infosys final fi

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Infosys



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Contents Overview-Indian IT Industry1

Infosys-Introduction & Timeline2

H R-Employee Analysis3

Marketing Strategies & Models4Financials & Horizontal Comparison5

Competitive Position & Environment6

Valuation-Quantitative & Brand7

Factors of Success8




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Indian IT Industry




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Indian IT industry OverviewIndian economy impacted by recessionary trends,

Slowdown in GDP growth to seven per cent,

IT-BPO industry in India is become a growth

engine for the economy,

During the year, the sector maintained its doubledigit growth rate and was a net hirer,

Growth has been fuelled by increasingdiversification in the geographic base andindustry verticals.




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Indian IT industry OverviewDirect employment is expected to reach nearly2.23 million,

Indirect job creation is estimated to touch 8million,

Software and services exports (including BPO) areexpected to account for over 99 per cent of totalexports,

While the current mood is that of “cautious optimism,” the industry is expected to witnesssustainable growth over a two-year horizon, goingpast its USD 60 billion export target in FY2011.




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Sources of revenuesIndian IT industry Revenue Break-up by sector

IT industry is largelydependent on Bankingand financial industry.

With the decline in thesesectors, the revenue

from these is expectedto decline, hurting the

bottomline of IT majors.This calls for exploringnew verticals.




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Financial Attractiveness of Top 5 Global ServicesLocations on a scale of 4

India continues tothe leader in terms

of “Financial

Attractiveness”




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Introduction

The idea was born on a January 1981 morning

On July 2, 1981, Infosys Consultants Pvt. Ltd.

The starting capital was $250 which was borrowed from Mrs. Murthy

The 6 people who were with Murthy are:• Nandan Nilekani• N S Raghavan• S Gopalakrishnan• S D Shibulal• K Dinesh• Ashok Arora




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Milestone1981

Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India, with aninitial capital of US$ 250Signs up its first client, Data Basics Corporation, in New York

1983 Relocates corporate headquarters to Bangalore

1987

Opens first international office in Boston, US1993

Introduces Employee Stock Options (ESOP) programAcquires ISO 9001/TickIT certification

1995Opens first European office in the UK and Global Development Centers at Toronto andMangalore. Sets up e-Business practice

1996The Infosys Foundation is established




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Milestone Contd.1999

Infosys becomes the 21st company in the world to achieve a CMMLevel 5 certificationInfosys Business Consulting Services is launched

2000Re-launches Banks 2000, the universal banking solution from Infosys,as Finacle

2002 Launches Progeon, offering business process outsourcing services

2005 Selected to the Global MAKE( Most Admired Knowledge Enterprises )Hall of Fame

Records the largest international equity offering of US$ 1 billion from

India2009

Infosys selected as a member of The Global DowEmployee strength grows to over 100,000




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Vision & Mission

Vision“To be a globally respectedcorporation that provides best-of-breed business solutions, leveragingtechnology, delivered by best-in-class people."

Mission“To achieve our objectives in anenvironment of fairness, honesty,and courtesy towards our clients,employees, vendors and society atlarge."




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Services

Application Development and maintenance

Corporate performance management

Enterprise quality services

Infrastructure services

Packaged application services

Product engineering

Systems Integration




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Industry they are in

Aerospace & defenseAutomotiveBankingCommunicationConsumer goodsManufacturingEnergy

Healthcare

HospitalityInsuranceLife SciencesMedia & EntertainmentResourcesRetailTransportation

Utilities




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Locations

Mangalore campus Infosys, Pune campus Mysore campus

Bangalore campus Hyderabad campus

http://en.wikipedia.org/wiki/File:Mangalore_infosys.jpg

http://en.wikipedia.org/wiki/File:India_Technology.jpg

http://en.wikipedia.org/wiki/File:India_Technology.jpg

http://en.wikipedia.org/wiki/File:Mangalore_infosys.jpg




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Staff-Human Resources

Infosys is in knowledge-based industry, itfocuses on the quality of the humanresources

At the entry level, it emphasizes on• Selecting candidates who find the

company's meritocratic culturesatisfying,• Superior academic records,• Technical skills, and• High level of learn ability.

The company emphasizes on training anddevelopment of its employees oncontinuous basis




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Employee Analysis




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Human resource valuation of infosysThey used the lev & schwartz model to compute the value of HR

The Lev & Schwortz Modellev and Schwartz (1971) proposed an economic valuation ofemployees based on the :

Present value of future earningsProbability of employee’s death/separation/retirement This method helps in determining what an employee’s futurecontribution is worth today.According to this model the present value of future earning

capacity of an employee, from the time of joining the organizationtill retirement was estimated.




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Cont…………. The human resource evaluation of infosys is based on

the present value of future earnings of employees and onthe following assumptions

(a) Employee compensation includes all direct and indirect

benefits earned both in India and overseas

(b) The incremental earnings based on group / age havebeen considered

(c) The future earnings have been discounted at the cost ofcapital of 11.21% (previous year 10.60%).




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To calculate the value of its human assets all the employees ofInfosys were divided into five groups, based on their average age.

Each group's average compensation was calculated.

Infosys also calculated the compensation of each employee atretirement by using an average rate of increment.

The increments were based on industry standards, and theemployee’s performance and productivity.

Finally the total compensation of each group was calculated.




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Employee Analysis8,29,800 applications receivedAdded 17,024 (net) in fiscal 2011No. of employees increased from 375 in 1993to 1,30,820 as of March 31, 2011Total value of stocks issued to employees tillnow approximately `50,000 crore




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Business Model

Saas Learning Consulting Business Process management

IT Outsourcing Systems Integration Independent Validation Services InfrastructureManagement Product Life-Cycle management

Technology Consulting Technology Enabled BPR Enterprise Solutions

Application Development and Maintenance Software Re-engineering

People | Organization | Infrastructure | Process | QualityInfosys Global Delivery Model

2010

2001

1996

1981




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Finacle-The Only Product




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Features of Finacle

Universal banking solution fromInfosys

Empowers banks to transformtheir business

Architected out of years ofexperience with global banksand offers several powerful anddifferentiating features

One of the most comprehensive,flexible and scalable solutions inits class




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Advantages of Finacle

Business Agility (alertness)CRM and Alert EnabledGlobal Deployment Capability

Multiple currency, time zones and languagesProven solution minimized risk

100% successRapid, smooth successful deployments

Integrated multi-channel frameworkBanks can offer their solutions through multiple channels

High scalabilityMost Scalable solutionsAllows banks to grow seamlessly




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McKinsey’s 7 S Model Leadership Style:

Infosys believes that leadership is one of the mostessential ingredients of organizational successwhich is provided by its Chairman, N R Narayanmurthy.Leadership is based on high business vision andpredominantly supportive styles. There is emphasison developing leadership qualities amongemployees

Staff (Human Resources):Since Infosys is in knowledge-based industry, itfocuses on the quality of the human resources. Outof total personnel, about 90 per cent are engineers.The company emphasizes on training and

development of its employees on continuous basisand spends about 2.65 per cent of its revenues onup gradation of employees skills, and around 50%as employee costs.




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McKinsey’s 7 S Model Strategy:

Increase business from existing and new clientsExpand geographicallyEnhance solution setPursue alliances and strategic acquisitions

Shared Values:

Customer Delight: A commitment to surpassingcustomer expectations.

Leadership by Example: T o be an exemplar for theindustry and teams.Integrity and Transparency: A commitment to beethical, sincere and open in our dealings.Fairness: A commitment to be objective and

transaction-oriented, thereby earning trust and respect.Pursuit of Excellence: A commitment to striverelentlessly, to constantly improve ourselves, ourteams, our services and products so as to become thebest.




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McKinsey’s 7 S Model

Organizational Structure:

Free form organization devoid of hierarchies.Everyone is known as associates irrespectiveof his position in the company.Creating the feeling of equality but also helpsin developing project leaders.

Skills:Infosys has made it mandatory for everyemployee auto clear a predefinedcertifications, domain as well as technical, inorder to be eligible for appraisal.Internal initiatives like knowledgemanagement, Infosys has been CMM-Level 5certified for its process capabilities.




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SWOT Analysis

STRENGTHSLeadership in sophisticated solutions that enable clients to optimize theefficiency of their businessProven “Global delivery model”

Commitment to superior quality and process execution

Strong Brand and Long-Standing Client RelationshipsStatus as an employer of choiceAbility to scaleInnovation and leadership




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SWOT Analysis Contd.

WEAKNESSExcessive dependence on US for revenues – 67 % of revenues fromUSAExcessive dependence on BFSI sector for revenues – 36 % of revenues from BFSI

Weak player in domestic market. Only 1 % of revenues from India – low as compared to peersLow R & D spending as compared to global IT companies – only 1.3 %of total revenuesRising wage bill – 42.9 % to 44.8 % of revenues

Low expertise in high end services like Consultancy and KPO.




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OPPORTUNITIESDomestic market set to grow by 20%.Expanding into new geographies – Europe, Middle East, etcInfosys is cash rich (Around US $ 1 Billion) - Acquiring companiesto increase expertise in Consultancy, KPO and package

implementation capabilitiesOpening offices and development centres in cost advantagecountries such as those in Latin America and Eastern Europe.




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THREATSThe economic environment, pricing pressure and rising wages in Indiaand overseasIntense competition in the market for technology services could affectcost advantages.

High dependency on a small number of clients, and the loss of any oneof the major clients could significantly impact business.Failure to complete fixed-price, fixed-time frame contracts withinbudget and on timeCurrency fluctuations

Termination of Client contracts can typically be terminated withoutcause and with little or no notice or penalty.




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BCG Matrix




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Shareholding pattern 2011




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Revenue Break up by Services offered- 2011

Infosys mustmove up thevalue chain –

concentrate morein consulting,BPO and KPO

business.




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Financial Performance-Yearly comparison




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Balance Sheet Analysis

Particulars 2010-11 2009-10 2008-09 2007-08 2006-07

Debt-equity ratio - - - - -

Debtors revenue (days) 61 56 61 72 64

Current ratio 5.22 4.46 4.72 3.28 4.91Cash and equivalents/ Total assets (%) 61.94 66.48 57.65 57.00 50.26

Cash and equivalents/ Total revenue (%) 60.21 70.03 50.78 49.14 42.66

Particulars 2010-11 2009-10 2008-09 2007-08 2006-07

Share Capital 287 287 286 286 286

Reserves & Surplus 24,214 21,749 17,523 13,204 10,876

Gross Block 6,934 6,357 5,986 4,508 3,889

Investments in liquid MFs and certificates of deposit

119 3,507 - - -

Net Current Assets 18,391 13,131 12,288 8,496 7,137

Total assets 24,677 22,268 17,846 13,490 11,162




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Strong & Liquid Balance Sheet

Highly Liquid(Cash & cash Equivalents stand at $3.7bn)Zero DebtHigh quality receivables(94.9% aging less than 60 days)ROCE of 38.5%, Roic of 64% for the quarter endedDecember 31, 2011

Dividends up to 30% of annual post-tax profits




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Superior Revenue Growth




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Financial Analysis

Total revenue-Approximately 97.7% were derived from oversees

operation and 2.3% from domestic operationsEPS increased by 11.8 percent during the year 2011, Rs.112.26per share from Rs.100.37 per share in the previous yearNet profit after tax increased by 12% to Rs.6443 crore (2011)from Rs.5755 crore in the previous year,

NPAT Represents 25.4% and 27.2% of total revenue.Selling and marketing expenses of 4.8% oftheir total revenues compared to last year’s 4.6%




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Profitability RatiosParticulars 2010-11 2009-10 2008-09 2007-08 2006-07

Export revenue/ Total revenue(%) 97.66 98.73 98.72 98.60 98.40

Software dev expenses/ Total revenue (%) 56.20 54.68 55.00 56.72 55.35

Gross Profit/ Total revenue (%) 43.80 45.32 45.00 43.28 44.65

Selling and marketing expenses/ Total revenue (%) 4.80 4.61 4.60 4.67 5.47

General and administration expenses/ Total revenue (%) 5.85 5.90 6.32 6.90 7.05

Aggregate employee costs/ Total revenue (%) 49.08 48.96 49.20 49.89 48.02

Operating profit (PBIDTA)/ Total revenue (%) 33.15 34.82 34.08 31.72 32.13

Operating profit after depreciation and interest/ Total revenue (%) 30.23 31.00 30.66 28.23 28.56

Depreciation and amortization/Total revenue (%) 2.92 3.82 3.42 3.49 3.57

Tax/ Total revenue (%) 9.37 8.12 4.42 4.03 2.68

Profit after tax/ Total revenue (%) 25.38 27.22 28.72 28.57 28.77ROCE (%) 37.58 37.25 42.90 41.38 45.73

Return on invested capital (%) 67.73 68.75 78.84 71.12 88.81




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Ratio Analysis




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Ratio Analysis Contd.

Ratio

2011

2010

2009

2008

2007

P/E Ratio 28.87 26.06 13.02 18.4 29.76

PEG Ratio 2.44 -20.68 0.44 1.2 0.56

-30

-20

-10

0

10

20

30

40

2011 2010 2009 2008 2007

P/E Ratio

PEG Ratio




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Cash Flow Statement




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Receivables Marginally gone up




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IT industry

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Infosys- Competitive Situation & Positioning

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Competitive Environment

Tata Consultancy Services(TCS)Infosys Technologies LtdWipro LimitedHewlett-Packard India Pvt. Ltd

IBM India LimitedSatyam Computer Services Ltd.HCL Technologies Ltd.Intel Technology India Pvt. Ltd.

CISCO Systems India Pvt. Ltd.Patni Computer Systems Ltd.Cognizant TechnologySolutions IndiaHCL Info-systems Ltd.

Mahindra-British TelecomRedington (India) Limitedi-Flex Solutions Ltd.

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Competition Analysis

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LOGO www.themegallery.com

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Market Share-2011Indian IT industry Revenue Break-up by company

Indian IT market isdominated by a few

large companieswith presence of a

number of small

and mediumcompanies





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IT Companies Comparison

Name Last Price Market Cap.(Rs. cr.)

SalesTurnover

Net Profit Total Assets

TCS 1,077.70 210,929.71 29,275.41 7,569.99 19,620.61

Infosys 2,600.30 149,314.20 25,385.00 6,443.00 24,501.00

Wipro 415.80 102,164.72 26,340.70 4,843.70 26,065.00

HCL Tech 420.25 29,029.56 6,794.48 1,198.28 6,889.31

Oracle Financ 1,939.95 16,284.27 2,360.51 967.98 5,150.34

MahindraSatyam

72.00 8,472.81 4,776.10 -127.60 3,423.10

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Company wise ComparisonBalance Sheet

Infosys TCS Wipro HCL Tech Oracle Finance

Mar '11 Mar '11 Mar '11 Jun '11 Mar '11

Sources Of Funds

Total Share Capital 287.00 295.72 490.80 137.74 41.95

Equity Share Capital 287.00 195.72 490.80 137.74 41.95

Share Application Money 0.00 0.00 0.70 1.00 0.08 Preference Share Capital 0.00 100.00 0.00 0.00 0.00

Reserves 24,214.00 19,283.77 20,829.40 5,720.41 5,108.31

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 24,501.00 19,579.49 21,320.90 5,859.15 5,150.34

Secured Loans 0.00 35.87 0.00 1,029.87 0.00

Unsecured Loans 0.00 5.25 4,744.10 0.29 0.00 Total Debt 0.00 41.12 4,744.10 1,030.16 0.00

Total Liabilities 24,501.00 19,620.61 26,065.00 6,889.31 5,150.34

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Company wise ComparisonCash Flow Statement

Wipro Infosys TCS Oracle Finance HCL Tech

Mar '11 Mar '11 Mar '11 Mar '11 Jun '11

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 5705.50 8821.00 8700.43 1034.39 1289.88

Net Cash From Operating Activities 3710.50 4270.00 5741.28 714.99 1519.39

Net Cash (used in)/fromInvesting Activities -1474.00 3235.00 -863.16 -1005.44 -535.03

Net Cash (used in)/from FinancingActivities

-2732.60 -3642.00 -4605.61 3.06 -882.56

Net (decrease)/increase In Cash andCash Equivalents

-496.10 3868.00 283.90 -287.39 102.86

Opening Cash & Cash Equivalents 5699.40 11297.00 293.28 395.14 64.84

Closing Cash & Cash Equivalents 5203.30 15165.00 577.18 107.75 167.70





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Brand Valuation Approach

Methodology followed for valuation of brand Infosys :Determine brand profits by eliminating the non-brandprofits from the total profitsRestate the historical profits at present-day values

Provide for the remuneration of capital to be used forpurposes other than promotion of the brandAdjust for taxesDetermine the brand-strength or brand-earnings

multiple.





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Brand Valuation





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Value-Added Statement





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EVA Analysis





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Value Of Firm

Value of firm = FCFF/(1+WACC)^t

Cost Of Capital = rf+ (market rate-rf)=19.64%

FCF = (Income+ depreciation- change in workingcapital- net book value)

= 285.8




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Valuation-Power of Intangibles




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Valuation

The valuation of Infosys, the brand, has improvedfrom Rs 14,153 crore in 2005 to Rs 36,907 crore in2011.It was 23.2 per cent of the company’s marketcapitalization five years ago, it stands at 24.6 percent now




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Balance Score CardThe Balanced Scorecard

is a management system

used tofocus and prioritize management energy

toward achievingboth short and long term organizational goals

and with the ability to giveearly warning signals for midcourse correction




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BSC

Key Business Objectives(Business Plans)

Vision

Strategic Goals

Key Business Processes

Learning

Process

CSF's

BalancedBusinessScorecard(BBS)

Finance

BalancedBusiness

Scorecard Cust.




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Objectives



Factors of successDelivering local business value

• Customizing services and solutions to suit client needs• Understanding client-specific needs and value proposition

Building the brand• Aggressive marketing and branding strategy• Coherent campaigns using multiple channels, including events, PR activities and direct

marketing• Creating positive perceptions with clients, industry associations, media and policy makers

Coherent Market Strategy• Range of investment in infrastructure, HR, technology and networking• Increase in client penetration rate• Helped in attracting best talent

Investing in Expertise

• Business innovation in GDM coupled with technology and industry expertise in variousfields• Disruptive model has enabled Infosys to offer distinctly superior services• Facilitated acquiring new clients

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