million transformational deal to design,

install and integrate a tax administration system for the Uganda Revenue Authority (URA). TCS is

going with certainty, lot of innovations and strategies to attain the vision of Global Top 10 by the year

2010.

2.3.3 ORACLE

Oracle Financial Services Software Limited (erstwhile i-flex solutions) (OFSSL) is a world leader in

providing IT solutions to the financial services industry. The Company was incorporated in September

27, 1989 as Citicorp Information Technology Industries Ltd. The Company addressing the entire

financial services space through a comprehensive portfolio of products, IT services, consulting and

knowledge process outsourcing services. With the experience of delivering value-based IT solutions

to over 810 financial institutions across 130 countries. OFSSL has 14 development centers across

India, Singapore and the USA. The Company has a strong global reach with a sales, marketing and

support presence in 27 overseas locations operating across four subsidiaries (i-flex solutions inc. in

the USA, i-flex solutions b.v. in the Netherlands, i-flex solutions ltd. in Singapore and iPSL in India).In addition, 30 corporate business partners and 32 implementation partners represent i-flex across

the globe. The Company also has strong alliance and/or implementation relationships with industry

leaders such as Hewlett-Packard, IBM, Sun Microsystems and Intel.

CITIL (Citicorp Information Technology Industries Limited), spun off from COSL (Citicorp Overseas

Software Limited), commences first year of operations in the year 1992. In 1995, CITIL gains

recognition for establishing world-class processes and quality Standards, It attained SEI CMM Level

4, becomes the first financial software firm in the world and one out of six companies worldwide to

achieved this distinction at that time. CITIL established the Center of Excellence during the year 1996

for business intelligence to provide specialized consulting and software products, as well as services

in data warehousing and business intelligence. A complete banking product suite for retail, consumer,

corporate, investment and internet banking, consumer lending, asset management and investor

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servicing, including payments (SWIFTNet and SEPA) was launched in the year 1997 under the name

of FLEXCUBE. MicroBanker becomes the 6th international banking product in the world to be used

by 100 customers in 1998 and the FLEXCUBE starts gaining traction and international leadership.

During the year 1999, FLEXCUBE Information Center, a Web-enabled business intelligence system

was launched along with a Center of Excellence for CRM and the Java Center for financial services

also established. CITIL was renamed as i-flex solutions limited in the year 2000. During the same

year 2000, Center of Excellence for e-services launched Separate business unit established to

address the Applications Services Provider (ASP) market. i-fl ex solutions b.v., a 100 percent

subsidiary of the company opened in Amsterdam, The Netherlands. The company's financial software

development facilities were established in the year 2001 at Pune and Chennai and fully owned

subsidiaries set up in USA and Singapore, i-flex solutions b.v. in Amsterdam, The Netherlands,

becomes operational, i-fl ex Consulting was launched. EBZ Online, a software company was joined

with the company during the year 2002 through which i-flex's product, Flexcube, for made available to

cooperative banks. Dotex International, a joint venture company supported by NSE.IT and i-flex

Solutions Ltd, signed a memorandum of understanding (MoU) with BgSE Financials Ltd, a subsidiary

of the Bangalore Stock Exchange, to give Internet trading service to the members of the exchange.

The Company entered into capital market with Initial Public Offering (IPO) of an issue of 3,961,700

equity shares. I-flex opened its first Overseas Software Development Center in Singapore in the year

2002.

In the year 2003, the company's flagship product FLEXCUBE ranked the world's No.1 selling

Universal Banking Solution and during the same year 2003, I-flex sets up development centre in New

York, Wins a major order from HypoVereinsbank Group (HVB Group), Germany, Inaugurated

FLEXCUBE Support & Prime Sourcing Solutions Centre in London and acquisition of Super Solutions

Corporation in all cash deal of .5 million was made. Waters Magazine ranked Mantas as the Best

Anti-Money Laundering Solution and Best

Compliance Solution for 2003.

Waters Magazine ranked Mantas as the Best Anti-Money Laundering Solution for 2003 and also for

2004. During the year 2004, i-flex opened its wholly owned holding company in US, namely i-flex

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America, for carrying out all future acquisitions in the USA. The Golden Peacock National Quality

Award was awarded to the company. i-flex Solutions ties up with Barbados-based first Caribbean

International for internet banking and e-finance platform of i-flex Solutions. The core banking solution

Flexcube had won The Banker Core Banking Solution of the Year and Application of the Year''

awards. The Company and YES Bank has signed Global Strategic Memorandum to collaborate on

technology led innovations to enhance quality and efficiency in banking products and delivery

processes. i-flex joined hands with People Soft to develop and market an integrated solution for the

banking industry.

Entered into strategic alliance with Castek Software Inc., a Toronto based provider of insurance

systems for the global Property & Casualty (P&C) in the year 2005. The decade-old relationship

between Oracle and i-flex was further strengthened in 2005 at a strategic level. In August 2005,

Oracle Corporation bought Citigroup's 41 percent equity interest in i-flex and floated an open offer to

purchase up to an additional 20 percent ownership from existing shareholders. i-flex assessed at

CMMi Level 5 also certified BS 7799 compliant. BS 7799 is security standards and policies

addressing information security. In the same year i-flex and EDB Business Partner ASA had entered

into an agreement to jointly offer comprehensive retail banking solutions to financial institutions in the

Nordic region. Reveleus was positioned in Gartner's 'Leaders Quadrant' in its 'Basel II Risk

Management Application Software Magic Quadrant for 2005' and '2006 Basel II Software Applications

Magic Quadrant'. Reveleus was also 'Highly Commended' for its Compliance Initiative Innovation in

The Banker Technology Awards for 2006. The Black Book of Outsourcing, ranked i-flex BPO as the

top outsourcing vendor to the Mortgage Banking Industry in 2006. The FLEXCUBE 10.0 was released

in 2007, it helps financial institutions respond faster to market dynamics and define and track

processes, while ensuring compliance. The suite also equipped with SWIFT 2007 enhancements and

supports SEPA payment processing. New Version of FLEXCUBE Core Banking for IBM System z

active from April 2008. During August of the year 2008, the company changed its name from I-flex

solutions Limited to Oracle Financial Services Software Limited.

FLEXCUBE, Reveleus, Daybreak, Mantas, PrimeSourcing, i-flex Consulting and iPFB are

trademarks of i-flex solutions and are registered in several countries. Together, Oracle and i-flex

solutions offer financial services institutions the world's most comprehensive and contemporary

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banking applications and want to embark technology footprint that address their complex IT and

business requirements.

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2.3.4 HCL

HCL Technologies Limited was incorporated in 1991, as HCL Overseas Limited. The certificate of

commencement of business was received on 10th February 1992. On July 14, 1994, the name of the

Company was changed to HCL Consulting Limited. The company provides software-led IT solutions,

remote infrastructure management services and BPO. In 1996 the 50:50 joint venture with Perot

Systems Corporation was formed to provide access to high value client base of Perot Systems under

the name of HCL Perot Systems NV. HCL Technologies focuses on Transformational Outsourcing,

working with clients in areas that impact and re-define the core of their business after its IPO in 1999

with aim of foray into the global IT landscape and in the same year again the Company changed its

name to HCL Technologies Limited. The company encompasses global offshore infrastructure and its

global network of offices in 18 countries to deliver solutions across selected verticals including

Financial Services, Retail & Consumer, Life Sciences & Healthcare, Hi-Tech & Manufacturing,

Telecom and Media & Entertainment (M&E).

HCL Tech started to create wholly owned subsidiaries to cater specific geographic regions from the

year 1999. HCL has the widest service portfolio among Indian IT service providers, with each of its

services having attained critical mass. In the year of 2000 the company has set up a dedicated

offshore development centre in Chennai for KLA-Tencor Corporation, a supplier of process control

and yield management solutions for the semiconductor and related microelectronics industry andHCL Comnet, the wholly owned subsidiary of HCL Technologies in association with its new partner

Globeset Inc for scouting largest Internet Service Providers and payment gateways in India to

introduce Net security management solutions. The Company launched the Nokia professional centre

in New Delhi, second among the chain of centres across the country. HCL Technologies has entered

into a strategic alliance with Nasdaq-listed Vitesse Semiconductor to develop software solutions for

global networking markets in the year 2001 and also entered into a strategic alliance with Toshiba

Information Systems (Japan) Corporation to set up a dedicated offshore software development centre

for developing embedded software for the Japanese company. HCL Comnet Systems & Services

Ltd., a fully owned subsidiary of HCL Technologies was gone into the business of Web-enabling

applications through the launch of demand-chain management solutions.

In 2002 the company acquired Gulf Computers Inc, USA and formed a JV with Answerthink, Inc., a

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leading US based provider of technology enabled business transformation solutions to Global 2000

firms. A strategic technology joint venture was made with Jones Apparel Group, Inc. Jones Apparel

Group, Inc. a Fortune 500 Company in the same year and also entered into a joint venture with M.A.

Partners, a management consulting firm to address software services opportunities in Global Finance

Markets, especially in the areas of Investment Banking, Asset Management and Private Banking.

M.A. Partners brings a wealth of domain expertise and clients including many of the top Global

Investment Banking firms to the JV. In the year 2003, BT Group UK's telecom service provider gave a

contract worth of $160 million for BPO service operations and the company has set up an exclusive

centre in Noida for exeucting the orders given by BT Group. The software business of HCL

Infosystems Limited was transferred to HCL Technologies Limited additionally. HCL Comnet, a

wholly- owned flagship of HC Technologies, secured Rs 31 crore network management

order from National Insurance Corporation (NIC).

HCL Technologies sets up Insurance Solutions Center in Chennai and the company has entered into

a strategic tie-up with IBM Rational Software, a division of IBM, to strengthen its software

development capabilities during the year 2004. The Company has been conferred the prestigious

Excellence in Education Award for 2004 by the Life Office Management Association (LOMA). BPO

delivery centre in Chennai gets BS7799 certification, by the British Standards Institute (BSI) on

August of the same year. The company has Introduced Cross View; a framework based Computer

Systems Validation (CSV) methodology for the development of robust software applications in the

Life

Sciences arena.

During the year 2005 SEBI ties up with HCL Technologies for market surveillance and the company

formed joint venture with NEC, Japan. The company amalgamated its six wholly owned subsidiaries

with company itself, such subsidiaries are DSL Software Ltd, Shipara Technologies Ltd, HCL

Technologies BPO Services Ltd, HCL Technologies (Mumbai) Ltd, Aquila Technologies Ltd and HCL

Enterprise Solutions (India) Ltd and the course of event the company acquired an Irish Call centre

during February 2005 and this acquisition establishes HCL's position as the single largest BPO

Centre operation on the Island of Ireland. HCL's Infrastructure Services Division ranked a 'Strong

Performer' in Remote Infrastructure Management by an International Research Firm and made a

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strategic partnership with EXA, Japan in same year. In the year of 2006 the company launched RoHS

Compliance Management System for Medical Device Users and entered $70 million outsourcing deal

with Teradyne of US. HCL developed Trusted ICT Infrastructure Platforms for BPO-ITE'S Segment

and has linked pact with Canada based electronics manufacturing services company Celestica Inc to

jointly design and manufacture electronic products for global original equipment manufacturers

(OEMs). The company has forayed into an alliance with $200 million Saudi Arabian company namely

Advanced Electronics Company (AEC) to implement IT projects in West Asia in the year 2007 and

formed a strategic alliance with Eckler to strengthen Insurance Domain expertise. The company

made US $15 million contract with Aleni Aeronautica, to provide engineering services that will support

the improvement of the C-27J Spartan production line. HCL Venture Capital Ltd., a company

incorporated in Bermuda and downstream subsidiary of the company was merged with HCL Bermuda

Ltd and HCL Technologies (Mass) Inc., a company incorporated in United States of America and a

down stream subsidiary of the company was

merged with HCL America Inc in the year 2007.

As on January 2008, HCL's Electro Magnetic Compatibility (EMC) and Durability Test Lab located in

Chennai, the first of its kind private Technology facility sector to obtained the ISO/IEC 17025

Accreditation from NABL (National Board for Accreditation of Testing and Calibration Laboratories,

India) and a new partnership with Mark Logic Corporation, provider of the industry's leading XML

content server was made on same month of the year. As on February 2008 the acquired Capital

Stream, Inc., a US based leader in providing comprehensive end-to-end lending and straight through

processing solutions to commercial banks and finance companies in North America worth about US $

40 Million and in same month company expanded global services partnership with SAP AG (NYSE:

SAP). During April 2008 HCL Technologies Ltd announced to launch of its new SaaS Service

Delivery Platform (SDP) AGORA - at Software 2008 in Las Vegas and in the same month of the same

year the company launched an innovative on-demand software testing lab at Software 2008 that

allows Independent Software Vendors (ISVs) to reduce their software testing cycle times and lower

their capital expenditure on testing hardware and software.

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2.3.5 WIPRO

Wipro Limited, the successful company crossed six decade of years. Wipro though started as a edible

oil producer way back in 1945 under the name Western India Vegetable Products, a private limited

company has transformed itself into leading player in Fast Moving Consumer Goods and IT services

& Products business. It was incorporated at Karnataka by Mr. Azim H Premji who is promoter and

chairman of the company. Five of Wipro's manufacturing and development facilities secured the

Indian Standard Organization (ISO) 9001 certification during 1994-95. Company provides the

integrated business, technology and process solution on a global delivery platform to customers

across Americas, Europe, Middle East and Asia Pacific, they offer business value to clients through

process excellence and service delivery innovation such as Information Technology services, Product

Engineering services, Technology Infrastructure services, Business Process Outsourcing services

and consulting services. 23 subsidiaries running under in Wipro. This company is listed in BSE ,

NSE and Newyork .

In February 2001, Wipro became the first software technology and services company in India to be

certified for ISO 14001 certification for complying with the international standards for Environmental

Management System (EMS) in three major software development and technology centers in

Bangalore and also achieved ISO 9000 certification and they are ISO 14000 certificate holder also for

good citizenship. Wipro Technologies has won the 'Banker Technology Award' for the year 2004Instituted by the Financial Times in the 'Risk Management Award' category. During December 2005

the company has signed a definitive agreement to acquire mPower Inc, a US based company with a

development center in Chennai and MPACT Technology Services which is also based in Chennai.

Wipro received the BEST award from American society for training & development (ASTD) for three

consecutive years 2004, 2005 and 2006. Wipro Ltd is a largest 3rd party Research & Development

service provider in the world, Wipro is among the top 3rd Indian BPO service providers by revenue

identified by NASSCOM, the IDC India noted among the top 2nd domestic IT services companies in

India. Wipro is the world first PCMM level 5 company and it is a winner company of the Dale Carnegie

Leadership award in 2007 for people excellence. Wipro is a first company to be assessed at level 5

on CMMi for process excellence as well as its a company to deploy six sigma in IT services at first.

Second time Wipro has announced that it has been recognized winner of the 2007 global MAKE

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award, the 2007 Asian MAKE award fifth time in a row and also received the 2007 Indian MAKE

award third time organized by CII

(Confederation of Indian Industry).

2006-07 was the year for acquisition to Wipro, during the year company acquired six companies

namely Quntech Global Services, Saraware Oy, Enabler Informatica S A, 3D Networks Pte Ltd,

Hydrauto Engineering AB and Northwest Switchgear. Wipro partnered with Motorola to form a joint

venture namely WMNETSERV, At the same time company invested Rs.16,684 million on fixed assets

during the year. Wipro has set up an overseas design center as Odyssey 21 for undertaking projects

and product developments in advanced technologies

for overseas clients.

Wipro has been a pioneer in fostering a culture of Innovation. This culture manifested in small and big

acts of Innovation of wiproites everyday. In the year 2000 itself Wipro launched Innovation Initiative

for business development and right now they engaged across 55 CoE's and 30 innovation projects

with over 500 peoples. Its not a edge, the companies future enhancement also to continued focus on

Innovation has caught the attention of stakeholders and industry. Wipro wants to make a

geographical footprint in Germany, Canada, Japan and Middle East that is likely to become the next

growth engines and wants to frame a end-to-end solutions for business needs of customer. Wipro

plans to set up a Global IT Services Center in Sydney.

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3. LITERATURE REVIEW

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3. Review of literature

Fundamental analysis is a sock valuation method that uses financial and economic analysis to predict

the movement of stock prices. The fundamental information that is analyzed can include a companysfinancial reports, and non-financial information such as estimates of the growth of demand for

products sold by the company, industry comparisons, and economy-wide changes, changes in

government policies etc. Security analysis is the initial phase of the portfolio management process.

This step consists of examining the risk-return characteristics of individual Securities.

Fundamental analysis

An investor who would like to be rational and scientific in his investment activity has to evaluate a lot

of information about the past performance and the expected future performance of the companies,

industries and the economy as a whole taking the investment decision. Such evaluation or analysis is

called fundamental analysis.

Fundamental analysis is really a logical and systematic approach to estimating in the future dividends

by a number of fundamental factor 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 investing purpose. It is in other words, a detailed analysis of the

fundamental factors affecting the performance of companies.

Each share is assumed to have an economics 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 there by asses 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 investmentdecision. If the market price of the share is lower than its intrinsic value, the investor would decide to

buy the share as it is under priced. The price of such a share is expected to move up in future to

match with its intrinsic value.

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On the contrary, when the market price of a share is higher than its intrinsic values, it is perceived to

be over priced. The market price of such a share is expected to come down in future and hence the

investor would decide to sell such a share. Fundamental analysis thus provides an analytical

framework for rational investment decision-making. This analytical framework known as E-I-C

framework, or economyindustry company analysis.

Fundamental analysis thus involves three steps:

1. Economy analysis

2. Industry analysis

3. Company analysis

3.1 Economy analysis

The performance of a company depends on the performance of the economy. If the economy is

booming, incoming rise and demand for goodwill increase, the industries and companies in the

general trend to be prosperous. On the other and if the economy is in recession, the performance of

the company will be generally bad.

Growth rate of National Income

The rate of growth of the National Economy is an important variable to be considered by an investor.

GNP, NNP and GDP are the different measures of the total income or total economic output of the

country as a whole. The growth rate of these measures indicate the growth rate of the economy. The

estimate of GNP, NNP, GDP and their growth rate are made available by the government from time

to time.

The estimated growth of the economy would be pointed towards the prosperity of the economy. An

economy typically passes through different phases of prosperity known as the different stager of the

economic or business cycle. The four stages of the economic cycle are depression, recovery, boom

and recession. The stage of economic cycle through which a country passes has different impact on

the performance of industries and companies.

Infrastructure

The development of an economy depends very much on the infrastructure available. Industry needs

electricity for its manufacturing activities, road and railways to transport raw materials and finished

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goods, communication channels to keep in touch with suppliers and customers. The availability of

infrastructure facilities such as power, transportation and communication systems affect the

performance of companies. Bad infrastructure leads to inefficiencies, louder productivity, wastage and

delays. An investor should assess the status of the infrastructure facilities available in the economy

before finalizing his investment plans.

Monsoon

The Indian economy is essentially an agrarian economy and agriculture is a important sector of the

Indian Economy. Because of the strong forward and backward linkages between agriculture and

industry, performance of several industries and companies are dependent to the performance of

agriculture to a very great extend that depends on monsoon. The adequacy of the monsoon detains

the success or failure of the agriculture activities in India. Hence the progress and adequacy of

monsoon becomes a matter of great concern for an investor in Indian content.

Economic and political stability

A stable political environment is necessary for steady and balanced growth. No industry or company

can grow and prosper in the midst of political turmoil. Stable long term economic policies are what

that is needed for industrial growth. Such stable policies can emanate only through stable political

system.

3.2 INDUSTRY ANALYSIS

An investor ultimately invests his money in the securities of one or more specific companies. Each

company can be characterized as belonging to an industry. The performance of companies would

therefore be influenced by the fortunes of the industry to which it belongs. For this reason an analyst

has to undergo an industry analysis so as to study the fundamental factors affecting the performance

of different industries.

At any stage in the economy, there are some industries which are fast growing while others are

stagnating or declining. If an industry is growing, the companies within the industry may also be

prosperous. The performance of companies will also depend on the state of the company to which it

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belongs. Industry analysis refers to an evaluation of the relative strength and weakness of weakness

of particular industries.

An industry is generally described as a homogenous group of companies. We may define an industry

as a group of firms producing reasonably similar products which serve the same needs of a common

set of buyers. Industries are traditionally classifies as cement industry, steel, cotton, textile, software

industry and so forth. However industry classification becomes difficult while dealing with firms having

a diverse product line. And such firms are now on the trend. Due to the difficulties that they suffer,

each country follows a standardized classification to facilitate data collection. The reports can effect

the growth of other industries.

Industry characteristics

In an industry analysis, there are a number of key characteristics that should be considered by the

analyst, These features broadly relate to the operational and structural aspects of the industry. They

have a bearing on the prospects of the industry. Some of there are discussed below:

Demand supply graph:

The demand for a product, usually tend to change at a steady rate. Whereas, the capacity to

produce the product tends to change at regular intervals, depending upon the installation ofadditional production capacity. As a result am industry is likely to experience undersupply and

oversupply of capacity at different times. Excess supply reduces the profitability of the industry

through a decline in the Unit prize realization.

Labour condition:

The state of labour condition in the industry under analysis is an important consideration in an

economy such as ours where the labour union are very powerful. If the labour in a particular

industry is rebellious and is inclined to resort to strikes frequently. The prospects of that industry

cannot become bright.

Attitude of government

The attitude of the government towards an industry has a significant impact on its prospects.

The government may encourage the growth of certain industries can assist such industries

through favorable legislation.

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3.3 Company Analysis

Company analysis is the final stage of fundamental analysis. The economy analysis provides the

investors a broad outline of the prospects of growth in the economy. The industry analysis helps the

investor to select the industry in which the investment would be rewarding. Now he should find the

company in which, he should invest his money. Company analysis gives an answer to this question.

Company analysis deals with the estimation of returns and risk of individual shares. This calls for

information. Many pieces of information influences the investment decisions. Information regarding

companies can be broadly classified into two groups: internal and external. Internal information

consist of data and events made public by companies concerning their operations. The internal

information source includes annual reports to shareholders, public and private statements of officers

of the company, the companies financial statements, etc. External sources of information are those

generated independently outside the company. Investment services and the financial press prepares

these.

In company analysis, the analyst tries to forecast the future earnings of the company because there is

strong evidence and that earnings have a direct and powerful effect upon share prices level, trend

and stability of earnings of a company, however depending upon a number of factors concerning the

operations of the company.

3.4 FINANCIAL TOOLS

Earnings Per Share (EPS) = Profit After Tax (PAT)

No. of Equity share

Dividend Per Share (DPS) = Amount declared as Dividend

No. of Equity shares

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Dividend Payout Ratio = Dividend Per Share (DPS)

Earnings Per Share (EPS)

Return on Equity = Profit After Tax (PAT) * 100

Net worth * 100

Price Earning Ratio = Market price per share

EPS

3.5 INTRINSIC VALUE CALCULATION

Dividend Payout Ratio = Dividend Per Share(DPS)

Earnings Per Share(EPS)

Average DPOR for 5 years = Sum of DPOR for 5 years

5

Average Return on Equity = 1- Avg DPOR

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Average return on Equity = Sum of ROE for years

5

Growth rate in Dividend = Avg retention ratio * Avg return on equity

and equity

Normalized average = Sum of price to equity ratio for 5 years

5

Projected earning per share = EPS for current year * ( 1+ growth rate)

Intrinsic value P/E ratio = Projected EPS * normalized average

Projected Dividend per share = DPS for current year * (1+ growth rate)

3.6 Financial statements

The prosperity of a company would depend upon its profitability and financial health. The financial

statements published by a company periodically helps us to assess the profitability and financial

health of the company. The two basic financial statement provided by the company are the balance

sheet and profit and loss account. The first gives us the picture of the companies asset and liabilities

while the second gives us a picture of its earnings.

The balance sheet gives the list of assets and liabilities of a company on a specific date. The major

categories of assets are fixed assets and current assets. Fixed assets are those assets, which are

intended to be used up over a period of years. Current assets are those assets that are intended to

be converted into cash in the near future (within 1 year). The major categories of liabilities are outside

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liabilities and liabilities towards shareholders. The outside liabilities are categorized as short term

liabilities and long term liabilities. The short term liabilities which are expected to be paid off within the

next 1 year are known as the current liabilities. The balance sheet indicates the financial position of a

company on a particular date namely, the last date of the accounting year.

The profit and loss account also called income statement, reveals the revenue earned, the

Cost incurred and the resulting profit or loss of the company for one accounting year. The profit after

tax divided by the number of shares gives the Earnings per Share, which is a figure in which most

investors are interested. The profit and loss account summarizes the activities of the company during

an accounting year.

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4. RESEARCH METHODOLOGY

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RESEARCH METHODOLOGY

Researchis a scientific and systematic search for pertinent information on a specific topic. Research

is an art of scientific investigation. Research considered as an effort to gain new knowledge.

Research finds out the solution for the problem. Research is essentially an investigation, a recording

and analysis of evidence for purpose of gaining knowledge. It demands accurate observation and

experimental evidences. The collected data is used for the new purpose. A good research should be

systematic, logical, empirical and replicable.

Research methodology is a scientific and systematic way to solve research problems. Researcher

has to design his methodology. Research methodology deals with and takes into consideration the

logic behind the method. An extensive literature survey is undertaken to understand the concept of

financial performance. It also deals with objective of research study, the method of defining the

problem, type of data collected, method used for collecting and analyzing data.

4.1 TYPES OF RESEARCH

The purpose of research is to discover answer to question through the application of scientific

procedures. The main aim of it is to find out the truth which is hidden and which is to be discovered.

There are various types of researches. The type of research used in the study is Historical research.

HISTORICAL RESEARCH: - Historical research is based on historical data. It attempt to find out

what happened in the past and to reveal reasons for why and how things happened.

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4.2 METHODS OF DATA COLLECTION

SECONDARY DATA:

The nature of data collected for the data is secondary. Secondary data are those, which have

already collected tabulated and presented in some forms by some one else for some other purpose.

Secondary data are already available data. Researchers have to modify such data for their individual

requirement. In this case researcher is certainly not confronted with the problem that usually

associated with the collection of original data. The researchers have to scrutinize the secondary data.

The sources of secondary data in this project are:

Books

Websites

Magazines

SAMPLING:

The sample stocks were selected by considering various stocks having high market capitalization in

the IT sector. The five Banks selected for the study are:

1 Infosys Technologies

2 Tata Consultancy Services

3 Oracle

4 Wipro

5 HCL Technologies

SOURCES:

Market capitalization given in the official site of Bombay Stock Exchange as on 10 thAUG, 2011.

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5. DATA ANALYSIS AND INTERPRETATION

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5.1 INFOSYS TECHNOLOGIES

Balance Sheet of Infosys ------------------- in Rs. Cr. -------------------

Mar '11 Mar '10 Mar '09 Mar '08 Mar '0

12 mths 12 mths 12 mths 12 mths 12 mth

Sources Of Funds

Total Share Capital 287.00 287.00 286.00 286.00 286.0

Equity Share Capital 287.00 287.00 286.00 286.00 286.0

Share Application Money 0.00 0.00 0.00 0.00 0.0

Preference Share Capital 0.00 0.00 0.00 0.00 0.0

Reserves 24,214.00 21,749.00 17,523.00 13,204.00 10,876.0

Revaluation Reserves 0.00 0.00 0.00 0.00 0.0

Networth 24,501.00 22,036.00 17,809.00 13,490.00 11,162.0

Secured Loans 0.00 0.00 0.00 0.00 0.0

Unsecured Loans 0.00 0.00 0.00 0.00 0.0Total Debt 0.00 0.00 0.00 0.00 0.0

Total Liabilities 24,501.00 22,036.00 17,809.00 13,490.00 11,162.0



Application Of Funds

Gross Block 6,934.00 6,357.00 5,986.00 4,508.00 3,889.0

Less: Accum. Depreciation 2,878.00 2,578.00 2,187.00 1,837.00 1,739.0

Net Block 4,056.00 3,779.00 3,799.00 2,671.00 2,150.0

Capital Work in Progress 499.00 409.00 615.00 1,260.00 957.0

Investments 1,325.00 4,636.00 1,005.00 964.00 839.0

Inventories 0.00 0.00 0.00 0.00 0.0

Sundry Debtors 4,212.00 3,244.00 3,390.00 3,093.00 2,292.0

Cash and Bank Balance 641.00 929.00 805.00 657.00 680.0

Total Current Assets 4,853.00 4,173.00 4,195.00 3,750.00 2,972.0

Loans and Advances 5,273.00 4,201.00 3,303.00 2,804.00 1,241.0

Fixed Deposits 13,024.00 8,868.00 8,234.00 5,772.00 4,827.0

Total CA, Loans & Advances 23,150.00 17,242.00 15,732.00 12,326.00 9,040.0

Deffered Credit 0.00 0.00 0.00 0.00 0.0

Current Liabilities 2,056.00 1,995.00 1,544.00 1,483.00 1,162.0

Provisions 2,473.00 2,035.00 1,798.00 2,248.00 662.0

Total CL & Provisions 4,529.00 4,030.00 3,342.00 3,731.00 1,824.0

Net Current Assets 18,621.00 13,212.00 12,390.00 8,595.00 7,216.0

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.0

Total Assets 24,501.00 22,036.00 17,809.00 13,490.00 11,162.0

Contingent Liabilities 1,013.00 295.00 347.00 603.00 670.0

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Book Value (Rs) 426.73 384.02 310.90 235.84 195.4

Profit & Loss account of Infosys ------------------- in Rs. Cr. -------------------Mar '11 Mar '10 Mar '09 Mar '08 Mar '0


Income

Sales Turnover 25,385.00 21,140.00 20,264.00 15,648.00 13,149.0

Excise Duty 0.00 0.00 0.00 0.00 0.0

Net Sales 25,385.00 21,140.00 20,264.00 15,648.00 13,149.0

Other Income 1,147.00 967.00 502.00 683.00 379.0

Stock Adjustments 0.00 0.00 0.00 0.00 0.0

Total Income 26,532.00 22,107.00 20,766.00 16,331.00 13,528.0Expenditure

Raw Materials 23.00 22.00 20.00 18.00 22.0

Power & Fuel Cost 0.00 0.00 125.00 106.00 88.0

Employee Cost 12,464.00 10,356.00 9,975.00 7,771.00 6,316.0

Other Manufacturing Expenses 2,613.00 1,993.00 1,697.00 1,443.00 1,290.0

Selling and Admin Expenses 1,834.00 992.00 1,367.00 1,214.00 1,050.5


Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.0

Total Expenses 16,970.00 13,778.00 13,356.00 10,684.00 8,923.0



Operating Profit 8,415.00 7,362.00 6,908.00 4,964.00 4,226.0

PBDIT 9,562.00 8,329.00 7,410.00 5,647.00 4,605.0

Interest 1.00 2.00 2.00 1.00 1.0

PBDT 9,561.00 8,327.00 7,408.00 5,646.00 4,604.0

Depreciation 740.00 807.00 694.00 546.00 469.0

Other Written Off 0.00 0.00 0.00 0.00 0.0

Profit Before Tax 8,821.00 7,520.00 6,714.00 5,100.00 4,135.0

Extra-ordinary items 0.00 0.00 -1.00 0.00 -5.0PBT (Post Extra-ord Items) 8,821.00 7,520.00 6,713.00 5,100.00 4,130.0

Tax 2,378.00 1,717.00 895.00 630.00 352.0

Reported Net Profit 6,443.00 5,803.00 5,819.00 4,470.00 3,783.0

Total Value Addition 16,947.00 13,756.00 13,336.00 10,666.00 8,901.0

Preference Dividend 0.00 0.00 0.00 0.00 0.0

Equity Dividend 3,445.00 1,434.00 1,345.00 1,902.00 649.0

Corporate Dividend Tax 568.00 240.00 228.00 323.00 102.0

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Per share data (annualised)

Shares in issue (lakhs) 5,741.52 5,738.25 5,728.30 5,719.96 5,712.1

Earning Per Share (Rs) 112.22 101.13 101.58 78.15 66.2

Equity Dividend (%) 1,200.00 500.00 470.00 665.00 230.0

Book Value (Rs) 426.73 384.02 310.90 235.84 195.4

Cash Flow of Infosys ------------------- in Rs. Cr. -------------------



Net Profit Before Tax 8821.00 7472.00 6714.00 5100.00 4129.0

Net Cash From Operating Activities 4270.00 5876.00 5152.00 3816.00 3256.0

Net Cash (used in)/from

Investing Activities3235.00 -3314.00 -195.00 -978.00 -1065.0

Net Cash (used in)/from Financing

Activities-3642.00 -1486.00 -2430.00 -777.00 -316.0

Net (decrease)/increase In Cash and

Cash Equivalents3868.00 1008.00 2600.00 2079.00 1871.0

Opening Cash & Cash Equivalents 11297.00 10289.00 7689.00 5610.00 3779.0

Closing Cash & Cash Equivalents 15165.00 11297.00 10289.00 7689.00 5650.0

Key Financial Ratios of Infosys ------------------- in Rs. Cr. -------------------


Investment Valuation Ratios

Face Value 5.00 5.00 5.00 5.00 5.0Dividend Per Share 60.00 25.00 23.50 33.25 11.5

Operating Profit Per Share (Rs) 146.56 128.30 120.59 86.78 73.9

Net Operating Profit Per Share (Rs) 442.13 368.40 353.75 273.57 230.2

Free Reserves Per Share (Rs) 420.79 378.08 305.80 230.74 190.3

Bonus in Equity Capital 93.26 93.26 93.58 93.58 93.5

Profitability Ratios

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Operating Profit Margin(%) -- -- -- --

Profit Before Interest And Tax Margin(%) -- -- -- --

Gross Profit Margin(%) -- -- -- --

Cash Profit Margin(%) -- -- -- --

Adjusted Cash Margin(%) 26.96 29.59 32.57 30.69 31.1

Net Profit Margin(%) 24.31 26.36 27.52 27.37 28.0Adjusted Net Profit Margin(%) -- -- -- --

Return On Capital Employed(%) -- -- -- --

Return On Net Worth(%) -- -- -- --

Adjusted Return on Net Worth(%) 26.13 25.89 34.76 33.09 33.4

Return on Assets Excluding Revaluations 426.73 384.02 310.90 235.84 195.4

Return on Assets Including Revaluations 426.73 384.02 310.90 235.84 195.4

Return on Long Term Funds(%) 35.84 33.69 39.80 37.77 36.6

Liquidity And Solvency Ratios

Current Ratio 5.11 4.28 4.71 3.30 4.9

Quick Ratio 5.02 4.20 4.67 3.28 4.9Debt Equity Ratio -- -- -- --

Long Term Debt Equity Ratio -- -- -- --

Debt Coverage Ratios

Interest Cover -- -- -- --

Total Debt to Owners Fund -- -- -- --

Financial Charges Coverage Ratio 9,523.00 4,116.50 3,891.00 5,642.00 4,559.0

Financial Charges Coverage Ratio Post

Tax7,184.00 3,306.00 3,257.50 5,017.00 4,253.0

Management Efficiency Ratios

Inventory Turnover Ratio -- -- -- --Debtors Turnover Ratio 6.81 6.37 6.25 5.81 6.9

Investments Turnover Ratio -- -- -- --

Fixed Assets Turnover Ratio -- -- -- --

Total Assets Turnover Ratio -- -- -- --

Asset Turnover Ratio 3.67 3.33 3.39 3.47 3.3

Average Raw Material Holding -- -- -- --

Average Finished Goods Held -- -- -- --

Number of Days In Working Capital 264.08 224.99 220.11 197.74 197.5

Profit & Loss Account Ratios

Material Cost Composition 0.09 0.10 0.09 0.11 0.1

Imported Composition of Raw Materials

Consumed-- -- -- --

Selling Distribution Cost Composition 0.12 0.41 0.40 0.56 0.4

Expenses as Composition of Total Sales 94.38 99.69 97.88 92.59 92.4

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 62.28 28.84 27.03 49.77 19.8

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Dividend Payout Ratio Cash Profit 55.86 25.32 24.15 44.35 17.6

Earning Retention Ratio 37.34 70.67 74.60 50.17 79.9

Cash Earning Retention Ratio 43.83 74.31 77.16 55.60 82.1

AdjustedCash Flow Times -- -- -- --


Earnings Per Share 112.22 101.13 101.58 78.15 66.2

Book Value 426.73 384.02 310.90 235.84 195.4

5.2 TCS

Balance Sheet of Tata Consultancy

Services------------------- in Rs. Cr. -------------------



Sources Of Funds

Total Share Capital 295.72 295.72 197.86 197.86 97.8

Equity Share Capital 195.72 195.72 97.86 97.86 97.8

Share Application Money 0.00 0.00 0.00 0.00 0.0

Preference Share Capital 100.00 100.00 100.00 100.00 0.0

Reserves 19,283.77 14,820.90 13,248.39 10,806.95 7,961.1

Revaluation Reserves 0.00 0.00 0.00 0.00 0.0

Networth 19,579.49 15,116.62 13,446.25 11,004.81 8,058.9

Secured Loans 35.87 29.25 32.63 9.27 41.7

Unsecured Loans 5.25 6.49 7.74 8.98 8.9

Total Debt 41.12 35.74 40.37 18.25 50.7

Total Liabilities 19,620.61 15,152.36 13,486.62 11,023.06 8,109.7



Application Of Funds

Gross Block 6,030.16 4,871.21 4,359.24 3,240.64 2,315.3

Less: Accum. Depreciation 2,607.98 2,110.69 1,690.16 1,300.11 854.7

Net Block 3,422.18 2,760.52 2,669.08 1,940.53 1,460.6

Capital Work in Progress 1,345.37 940.72 685.13 889.74 757.8

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Investments 5,795.49 7,893.39 5,936.03 4,509.33 3,252.0

Inventories 5.37 6.78 16.95 17.19 12.0

Sundry Debtors 4,806.67 3,332.30 3,717.73 3,747.01 2,799.8

Cash and Bank Balance 224.77 212.31 479.93 402.24 314.6

Total Current Assets 5,036.81 3,551.39 4,214.61 4,166.44 3,126.5

Loans and Advances 5,063.51 4,101.84 3,910.85 3,104.74 1,925.7Fixed Deposits 5,379.75 3,183.85 1,125.33 125.28 242.4

Total CA, Loans & Advances 15,480.07 10,837.08 9,250.79 7,396.46 5,294.7

Deffered Credit 0.00 0.00 0.00 0.00 0.0

Current Liabilities 3,932.39 3,352.74 3,604.18 2,525.56 1,750.4

Provisions 2,490.11 3,926.61 1,450.23 1,187.44 905.0

Total CL & Provisions 6,422.50 7,279.35 5,054.41 3,713.00 2,655.5

Net Current Assets 9,057.57 3,557.73 4,196.38 3,683.46 2,639.2


Total Assets 19,620.61 15,152.36 13,486.62 11,023.06 8,109.7

Contingent Liabilities 3,938.76 3,292.50 2,924.33 2,726.11 3,003.2

Book Value (Rs) 99.53 76.72 136.38 111.43 82.3

Profit & Loss account of Tata

Consultancy Services------------------- in Rs. Cr. -------------------



Income

Sales Turnover 29,275.41 23,044.84 22,404.00 18,536.55 14,942.0Excise Duty 0.00 0.39 2.08 2.83 2.1

Net Sales 29,275.41 23,044.45 22,401.92 18,533.72 14,939.9

Other Income 486.44 182.10 -456.24 440.45 216.0

Stock Adjustments -0.87 -1.38 1.73 -0.04 -2.7

Total Income 29,760.98 23,225.17 21,947.41 18,974.13 15,153.2

Expenditure

Raw Materials 17.75 23.75 53.67 45.81 22.0

Power & Fuel Cost 240.00 183.62 164.34 135.57 93.8

Employee Cost 10,190.31 7,882.43 7,370.09 6,015.19 6,186.8

Other Manufacturing Expenses 8,135.57 6,446.99 6,947.60 5,687.82 3,095.8

Selling and Admin Expenses 1,097.52 1,268.03 1,218.41 991.43 765.0


Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.0

Total Expenses 20,502.72 16,375.90 16,382.82 13,508.07 10,635.7



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Operating Profit 8,771.82 6,667.17 6,020.83 5,025.61 4,301.4

PBDIT 9,258.26 6,849.27 5,564.59 5

fundamental analysis final

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