Firstcall recommend Saksoft after Q4FY15 PBT rises 56.04% y/y to INR73.93m

1. CMP 145.00
Target Price 165.00
ISIN: INE667G01015
JUNE 6th
, 2015
SAKSOFT LIMITED
Result Update (CONSOLIDATED): Q4 FY15
BUY
Index Details
Stock Data
Sector IT Software Products
BSE Code 590051
Face Value 10.00
52wk. High / Low (Rs.) 231.50/76.40
Volume (2wk. Avg.) 693
Market Cap (Rs. in mn.) 1502.20
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 2314.00 2508.38 2683.96
EBITDA 282.07 320.26 358.09
Net Profit 167.06 196.72 221.89
EPS 16.13 18.99 21.42
P/E 8.99 7.64 6.77
Shareholding Pattern (%)
1 Year Comparative Graph
SAKSOFT LTD S&P BSE SENSEX
SYNOPSIS
Saksoft Ltd, an information technology company,
provides information management solutions to
organizations primarily in India, the United
Kingdom, the United States and Singapore.
During the quarter, net profit grew by 32.98%y-
o-y of Rs. 49.84 million against Rs. 37.48 million
in the corresponding quarter ending of previous
year.
Revenue rose by 10.07% y-o-y of Rs. 592.27
million for the 4th quarter of FY15 compared to
Rs. 538.10 million for the 4th quarter of FY14.
Profit before interest, depreciation and tax is Rs.
86.65 million, an increase of 43.67% as against
Rs. 60.31 million in the corresponding period of
the previous year.
Reported earnings per share of the company
stood at Rs. 4.81 a share during the quarter as
against Rs. 3.66 over previous year period.
Profit before tax (PBT) of the company increased
by 56.04% y-o-y of Rs. 73.93 million in Q4 FY15
compared to Rs. 47.38 million in Q4 FY14.
The company has recommended a final dividend
at the rate of 25% i.e., Rs. 2.50/- per share on the
face value of Rs. 10.00/- each for the year 2014-
2015.
Net Sales and PAT of the company are expected to
grow at a CAGR of 14% and 19% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Saksoft Ltd 145.00 1502.20 16.13 8.99 1.36 25.00
Polaris Consulting & Services Ltd 185.70 18564.40 12.39 14.99 1.58 300.00
Mindteck Ltd 64.80 1624.10 4.58 14.15 0.98 10.00
Nucleus Software Exports Ltd 254.50 8241.70 18.76 13.57 1.98 50.00

2. QUARTERLY HIGHLIGHTS (CONSOLIDATED)
Results Updates- Q4 FY15
Saksoft Limited was founded in 1999, an information technology company, provides information management
solutions to organizations, reported its financial results for the quarter ended 31st Mar, 2015.
The company’s net profit stood at Rs. 49.84 million against Rs. 37.48 million in the corresponding quarter ending
of previous year, an increase of 32.98% y-o-y. Revenue for the March quarter rose by 10.07% to Rs. 592.27
million when compared with Rs. 538.10 million for the prior year period. Reported earnings per share of the
company stood at Rs. 4.81 a share during the quarter as against Rs. 3.66 over previous year period. Profit before
interest, depreciation and tax is Rs. 86.65 million as against Rs. 60.31 million in the corresponding period of the
previous year.
Break up of Expenditure
Months
Mar-15 Mar-14 % Change
Net Sales 592.27 538.10 10.07
PAT 49.84 37.48 32.98
EPS 4.81 3.66 31.37
EBITDA 86.65 60.31 43.67
Break up of Expenditure
(Rs in millions)
Q4 FY15 Q4 FY14 Chng %
Employee Benefit Expenses 250.07 225.45 11%
Dep & Amortization Exp 2.08 4.24 -51%
Other Expenses 265.40 253.20 5%

3. COMPANY PROFILE
Saksoft Limited was founded in 1999 an information technology company provides information management
solutions to organizations primarily in India, the United Kingdom, the United States, and Singapore. The company
offers various software solutions, including consulting, design, development, re-engineering, systems integration,
implementation, and testing services.
It provides a range of business consulting and technology services, such as strategic advisory, managed services,
business intelligence and enterprise data warehouse, and corporate performance management services, as well
as BO migration and report factory, mobile application development, and SAP mobility services.
The company offers testing services comprising functional, automated regression, usability and reliability,
performance/load, and security testing services, as well as specialized e-commerce testing services; managed
services that consist of building custom applications from concept to completion.
Its products and solutions include Veri-sens, a business intelligence solution for retail banking and credit cards;
Prima, which allows to define loyalty programs at various levels and to tailor the programs to reward loyal
customers; Dedupe system to enhance customer data through matching techniques, algorithms, and phonetics;
and Acusend that automates and personalizes information generation and distribution in various formats.
In addition, the company offers Warehouse Seeker and merchant management solutions, and portfolio
performance management services; and services, such as DWH build and implementation, tools migration and
re-engineering, data migration, DWH support, application management, data quality, and customer analytic
services. It serves banking and insurance, telecom, retail, life sciences, hospitality, travel and leisure, utilities and
industries; and public sector and central government.

4. FINANCIAL HIGHLIGHT (CONSOLIDATEDT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY-14A FY-15A FY-16E FY-17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 102.35 103.60 103.60 103.60
Reserves and Surplus 936.70 1003.34 1123.74 1240.61
1. Sub Total - Net worth 1039.05 1106.94 1227.34 1344.21
2. Minority Interest 0.00 19.12 13.96 15.13
Non Current Liabilities
Long term Borrowings 272.96 296.49 317.24 333.11
Long term Provisions 10.03 11.85 13.63 15.26
3. Sub Total - Non Current Liabilities 282.99 308.34 330.87 348.37
Current Liabilities
Short term Borrowings 48.29 125.64 173.38 211.53
Trade Payables 251.36 280.01 308.01 332.65
Other Current Liabilities 217.07 247.60 277.31 305.04
Short Term Provisions 62.89 73.51 82.33 90.56
4. Sub Total - Current Liabilities 579.61 726.76 841.04 939.79
Total Liabilities (1+2+3+4) 1901.65 2161.16 2413.21 2647.50
APPLICATION OF FUNDS
Non-Current Assets
a) Fixed Assets 21.30 19.16 20.69 21.73
b) Deferred tax assets (net) 1076.36 1205.19 1325.71 1438.39
c) Long Term loans and advances 14.37 17.50 20.13 22.54
d) Other non-current assets 9.74 16.31 21.53 26.91
1. Sub Total - Non Current Assets 1121.77 1258.16 1388.06 1509.58
Current Assets
Current Investment 13.59 0.00 11.42 14.27
Trade receivables 492.10 544.13 587.66 628.80
Cash and Bank Balances 91.95 152.77 203.68 257.13
Short-terms loans & advances 171.18 168.91 173.30 181.27
Other current assets 11.06 37.19 49.09 56.45
2. Sub Total - Current Assets 779.88 903.00 1025.15 1137.92
Total Assets (1+2) 1901.65 2161.16 2413.21 2647.50

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 2243.70 2314.00 2508.38 2683.96
Other Income 10.82 21.22 29.28 36.02
Total Income 2254.52 2335.22 2537.66 2719.98
Expenditure -2009.03 -2053.15 -2217.40 -2361.89
Operating Profit 245.49 282.07 320.26 358.09
Interest -39.72 -42.07 -45.44 -49.98
Gross profit 205.77 240.00 274.82 308.12
Depreciation -12.96 -12.96 -13.22 -13.83
Profit Before Tax 192.81 227.04 261.60 294.29
Tax -41.60 -53.30 -64.88 -72.39
Profit After Tax 151.21 173.74 196.72 221.89
Minority Interest 0.00 -6.68 0.00 0.00
Net Profit 151.21 167.06 196.72 221.89
Equity capital 102.35 103.60 103.60 103.60
Reserves 936.70 1003.34 1123.74 1240.61
Face value 10.00 10.00 10.00 10.00
EPS 14.77 16.13 18.99 21.42
Quarterly Profit & Loss Statement for the period of 30th Sept, 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 582.10 570.54 592.27 611.22
Other income 5.22 4.42 9.85 7.68
Total Income 587.32 574.96 602.12 618.91
Expenditure -521.06 -500.69 -515.47 -540.32
Operating profit 66.26 74.27 86.65 78.58
Interest -10.52 -12.72 -10.64 -9.36
Gross profit 55.74 61.55 76.01 69.22
Depreciation -3.39 -3.16 -2.08 -2.46
Profit Before Tax 52.35 58.39 73.93 66.76
Tax -14.99 -12.54 -17.41 -15.55
Profit After Tax 37.36 45.85 56.52 51.20
Minority Interest 0.00 0.00 -6.68 0.00
Net Profit 37.36 45.85 49.84 51.20
Equity capital 103.30 103.60 103.60 103.60
Face value 10.00 10.00 10.00 10.00
EPS 3.62 4.43 4.81 4.94

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 14.77 16.13 18.99 21.42
EBITDA Margin (%) 10.94% 12.19% 12.77% 13.34%
PBT Margin (%) 8.59% 9.81% 10.43% 10.96%
PAT Margin (%) 6.74% 7.51% 7.84% 8.27%
P/E Ratio (x) 9.81 8.99 7.64 6.77
ROE (%) 14.55% 15.70% 16.03% 16.51%
ROCE (%) 19.00% 19.29% 19.41% 19.69%
Debt Equity Ratio 0.31 0.38 0.40 0.41
EV/EBITDA (x) 6.92 6.28 5.55 4.96
Book Value (Rs.) 101.52 106.85 118.47 129.75
P/BV 1.43 1.36 1.22 1.12
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs. 145.00 the stock P/E ratio is at 7.64 x FY16E and 6.77 x FY17E
respectively.
Earnings per share (EPS) of the company for the earnings for FY16E and FY17E are seen at Rs. 18.99 and Rs.
21.42 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 5.55 x for FY16E and 4.96 x for FY17E.
Price to Book Value of the stock is expected to be at 1.22 x and 1.12 x respectively for FY16E and FY17E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs. 165.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
India is the world's largest sourcing destination for the information technology (IT) industry, accounting for
approximately 52 per cent of the US$ 124-130 billion market. The industry employs about 10 million Indians and
continues to contribute significantly to the social and economic transformation in the country.
The Indian IT and ITeS industry is divided into four major segments – IT services, business process management
(BPM), software products and engineering services, and hardware. The IT-BPM sector in India grew at a
compound annual growth rate (CAGR) of 25 per cent over 2000-2013, which is 3-4 times higher than the global
IT-BPM spend, and is estimated to expand at a CAGR of 9.5 per cent to US$ 300 billion by 2020. India has
emerged as the fastest growing market for Dell globally and the third largest market in terms of revenue after the
US and China, reported by Managing Director, Dell India.
Market Size
India, the fourth largest base for young businesses in the world and home to 3,000 tech start-ups, is set to
increase its base to 11,500 tech start-ups by 2020, as per a report by Nasscom and Zinnov Management
Consulting Pvt Ltd.
India’s internet economy is expected to touch Rs 10 trillion (US$ 161.26 billion) by 2018, accounting for 5 per
cent of the country’s gross domestic product (GDP), according to a report by the Boston Consulting Group (BCG)
and Internet and Mobile Association of India (IAMAI). In December 2014, India’s internet user base reached 300
million, the third largest in the world, while the number of social media users and smartphones grew to 100
million.

8. Investments
Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments
from major countries. The computer software and hardware sector in India attracted cumulative foreign direct
investment (FDI) inflows worth US$ 13,788.56 million between April 2000 and December 2014, according to
data released by the Department of Industrial Policy and Promotion (DIPP).
Most large technology companies may have so far focused primarily on bigger enterprises, but a report from
market research firm Zinnov highlighted that the small and medium businesses will present a lucrative
opportunity worth US$ 11.6 billion in 2015 and US$ 25.8 billion in 2020. Moreover, India has nearly 51 million
such businesses of which 12 million have a high degree of technology influence and are looking to adopt newer
IT products, as per the report.
Some of the major investments in the Indian IT and ITeS sector are as follows:
• Wipro has won a US$ 400 million, multi-year IT infrastructure management contract from Swiss engineering
giant ABB, making it the largest deal for the technology company.
• Tech Mahindra has signed a definitive agreement to acquire Geneva-based SOFGEN Holdings. The acquisition
is expected to strengthen Tech Mahindra’s presence in the banking segment.
• Tata Consultancy Services (TCS) plans to set up offshore development centres in India for Japanese clients in
a bid to boost the company's margin in the market.
• Reliance is building a 650,000 square feet (sq ft) data centre in India—its 10th data centre in the country—
with a combined capacity of about 1 million sq ft and an overall investment of US$ 200 million.
• Intel Corp plans to invest about US$ 62 million in 16 technology companies, working on wearable, data
analytics and the Internet of Things (IoT), in 2015 through its investment arm Intel Capital. The Indian IoT
industry is expected be worth US$ 15 billion and to connect 28 billion devices to the internet by 2020.
• Keiretsu Forum, a global angel investor network, has forayed into India by opening a chapter in Chennai.
With this, the Silicon Valley-based network will have 34 chapters across three continents.
Government Initiatives
The adoption of key technologies across sectors spurred by the 'Digital India Initiative' could help boost
India's gross domestic product (GDP) by US$ 550 billion to US$ 1 trillion by 2025, as per research firm
McKinsey.
Some of the major initiatives taken by the government to promote IT and ITeS sector in India are as follows:

9. India and the United States (US) have agreed to jointly explore opportunities for collaboration on
implementing India's ambitious Rs 1.13 trillion (US$ 18.22 billion) ‘Digital India Initiative’. The two sides also
agreed to hold the US-India Information and Communication Technology (ICT) Working Group in India later
this year.
India and Japan held a Joint Working Group conference for Comprehensive Cooperation Framework for ICT.
India also offered Japan to manufacture ICT equipment in India.
The Government of Telangana began construction of a technology incubator in Hyderabad—dubbed T-Hub—
to reposition the city as a technology destination. The state government is initially investing Rs 35 crore (US$
5.64 million) to set up a 60,000 sq ft space, labelled the largest start-up incubator in the county, at the
campus of International Institute of Information Technology-Hyderabad (IIIT-H). Once completed, the
project is proposed to be the world’s biggest start-up incubator housing 1,000 start-ups.
Bengaluru has received US$ 2.6 billion in venture capital (VC) investments in 2014, making it the fifth largest
recipient globally during the year, an indication of the growing vibrancy of its startup ecosystem. Among
countries, India received the third highest VC funding worth US$ 4.6 billion.
Road Ahead
Internet should be a basic human right, say 87 per cent of internet users in India, compared with 83 per cent
globally, according to a report by Centre for International Governance Innovation (CIGI).
India continues to be the topmost offshoring destination for IT companies followed by China and Malaysia in
second and third position, respectively. Emerging technologies present an entire new gamut of opportunities for
IT firms in India. Social, mobility, analytics and cloud (SMAC) collectively provide a US$ 1 trillion opportunity.
Cloud represents the largest opportunity under SMAC, increasing at a CAGR of approximately 30 per cent to
around US$ 650-700 billion by 2020. Social media is the second most lucrative segment for IT firms, offering a
US$ 250 billion market opportunity by 2020.
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