1. Warsaw School of Economics
Financial Management
Prepared by:
ANUBHAV JAIN (id 70286)
Warsaw
2015
2. 2
Table of Content;
1. COMPANY’S PROFILE…………………………………………….…3
2. FINANCIAL HIGHLIGHTS…………………………………………...4
3. FINANCIAL ANALYSIS
3.a. Current Ratio………………………………..…..5
3.b. Quick Ratio……………………………………...5
3.c. Net Profit Margin…………… ………………….6
3.d. Return on Equity Ratio………………………….7
3. e. Return on Assets Ratio…………………………..8
3. f. Debt-Equity Ratio………………………………..9
3. g. Asset Turnover Ratio…………………………....9
4. RECOMMENDATIONS FOR INVESTORS...………….10
5. APPENDIX………………………………………………11-13
6. BIBLIOGRAPHY ………………………………………...14
3. 3
1. Company’s Profile
Name of the company: INFOSYS
Year of establishment: July 2, 1981
Founder: Narayan Murthy
CEO: Vishal Sikka
Type: Public
Location: Pune, India
Headquarters: Bengaluru, India
Subsidiaries: Infosys BPO Limited, Panaya, Lodestone Management Consultants
Contact: https://www.infosys.com/
Stock price: INFY (NSE) $ 16.17
Number of employees: 187,976 (September 2015)
Operating income: Increase US$ 2.25 billion (2015)
Profit Increase: US$ 2.01 billion (2015)
Total assets: Increase US$ 10.61 billion (2015)
Total equity: Increase US$ 8.76 billion (2015)
Revenue: Increase US$ 8.71 billion (2015)
Services: IT, business consulting & outsourcing services
Area Served: Worldwide
4. 4
2. Financial Highlights (In US $ Millions)
Increase in gross profit: 904 (September 30, 2015) 848 (September 30, 2014)
Increase in net profit: 519 (September 30, 2015) 519 (September 30, 2014)
Decrease in Non-current Liabilities: 30 (2015) 364(2014) in Cr.
Increase in Revenues: 2392 (September 30, 2015) 2201 (September 30, 2014)
Decrease in Current Investment: 749 (2015) 2749(2014) in Cr.
Increase in Operating Profit: 610 (September 30, 2015) 575 (September 30, 2014)
Increase in cash flow from operating activities: 152 (2013) 320 (2014)
Increase in Cost of Sales: 1,488 (September 30, 2015) 1353 (September 30, 2014)
Main Competitors
1. Wipro is an Indian multinational IT consulting and System Integration Services
Company headquartered in Bangalore, India. As of March 2015, the company has
158,217 employees servicing over 900 of the Fortune 1000 corporations with a presence
in 67 countries. On 31 March 2015, its market capitalization was approximately $ 35
Billion, making it one of India's largest publicly traded companies and seventh largest IT
Services firm in the World.
2. Fidelity National Information Services is an international provider of financial services
technology solutions and outsourcing services. FIS has over 14,000 clients in more than
130 countries.FIS is 426 on the Fortune 500 and is a member of Standard & Poor’s 500
Index.
3. Tata Consultancy Services Limited (TCS) is an Indian multinational information
technology (IT) service, consulting and business solution.
4. International Business Machines Corporation (commonly referred to as IBM) is
an American multinational technology andconsulting corporation, with headquarters
in Armonk, New York. IBM manufactures and markets computer hardware, middleware
software and offers infrastructure, hosting and consulting services in areas ranging
from mainframe computers to nanotechnology.
5. 5
3. Financial Analysis
(a).Current Ratio
The Current ratio is the ratio of current asset to current liabilities; indicates a company’s ability to satisfy
its current liabilities with in current assets:
Current Ratio = Current Assets / Current Liabilities
The Current ratio indicates a company ability to meet short term debt , though it has decreased
from last couple of years, it indicates company might not be using C.A or its short term finance
efficiently, that also indicate problem in working capital management of the company
(b).Quick Ratio
The Quick (aki acid) Ratio is used as a solvency metric to determine a firm's ability to pay down
current liabilities.
Date Range Current
Assets
Current
liabilities
Current Ratio
Infosys
Wipro Fidelity National
Info
Sept. 30, 2015 742.61M 199.08M 3.730 2.570 1.556
June. 30, 2015 7.311B 2.067B 3.537 2.683 1.480
Mar. 31, 2015 7.554B 1.821B 4.149 2.661 1.475
Dec. 31, 2014 7.651B 1.792B 4.270 2.760 1.547
Sept. 30, 2014 7.656B 1.731B 4.421 2.677 1.744
June. 30, 2014 7.244B 1.656B 4.374 2.724 1.666
Mar. 31, 2014 7.157B 1.519B 4.711 2.605 1.577
Dec. 31, 2013 6.542B 1.444B 4.531 2.592 1.406
Sept. 30, 2013 6.421B 1.456B 4.409 2.285 1.577
June. 30, 2013 6.206B 1.240B 5.003 2.337 1.795
Mar. 31, 2013 6.507B 1.158B 5.617 2.124 1.504
Dec. 31, 2012 6.076B 1.106B 5.492 2.146 1.467
Date Range Quick Ratio
Infosys
Quick Ratio
Wipro
Quick Ratio Fidelity
National Info
6. 6
The Quick Ratio is considered more realistic to judge the financial strength of the company.
Since it only include the most liquid assets. So it can show the real strength of the company to
pay off its current debt. The liquid ratio 3.608 of Infosys shows that it’s slightly lower than its
current ratio which is 3.70. It means that most of its assets are in form of liquid assets so it has
the capability to pay off its debt very easily as compare to its competitors (Wipro 2.078, Fidelity
National Info 1.386).
(c).Net Profit Margin
Net Profit Margin is one of the key indicators in assessing the company's profitability, which
shows how good a company is at converting revenue into profits available for the shareholders
Profit Margin = Net Income / Revenue
Sept. 30, 2015 3.608 2.078 1.386
June. 30, 2015 3.229 2.323 1.174
Mar. 31, 2015 4.024 2.243 1.154
Dec. 31, 2014 4.023 2.330 1.396
Sept. 30, 2014 4.402 2.232 1.381
June. 30, 2014 4.073 2.292 1.266
Mar. 31, 2014 4.539 2.35 1.195
Dec. 31, 2013 4.374 2.253 1.279
Sept. 30, 2013 3.829 1.988 1.152
June. 30, 2013 4.916 2.024 1.585
Mar. 31, 2013 5.558 1.866 1.349
Dec. 31, 2012 5.190 1.845 1.334
Date Range Net
Income
Net
Revenue
Infosys Wipro Fidelity
National Info
Sept. 30, 2015 52.33M 240.76M 21.73% 17.86% 11.10%
June. 30, 2015 478.77M 2.269B 21.10% 17.88% 15.14%
Mar. 31, 2015 479.04M 2.077B 23.06% 18.71% 7.13%
Dec. 31, 2014 534.77M 2.272B 23.53% 18.28% 11.56%
Sept. 30, 2014 51.13M 220.34M 23.20% 17.84% 9.38%
June. 30, 2014 484.41M 2.144B 22.60% 18.89% 11.18%
Mar. 31, 2014 432.13M 1.833B 23.57% 19.10% 10.16%
Dec. 31, 2013 461.29M 2.092B 22.05% 17.87% 4.57%
7. 7
The Net profit ratio of Infosys 21.73% is much higher than its competitors its almost double of
the Fidelity National Info that has the ratio of the 11.10%.This shows the Financial efficiency of
Infosys its better in converting revenues into net profit which will ultimately leads to the higher
dividends and earning per share, which is due to increase in net sales and the efficiency of
management in manufacturing, selling, administrative and other activities of the firm.
(d).Return on Equity
The higher the return, the more efficient is company.
If we compare the recent quarter result of Infosys from last 1 year quarter result, it shows that the
increase in ROE is due to increase in their sales, operating income and net profit.
And the last thing is EPS which increase from -72.56% to 12.14% from previous year if see in
Indian market which is positive sign from investors point view to invest in company.
Sept. 30, 2013 388.06M 2.093B 18.54% 17.94% 11.49%
June. 30, 2013 451.29M 2.150B 20.99% 16.68% 6.93%
Mar. 31, 2013 437.44M 1.910B 22.90% 17.99% 9.75%
Dec. 31, 2012 439.23M 1.934B 22.71% 18.04% 9.11%
Date Range Infosys Wipro Fidelity National Info
Sept. 30, 2015 22.36% 21.87% 11.16%
June. 30, 2015 18.57% 22.19% 10.78%
Mar. 31, 2015 18.90% 23.05% 9.80%
Dec. 31, 2014 19.03% 23.91% 10.40%
Sept. 30, 2014 18.68% 24.53% 8.49%
June. 30, 2014 23.96% 24.91% 8.78%
Mar. 31, 2014 23.88% 24.58% 7.63%
Dec. 31, 2013 24.70% 23.52% 7.45%
Sept. 30, 2013 24.69% 22.93% 8.41%
June. 30, 2013 25.84% 22.23% 7.12%
Mar. 31, 2013 25.74% 21.81% 7.81%
Dec. 31, 2012 26.56% 21.40% 6.98%
8. 8
(e).Return on Assets Ratio
Return on Assets (ROA) ratio is a financial indicator, which tells the investors how much profit a
company generates for each $1 of assets. The higher the return, the more efficient is company.
Return on assets ratio shows that how much company is efficient to utilize its assets. The overall
result shows that it is using its assets in a good way but Wipro has shown more consistency in its
ROA ratio. Based on the financial highlights for the last year, there is an increase in sales
revenue, profit, EPS, market caputurerization and net cash flow. But on the other hand, the
decrease in ROA shows that how much company is efficient to utilize its assets shows that it is
using its assets in a good way.
(f).Debt/Equity Ratio
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by
total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is
Date Range Net
Income
Total
Assets
Infosys Wipro Fidelity
National Info
Sept. 30, 2015 52.33M 1.073B 3.53 13.65 4.92
June. 30, 2015 478.77M 10.61B 17.95 14.06 6.67
Mar. 31, 2015 479.04M 10.62B 18.39 15.49 3.06
Dec. 31, 2014 534.77M 10.01B 20.86 15.51 5.45
Sept. 30, 2014 51.13M 10.03B 2.06 15.50 4.21
June. 30, 2014 484.41M 9.625B 20.38 16.52 4.98
Mar. 31, 2014 432.13M 9.491B 19.36 18.21 4.38
Dec. 31, 2013 461.29M 8.744B 21.74 17.13 2.02
Sept. 30, 2013 388.06M 8.480B 18.16 15.92 4.88
June. 30, 2013 451.29M 8.132B 20.38 13.98 3.05
9. 9
using to finance its assets relative to the amount of value represented shareholders ‘equity.
Debt - Equity Ratio = Total Liabilities / Shareholders' Equity
Generally speaking, as a firm's debt-to-equity ratio increases, it becomes more risky because if it
becomes unable to meet its debt obligations. But if we compare debt ratio of Infosys with its
competitor Wipro is now slightly up but in late 2012-13 it’s performing well to compete with
their competitor.
(g).Asset Turnover Ratio
Like return on assets (ROA), the asset turnover ratio tells you how good the company is at using
its assets to make products to sell. For example, if Company A reported $100,000 of sales and
owns $50,000 in assets, its asset turnover ratio is 2x. Forever $1 of assets it owns, it can generate
$2 in sales each year.
Date Range
Total
Liabilities
Shareholders’
Equity
Infosys Wipro Fidelity National
Info
Sept. 30,2015 205.19M 867.68M 0.2362 0.2292 0.7613
June. 30,2015 2.130B 8.482B 0.2511 0.1905 0.7831
Mar. 31, 2015 1.854B 8.766B 0.2114 0.1934 0.8169
Dec. 31, 2014 1.810B 8.201B 0.2207 0.1746 0.7729
Sept. 30,2014 1.804B 8.223B 0.2193 0.153 0.7705
June. 30, 2014 1.725B 7.900B 0.2183 0.1291 0.7549
Mar. 31, 2014 1.584B 7.907B 0.2003 0.1502 0.7313
Dec. 31, 2013 1.504B 7.240B 0.2077 0.1442 0.6791
Sept. 30,2013 1.512B 6.968B 0.2169 0.184 0.7253
June. 30,2013 1.298B 6.834B 0.1899 0.1784 0.7208
Mar. 31, 2013 1.208B 7.334B 0.1647 0.2249 0.6933
Dec. 31, 2012 1.140B 6.803B 0.1675 0.191 0.6604
Date Range Total
Revenue
Total
Asset
Infosys Wipro Fidelity
National Info
10. 10
The Asset turnover ratio of the company Infosys is a picture of its return on asset ratio as was the
case in ROA ratio same is reality in above table. The most consistent company seems Wipro
which has a consistency in its conversion while Infosys has two very interesting fluctuation in
September 2014 the ratio is 0.02 and in September 2015 the ratio is 0.04. Since this fluctuation is
exactly after one year so it seems company might have disposed off its assets after a one year this
is purely a subjective observation of mine and have no financial proof of this fact.
4. Recommendations for Investors Buy
A financial highlight of the company Infosys shows that it has continues and gradual increase in
all the ratios which are considered important by the individuals before investing in any company.
i. Based on the financial ratios that are calculating for Infosys, a risk-average person who
tends to protect his capital may invest in Infosys for long term because it has good
financial fundamental as compares to other IT firms. The fact that all ratios are above the
industry average suggests that the company is more profitable, efficient and liquid in its
peer group. Moreover, in the comparison with the main competitor in the IT industry
(Wipro, India) also shows good indicators in the categories, such as Asset ratio and asset
turnover ratio.
ii. Based on the financial highlights for the last couple of year, Infosys may be chosen for
investing, due to these factors that is increase sales revenue, profit, EPS, market
caputurerization and net cash flow.
Sept. 30, 2015 240.76M 1.073B 0.04 0.19 0.11
June. 30, 2015 2.269B 10.61B 0.21 0.20 0.11
Mar. 31, 2015 2.077B 10.62B 0.20 0.21 0.11
Dec. 31, 2014 2.272B 10.01B 0.22 0.21 0.12
Sept. 30, 2014 220.34M 10.03B 0.02 0.22 0.11
June. 30, 2014 2.144B 9.625B 0.23 0.22 0.11
Mar. 31, 2014 1.833B 9.491B 0.21 0.24 0.11
Dec. 31, 2013 2.092B 8.744B 0.25 0.24 0.11
Sept. 30, 2013 2.093B 8.480B 0.25 0.22 0.11
June. 30, 2013 2.150B 8.132B 0.24 0.21 0.11
Mar. 31, 2013 1.910B 8.542B 0.22 0.22 0.11
Dec. 31, 2012 1.934B 7.943B 0.24 0.21 0.11
11. 11
iii. According to the historical data , Fidelity National Info had showed consistent
performance which result it give not more profit for Long – Term investor as compare to
Infosys because its net profit margin is not much higher than Infosys which directly result
to earing per share and to give to dividend to their investors .
iv. The evidence that Fidelity National Info operates mainly in U.S Market, makes the
investing is quite attractive but on the other hand the Infosys also operate in Indian Stock
Market and plays a vital role in IT Industry in India which directly lead to generating
more revenues because now a days Indian IT market is blooming so fast as comparative
to other Asian market.
v. Infosys Foundation USA, a non-profit organization focused on bridging the digital divide
in America, announced on 18 November 2015, a new strategic grant partnerships
with Girls Who Code, CodeNowand ScriptEd. These organizations focus on delivering
computer science and coding education to middle and high school students through
curricular and extracurricular programs nationwide which may help to generate more
revenues and market caputurerization .
vi. The political and country risks, which are always undesirable by private investors and
Foreign investors are pretty low as comparative than other competitors.
5. Appendix
In comparison with Technology sector and other competitors, the Infosys Company’s shares are
more attractive for investors due to their historical primary growth.
12. 12
1. Infosys retreated from a record high hit earlier in the day and closed 3.81 percent lower,
posting its biggest single-day percentage fall since Aug. 24, a day when global markets
reeled after steep falls in China's sharesthis is all happen due to steep fall in china’s
market.
2. Infosys, which provides IT services to clients such as Apple Inc, Volkswagen AG and
Wal-mart Stores Inc , posted a net profit of 33.98 billion rupees ($525.07 million) in its
fiscal second quarter to Sept. 30, compared with 30.96 billion rupees a year ago.
3. If we see in graph on October 19, 2015, the Infosys performing the rapid growth in there
share price as comparative to technology sector and other companies is due to the
Infosys completed the acquisition with US-based oil and gas consulting firm Noah
Consulting for USD 70 million (about Rs 453.5 crore) in an all-cash deal .
SWOT Analysis
Strengths
Since the company is based in India its competitive advantage is enhanced. The Indian economy,
despite weak economic indicators such as relatively high rates of inflation, has low labor costs.
The workforce has relatively high skills levels in Information Technology. Couple these two
elements together and you have an operational basis that offers low-cost based, highly skilled
competitive advantage. Trained Indian personnel often speak very good English and are sensitive
to Western culture.
Infosys is in a strong financial position. The business turned over more than $4 billion in 2008.
This means that it has the capital to expand, and also the basis to leverage potential investors
Weaknesses
Infosys on occasion struggles in the US markets, and has particular problems in securing United
States Federal Government contracts in North America. Since these contracts are highly
profitable and tend to run for long periods of time, Infosys is missing out on lucrative business.
Added to this is the fact that its competitors do well in terms of securing the same Federal
business (and one should also take into account that many of its competitors are domiciled in the
US and there could be political pressure on the US Government to award contracts to domestic
organizations).
13. 13
Despite being a huge IT company in relation to its Indian competitors, Infosys is much smaller
than its global competitors. Infosys generated $4 billion in 2008, which is relatively low in
comparison with large global competitors such as Hewlett-Packard ($91 billion), IBM ($91
billion), EDS ($21 billion) and Accenture ($18 billion).
It is sometimes argued that Infosys is weaker when it comes to high-end management
consultancy, since it tends to work at the level of operational value creation. Competitors such as
IBM and Accenture tend to dominate this space.
Opportunities
At a time of recession in the global economy, it may appear that some companies will reduce
take up of services that Infosys offers. However, in tough times clients tend to focus upon cost
reduction and outsourcing – with are strategies that Infosys offers. So hard times could be
profitable for Infosys.
The strategic alliance between Infosys and Schlumberger gives the IT company access to
lucrative business in the gas and oil industries which is their new strategy to roll-up in global
market
Threats
Other global players have realized that India has the benefit of low-cost, highly-skilled labor that
often speaks English and is culturally sensitive to Western practices. As with all global IT
players, Infosys has to compete for skilled labor and this may have the effect of driving up wage
levels, and making it more difficult to recruit and retain staff.
