The company's net profit grew by 75.53% at Rs. 85.57 mn in current June quarter compared to Rs. 48.75 mn in the corresponding quarter of the previous year. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 26% over 2012 to 2015E respectively.

1. CMP 53.70
Target Price 67.00
ISIN: INE411H01032
JULY 30th
2014
R SYSTEMS INTERNATIONAL LTD
Result Update(PARENT BASIS): Q2 CY14
BUYBUYBUYBUY
Index Details
Stock Data
Sector IT
BSE Code 532735
Face Value 1.00
52wk. High / Low (Rs.) 68.30/20.00
Volume (2wk. Avg.) 17000
Market Cap (Rs. in mn.) 6761.90
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS CY13A CY14E CY15E
Net Sales 2701.22 3133.42 3634.76
EBITDA 592.10 732.87 683.95
Net Profit 365.52 440.32 411.26
EPS 2.90 3.50 3.27
P/E 18.50 15.36 16.44
Shareholding Pattern (%)
1 Year Comparative Graph
R SYSTEMS INTERNATIONAL LTD BSE SENSEX
SYNOPSIS
R Systems International Ltd founded in 1993, is one
of the leading provider of outsourced product
development and customer support services.
Net profit grew by 75.53% at Rs. 85.57 million in
current June quarter compared to Rs. 48.75 million
in the corresponding quarter of the previous year.
Revenue for the quarter rose by 10.41% to Rs.
718.25 million from Rs. 650.53 million, when
compared with the prior year period.
Profit before interest, depreciation and tax is Rs.
148.18 millions as against Rs. 94.54 millions,
registered a growth of 56.74%.
Consolidated revenue from operations for Q2 CY14
was Rs. 1606.7 million compared to Rs.
1452.2million in Q2 CY13, an increase of 10.64%.
Total Consolidated Cash and bank balance as at June
30, 2014 was Rs. 995.1 mn compared to Rs. 1239.0
mn as on March 31, 2014.
One of the leading providers of cloud-based
products for health insurers and state health
agencies based in USA has engaged R Systems for
various cloud based J2EE initiatives using spring
and Hibernate technologies.
The Company has incorporated a wholly owned
subsidiary R Systems Products & Technologies Ltd
and has approved the transfer of Indus IT Product
and Service business operated out of Pune and
Chennai locations to this subsidiary company.
Net Sales and PAT of the company are expected to
grow at a CAGR of 17% and 26% over 2012 to
2015E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
R Systems International Ltd. 53.70 6761.90 2.90 18.50 3.60 145.00
Accelya Kale Solutions Ltd. 711.80 10624.5 59.39 11.99 13.93 0.00
Sasken Communication Technologies Ltd. 310.00 6632.3 23.59 13.21 1.55 45.00
Financial Technologies Ltd. 329.50 15199.0 0.00 0.00 0.62 100.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q2 CY14,
R Systems is an integrated Product Lifecycle
Management (iPLM) company offering valued
outsourcing services to Fortune 1000, Government
and Mid-sized organizations, reported its financial
results for the quarter ended 30th Jun, 2014.
Months Jun-14 Jun-13 % Change
Net Sales 718.25 650.53 10.41
PAT 85.57 48.75 75.53
EPS 0.68 3.88 (82.59)
EBITDA 148.18 94.54 56.74
The company’s net profit jumps to Rs. 85.57 million against Rs. 48.75 million in the corresponding quarter
ending of previous year, an increase of 75.53%. Revenue for the quarter rose by 10.41% to Rs. 718.25 million
from Rs. 650.53 million, when compared with the prior year period. The company has reported an EPS of Rs. 0.68
for the 2nd quarter as against an EPS of Rs. 3.88 in the corresponding quarter of the previous year. Profit before
interest, depreciation and tax is Rs. 148.18 millions as against Rs. 94.54 millions in the corresponding period of
the previous year.
Break up of Expenditure
Break up of Expenditure
Rs. Millions
Q2 CY14 Q2 CY13
Travelling & Conveyance
Expenses
56.26 51.38
Depreciation & Amortisation
expenses
16.91 12.12
Employees Benefit Expenses 442.32 409.41
Legal & Professional
Expenses
12.75 9.44
Other Expenditure 52.19 79.38
Communication Costs 14.5 12.64

3. Segment Revenue
Latest Updates
• The Company has incorporated a wholly owned subsidiary R Systems Products & Technologies Ltd and has
approved the transfer of Indus IT Product and Service business operated out of Pune and Chennai locations
to this subsidiary company.
• One of the leading providers of cloud-based products for health insurers and state health agencies based in
USA has engaged R Systems for various cloud based J2EE initiatives using spring and Hibernate technologies.
• One of the leading Accounting and Consulting firm in USA has selected R Systems for IT services covering a
suite of Microsoft applications along with handling significant database migration.
• The Company has issued 712,600 equity shares of Rs. 1 each at an exercise price of Rs.12.07 per share,
pursuant to exercise of employee stock options.
Highlights (Consolidated)
• Consolidated revenue from operations for Q2 CY14 was Rs. 1606.7 million compared to Rs. 1452.2million in
Q2 CY13, an increase of 10.64%.
• Profit before interest, depreciation and tax is Rs. 224.3 millions as against Rs. 156.5 millions, registered a
growth of 43.27% YoY.
• During the quarter, Net profit after taxes was Rs. 139.3 million compared to Rs. 76.8 million, grew by 81.38%
YoY.

4. COMPANY PROFILE
R Systems was incorporated in 1993 as a consulting firm in the United States. With a focus on delivering quality
to all customers, the company started its India operations in 1997, opened headquarters in Noida, and started
offshore software development services.
The Company had received strategic investments by Intel Capital and GE Capital in 2001 and 2002, and with a
backdrop of success response obtained from ISVs, R Systems had undergone a massive transformation by the
year 2006. From offshore software Development Company to global outsourced product Development Company,
R Systems sharpened its business focus. Remarkable acquisitions including Pune based Indus Software, and
Singapore based ECnet, were carried out.
R Systems rapidly growing customer list includes a variety of Fortune 1000, government and mid-sized
organizations across a wide range of industry verticals including Banking and Finance, High Technology,
Independent Software Vendors, Telecom and Digital Media, Government, HealthCare, Manufacturing and Logistic
Industries. To further strengthen the Telecom Vertical, R Systems acquired UK based Computaris. The company
also continued its focus on quality and got the certification, SEI CMMi Level 5 v 1.2. R Systems maintains thirteen
development and service centres and serve customers in the US, Europe, South America, the Far East, the Middle
East and Africa.
Business Area
• Telecom & Media
• Banking & Financials
• Healthcare
• Manufacturing & Logistics
Services
• OPD-iPLM
• Application Services
• Testing Services
• BPO & KPO Services
• Packaged Services
Geographical Presence:
• India
o Noida
o Pune

5. o Chennai
• Singapore
• United States of America
o El Dorado Hills
o Salt Lake City
o Atlanta
• Europe
o Enschede, Netherlands
o Metz, France
o Bucharest, Romania
o Warsaw, Poland
o London, United Kingdom
o Moldova

6. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at December 31, 2012-2015E
CY12A CY13A CY14E CY15E
EQUITY AND LIABILITIES
Shareholder's Funds
Share Capital 124.47 125.92 125.92 125.92
Reserves and Surplus 1677.92 1754.62 1877.44 2065.19
1) Sub Total - Net worth 1802.39 1880.54 2003.36 2191.11
Non Current Liabilities
Long-term borrowings 3.45 4.40 4.93 5.22
Other Long Term Liabilities 6.57 3.83 4.44 4.80
Long Term Provisions 71.24 73.44 84.46 92.06
2) Sub Total - Non Current Liabilities 81.26 81.67 93.83 102.08
Current Liabilities
Trade Payables 118.80 152.85 146.74 151.14
Other Current Liabilities 130.17 113.27 265.50 300.02
Short Term Provisions 266.68 322.89 203.42 183.08
3) Sub Total - Current Liabilities 515.65 589.01 615.66 634.23
TOTAL EQUITY AND LIABILITIES (1+2+3) 2399.30 2551.22 2712.85 2927.42
ASSETS
Fixed Assets:
i. Tangible Assets 278.22 308.53 333.21 353.21
ii. Intangible Assets 14.09 23.40 28.55 33.69
iii. Intangible assets under development 12.32 14.13 16.11 17.88
a) Sub Total - Fixed Assets 304.63 346.06 377.87 404.77
b) Non Current Investments 767.02 793.61 833.29 866.62
c) Deferred Tax Assets 48.79 51.38 46.76 49.09
d) Long Term Loans and Advances 89.48 68.61 59.00 63.72
e) other non-current assets 71.33 79.71 75.72 80.27
1) Sub Total - Non Current Assets 1281.25 1339.37 1392.64 1464.48
Current Assets
Current Investments 0.00 10.00 19.50 23.01
Trade receivables 462.87 579.53 685.84 781.69
Cash and Bank Balances 548.16 441.55 423.89 440.84
Short-terms loans & advances 43.45 67.86 91.61 108.10
Other Current Assets 63.57 112.91 99.36 109.30
2) Sub Total - Current Assets 1118.05 1211.85 1320.20 1462.94
TOTAL ASSETS (1+2) 2399.30 2551.22 2712.85 2927.42

7. Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) CY12A CY13A CY14E CY15E
Description 12m 12m 12m 12m
Net Sales 2291.36 2701.22 3133.42 3634.76
Other Income 40.13 38.51 43.52 47.87
Total Income 2331.49 2739.73 3176.93 3682.63
Expenditure -1959.09 -2147.63 -2444.06 -2998.68
Operating Profit 372.40 592.10 732.87 683.95
Interest -2.73 -2.80 -2.91 -3.20
Gross profit 369.67 589.30 729.96 680.75
Depreciation -62.40 -47.81 -59.76 -66.93
Profit Before Tax 307.27 541.49 670.19 613.81
Tax -101.98 -175.97 -229.88 -202.56
Net Profit 205.29 365.52 440.32 411.26
Equity capital 124.47 125.92 125.92 125.92
Reserves 1677.92 1754.62 1877.44 2065.19
Face value 10.00 1.00 1.00 1.00
EPS 16.49 2.90 3.50 3.27
Quarterly Profit & Loss Statement for the period of 31st Dec, 2013 to 30th Sep, 2014E
Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E
Description 3m 3m 3m 3m
Net sales 737.72 704.26 718.25 811.62
Other income 9.57 10.95 10.15 10.56
Total Income 747.29 715.21 728.40 822.18
Expenditure -510.60 -558.01 -580.22 -620.08
Operating profit 236.69 157.20 148.18 202.10
Interest -0.87 -0.85 -0.67 -0.70
Gross profit 235.82 156.35 147.51 201.40
Depreciation -12.46 -15.54 -16.91 -16.57
Profit Before Tax 223.36 140.81 130.60 184.82
Tax -77.03 -48.36 -45.03 -62.99
Net Profit 146.33 92.45 85.57 121.84
Equity capital 125.92 126.63 126.63 126.63
Face value 1.00 1.00 1.00 1.00
EPS 1.16 0.73 0.68 0.96

8. Ratio Analysis
Particulars CY12A CY13A CY14E CY15E
EPS (Rs.) 16.49 2.90 3.50 3.27
EBITDA Margin (%) 16.25 21.92 23.39 18.82
PBT Margin (%) 13.41 20.05 21.39 16.89
PAT Margin (%) 8.96 13.53 14.05 11.31
P/E Ratio (x) 3.26 18.50 15.36 16.44
ROE (%) 11.39 19.44 21.98 18.77
ROCE (%) 24.08 33.95 39.47 34.19
EV/EBITDA (x) 0.33 10.67 8.63 9.22
Book Value (Rs.) 144.81 14.93 15.91 17.40
P/BV 0.37 3.60 3.38 3.09
Charts

9. OUTLOOK AND CONCLUSION
At the current market price of Rs.53.70, the stock P/E ratio is at 15.36 x CY14E and 16.44 x CY15E
respectively.
Earning per share (EPS) of the company for the earnings for CY14E and CY15E is seen at Rs.3.50 and Rs.3.27
respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 26% over 2012 to 2015E
respectively.
On the basis of EV/EBITDA, the stock trades at 8.63 x for CY14E and 9.22 x for CY15E.
Price to Book Value of the stock is expected to be at 3.38 x and 3.09 x respectively for CY14E and CY15E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs. 67.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
Information Technology (IT) has made possible information access at gigabit speeds. It has created a level
playing field among nations and created has a positive impact on the lives of millions.
Today, a country’s IT potential is paramount for its march towards global competitiveness, healthy gross
domestic product (GDP) and meeting up the energy and environmental challenges.
The Indian IT and Information Technology enabled Services (ITeS) sectors go hand-in-hand in every aspect. The
industry has not only transformed India’s image on the global platform, but also fuelled economic growth by
energising the higher education sector (especially in engineering and computer science). The industry has
employed almost 10 million Indians and, hence, has contributed significantly to social transformation in the
country.
India is one of the fastest-growing IT services markets in the world. It is also the world’s largest sourcing
destination, accounting for approximately 52 per cent of the US$ 124–130 billion market. The country’s cost
competitiveness in providing IT services continues to be its USP in the global sourcing market.
The Department of Electronics and Information Technology is coordinating strategic activities, promoting skill
development programmes, enhancing infrastructure capabilities and supporting research and development
(R&D) for India’s leadership position in IT and ITeS.

10. Market Size
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 services sector accounted for the
largest share of the IT and ITeS industry, with a total market size of US$ 56.3 billion during FY13, followed by
BPM sector (US$ 20.9 billion), and software products and engineering services (US$ 17.9 billion); the market size
for hardware was US$ 13.3 billion during FY12.
The Indian IT-BPM industry is expected to add revenues of US$ 13–14 billion to the existing revenues by FY15,
according to National Association of Software and Services Companies (NASSCOM).
The industry grew at a compound annual growth rate (CAGR) of 13.1 per cent during FY08–13.Total exports
from the IT-BPM sector (excluding hardware) were estimated at US$ 76 billion during FY13, Export of IT services
has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding hardware) in FY13.
BPM accounted for 23.5 per cent of total IT exports during the same fiscal. The IT outsourcing sector is expected
to see exports growing by 13–15 per cent during FY15.
Investments
Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments
from major countries.
According to the Department of Industrial Policy and Promotion (DIPP), the computer software and hardware
sector attracted foreign direct investment (FDI) worth Rs 59,381.64 crore (US$ 9.89 billion) between April 2000
and February 2014.
Some of the major investments in Indian IT and ITeS sector are as follows:
• Tata Consultancy Services (TCS) plans to merge its two units in Japan with Mitsubishi Corp’s IT
subsidiary to create a joint venture (JV) company with a revenue base of US$ 600 million in the world’s
second-largest market for software services.
• Private equity (PE) firm TPG Growth and India's Smile Group will jointly invest US$ 100 million to help
internet and e-commerce companies build and scale their businesses across the Asia–Pacific region and
West Asia.
• Synechron plans to invest US$ 30–35 million on the expansion of its Hyderabad and Bengaluru facilities.
• Bharti Airtel, India's largest telecom operator, has renewed its technology outsourcing contract with
software major IBM for a period of five years.

11. • Infosys has partnered with telecom company Orange to provide Internet TV to its customers. Infosys will
deliver a portfolio of interactive TV apps on the Orange Livebox Play. The TV apps will be powered by
Infosys DigitizeEdge, a digital asset and experience platform for TV operators, media companies,
advertisers and content publishers.
Government Initiatives
The Government of India played a key role with public funding of a large, well trained pool of engineers and
management personnel who could forge the Indian IT industry.
The Central Government and the respective State Governments are expected to collectively spend US$ 6.4 billion
on IT products and services in 2014, an increase of 4.3 per cent over 2013, according to a study by Gartner.
Some of the major initiatives taken by the Government to promote IT and ITeS sector in India are as follows:
• The Government of Bihar has unveiled 20 km free Wi-Fi zone in Patna, the longest across the planet,
making a strong impression on the world's infotech map.
• The Government of India has given an in-principle approval for setting up of the first electronic system
design and manufacturing (ESDM) cluster development in Electronics City, Bengaluru. The ESDM project
will come up on a 1.16 acre of land at an investment of approximately Rs 85 crore (US$ 14.16 million).
• More than 20 small and medium enterprises (SMEs) in the IT sector have recently received land
allotment letters from the Government of Punjab to set up their units with an investment of Rs 500 crore
(US$ 83.24 million).
• The Governments of Maharashtra and Tamil Nadu are in talks with NASSCOM to set up ‘start-up
warehouses’ for incubation of start-ups. The centres are expected to come up in Mumbai and Chennai and
are likely to be operational by December 2014.
Road Ahead
India’s IT sector is gradually moving from linear models (rising headcount to increase revenue) to non-linear
ones.
In line with this, IT companies in the country are focusing on new models such as platform-based BPM services
and creation of intellectual property.
Tier II and III cities are increasingly gaining traction among IT companies aiming to establish business in India.
Cheap labour, affordable real estate, favourable government regulations, tax breaks and special economic zone
(SEZ) schemes are facilitating their emergence as new IT destinations.

12. Indian insurance companies also plan to spend Rs 12,100 crore (US$ 2.01 billion) on IT products and services in
2014, a 12 per cent rise over 2013. This forecast includes spending by insurers on internal IT (including
personnel), software, hardware, external IT services and telecommunications.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.

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