Infosys financial analysis including risk & returns

1. INFOSYSPresented By- GROUP 2
Anirban (MP13011)
Atul (MP13019)
Shwet (MP13057)
Viraj (MP13068)
Vishal (MP13069)
Ramesh (MP13074)

2. INFOSYS LTD
 HISTORY OF INFOSYS
Narayan Murthy along with his six software engineers namely Nandan
Nilekani, N S Raghavan, S Gopalakrishnan, S D Shibulal, K Dinesh and
Ashok Arora registered the company on 2nd July 1981. Initial startup capital
was $250.Infosys co-founder N S Raghavan's house in Matunga, north
central Mumbai, was its registered office. It was then known as Infosys
Consultants Pvt Ltd.
Established in 1981, Infosys is a NYSE listed global consulting and IT
services company with more than 161,000 employees. From a capital of
US$ 250, we have grown to become a US$ 8.39 billion (LTM Q1 FY15
revenues) company with market capitalization of approx. US$31 billion.
Change in name: It changed its name to "Infosys Technologies Private
Limited" in April 1992 and to "Infosys Technologies Limited" when it
became a public limited company in June 1992. It was later renamed to
"Infosys Limited" in June 2011

3. INFOSYS LTD
INDUSTRY: IT Services & IT Consulting HEADQUARTERS: Banglore,
Karnataka, India PRODUCTS: Finacle (A Universal Banking product)
SERVICES
• Information Technology
• Consulting Service
• Solutions and Outsourcing
• System Integration
• Application Services
LISTING OF INDICES
• Sensex
• Nifty
• BSE-100, BSE-200
• CRISIL-500
• NYSE
• Bangalore Stock Exchange
BUSINESS MODEL
•Provides consulting and IT services to clients globally

4. Corporate Governance Analysis
 Infosys, India’s second largest IT services company recently appointed
Vishal Sikka, the former chief technology officer and member of executive
board at enterprise software maker SAP, as the new CEO & MD. He has
replaced S D Shibulal as one of the founders who was the CEO and MD
of the company on August 1 2014.
 Dr. Sikka is the first non founder CEO of the company. He was inducted
as a whole-time director of the Board and CEO & MD (Designate) of
Infosys on June 14.
 Under the compensation structure for Sikka, he is entitled to an annual
grant of restricted stock units (RSUs) covering either the company equity
shares or American Depository Shares (ADS) with a value of $2 million.
The annual base salary of Sikka is $900,000 with variable component
being $4,180,000 ($4.18 million), making him the highest paid executive
in the Indian IT services industry.
 Sikka has been appointed as CEO and managing director of Infosys for
five years from August 1, 2014, till June 13, 2019.

5. Board of Directors
Name Designation
N R Narayana Murthy Non Executive Chairman
U B Pravin Rao Chief Operating Officer
Carol M Browner Independent Director
Jeffrey Sean Lehman Independent Director, VC and CEO of startup joint venture New York
University, Shanghai
Kiran Mazumdar Shaw Independent Director, Chairman & MD of Biocon Limited
Vishal Sikka Whole Time Director,CEO & MD
S Gopalakrishnan Non Executive Vice Chairman, President of CII
K V Kamath Independent Director
Omkar Goswami Independent Director, Founder and Chairman of CERG Advisory
Private Limited
R Seshasayee Independent Director, Chairman Indusland Bank Limited
Ravi Venkatesan Independent Director, Chairman Social Ventures Partners India

6. INTERESTS IN INFOSYS CAPITAL
The following table sets forth as of March 2012, certain information with respect to the
beneficial ownership of Infosys Equity Shares by each shareholder or group known by it to
be the beneficial owner of 5% or more of our outstanding Equity Shares
The Shares beneficially owned by the directors include Equity Shares owned by their
family members to which such directors disclaim beneficial ownership
The Share numbers and Percentages listed below are based on 574,230,001 Equity
Shares outstanding, as on March 31, 2012
Name of the Beneficial Owner Class of
Security
No of shares
beneficially held
% of class of shares
March 31, 2012
Shareholding of all Directors and
officers as a Group
-33,690,992 5.87
1. Comprised 19,555,717 Equity Shares beneficially owned by S Gopalakrishnan, representing 3.41% and
12,628,911 Equity Shares beneficially owned by S D Shibulal, representing 2.20%
2. Comprised of 1,506,364 shares owned by non-founder directors and officers. The % ownership of the
group is calculated on a base of 574,237,430 Equity Shares which includes 7,429 options that are
currently exercisable or exercisable by all the optionees within 60 days of March 31,2012

7. • Having founded the INFOSYS FOUNDATION, the company strengthened
its commitment to social causes like aiding the destitute and the
disadvantaged people.
• One percent of Infosys’ profit goes to the foundation annually(post
taxation).
• The foundation emphasises on healthcare, education and promotion of
arts & culture
• In 2003-04 Infosys initiated 3 social programmes to improve the computer
literacy among rural people, including the teachers in those areas.
• Along with Microsoft, Infosys launched a programme,
computer@classrooms, giving away old computers to educational
institutions.
• Infosys Fellowship Program.
• Rural Reach program.
• Catch Them Young.
• Train the Trainer.
Philanthropy: The Infosys way

8. Capital Structure of Infosys
Capital Structure (Infosys)
Period Instrument Authorized
Capital
Issued
Capital
- P A I D U P -
From To (Rs. cr) (Rs. cr) Shares (nos) Face Value Capital
2013 2014 Equity Share 300 285.7 571402566 5 285.7
2012 2013 Equity Share 300 287.08 574151559 5 287.08
2011 2012 Equity Share 300 287.08 574151559 5 287.08
2010 2011 Equity Share 300 287.08 574151559 5 287.08
2009 2010 Equity Share 300 286.91 573825192 5 286.91
2008 2009 Equity Share 300 286.42 572830043 5 286.42
2007 2008 Equity Share 300 286 571995758 5 286
2006 2007 Equity Share 300 285.6 571209862 5 285.6
2005 2006 Equity Share 150 137.78 275554980 5 137.78
2004 2005 Equity Share 150 135.29 270570549 5 135.29
2003 2004 Equity Share 50 33.32 66641056 5 33.32
2002 2003 Equity Share 50 33.12 66243078 5 33.12
2001 2002 Equity Share 50 33.09 66186130 5 33.09
2000 2001 Equity Share 50 33.08 66158117 5 33.08
1999 2000 Equity Share 50 33.08 66150700 5 33.08
1998 1999 Equity Share 50 33.07 33069400 10 33.07
1997 1998 Equity Share 30 16.02 16017200 10 16.02
1996 1997 Equity Share 10 7.26 7259600 10 7.26
1995 1996 Equity Share 10 7.26 7258600 10 7.26
1994 1995 Equity Share 10 7.26 7258600 10 7.26
1993 1994 Equity Share 4 3.35 3352100 10 3.35
1992 1993 Equity Share 4 1.98 1976100 10 1.98

9. CAPITAL STRUCTRE

10. Announcment
Date
Effective
Date
Dividend
Date
Dividend
(%)
Remarks
28-08-2014 16-10-2014 Interim 600% Rs.30.0000 per share(600%)Interim Dividend
15-04-2014 29-05-2014 Final 860% Rs.43.0000 per share(860%)Final Dividend
26-09-2013 17-10-2013 Interim 400% Rs.20.0000 per share(400%)Interim Dividend
12-04-2013 30-05-2013 Final 540% Rs.27.0000 per share(540%)Final Dividend
24-09-2012 18-10-2012 Interim 300% Rs.15.0000 per share(300%)Interim Dividend
13-04-2012 24-05-2012 Final 640%
Rs. 22.00 per share (440%) Final Dividend & Rs.10.00 per share
(200%) Special Dividend
22-09-2011 20-10-2011 Interim 300%
15-04-2011 26-05-2011 Final 400%
29-09-2010 21-10-2010 Interim 800%
Rs.10.00 per share(200%)Interim Dividend & Rs.30.00 per
share(600%)Special Dividend.
13-04-2010 26-05-2010 Final 300%
22-09-2009 15-10-2009 Interim 200%
15-04-2009 04-06-2009 Final 270%
25-09-2008 16-10-2008 Interim 200%
15-04-2008 29-05-2008 Final 545% (Final Dividend 145% + Special Dividend 400%)
26-09-2007 18-10-2007 Interim 120%
13-04-2007 06-06-2007 Final 130% AGM
28-09-2006 19-10-2006 Interim 100%
14-04-2006 25-05-2006 Final 770%
Silver Jubilee special dividend of Rs. 30 per share (600% on par
value of Rs. 5 per share) & final dividend of Rs. 8.50/- per share
(170% on an equity share par value Rs. 5/-).
23-09-2005 17-10-2005 Interim 130%
14-04-2005 01-06-2005 Final 130%
Final dividend of Rs. 6.50 per share (130% on an equity share par
value Rs. 5/-).
01-10-2004 18-10-2004 Interim 100% (100% on a par value of Rs.5/- per share)
13-04-2004 26-05-2004 Final 2300%
Final dividend of Rs. 15/- per share (300% on an equity share par
value Rs. 5/-) & Special one-time dividend of Rs. 100/- per share
(2000% on an equity share par value of Rs. 5/-). (Revised)
Dividend Declared by Infosys

11. Analysis of Dividend Payout

12. Effect of Dividend Payout

13. Definition of Stock
Stock : A type of security that signifies ownership in a corporation and
represents a claim on part of the corporation's assets and earnings. There
are two main types of stock: common and preferred. A stock is represented
by a stock certificate. For example, if a company has 1,000 shares of stock
outstanding and one person owns 100 shares, that person would own and have
claim to 10% of the company's assets.
Common stock usually entitles the owner to vote at shareholders' meetings
and to receive dividends. Preferred stock generally does not have voting
rights, but has a higher claim on assets and earnings than the common
shares. For example, owners of preferred stock receive dividends before
common shareholders and have priority in the event that a company goes
bankrupt and is liquidated.
Stock Holder Analysis

14. Share Holding Pattern
13%
56%
16%
15%
Promoters
Institutions
Others
Non Institutions

15. Promoter Group and Public Shareholding

16. Besides the managers and directors, anyone with more that
5% of share holding is treated as an insider.
For Infosys the insiders are :
1.) Insurance Companies(10.83%)
2.) FII (Foreign Institution Investors) (39.93%)
3.) Individuals (7.02%)
Category Number of
Share Holders
Number of
Shares
% of Total
Shares
Number of
Share
Holders
Number of
Shares
% of Total
Shares
Share Holding Pattern
Institutions 2014 2012
Insurance Companies 199.00 62,176,372 10.83% 185 67933107 11.86%
FIIs 808.00 229,275,165 39.93% 928 224063432 39.12%
Non-institutions
Individuals holding nominal
capital up to 1 Lakh 374088.00 40,303,022 7.02% 446,510 45802825 8.00%
Insider Holding

17. -15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
-10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%
InfosysMonthlyReturns(5
Years)
BSE Monthly Returns (5 YEARS)
INFOSYS BETA
• Equation of the regression Line: Y = 0.5574X + 0.0102
• The intercept of the line is 0.0102, which is also known as the alpha value, and it basically
signifies that how much better the equity has performed than the predicted CAPM of 12.85%,
which implies that the equity has performed 1% more than the predicted CAPM value.
• R-Square value of 0.2097 implies the fact that only 20% of its risk exposure is measured by the
Beta value of 0.5574.
y = 0.5574x + 0.0102
R² = 0.2097
Beta = 0.5574
Alpha = 0.0102
Regression Analysis for Beta Calculation
Risk & Return Analysis

18.  The Overall Risk for the Equity is 6.33%, out of which the systematic risk is
2.90%, which is because of the market factors.
 The unsystematic risk for the equity is 3.43%, which is purely dependent and
attributed to the business factors.
 High business factor risk of 3.43% as against that of the Market factor risk of
2.90% is solely because of the fact that the Infosys business is majorly
dependent on the Foreign clients.
Risk & Return Analysis (Contd.)

19. Cost of Capital 2009-10 2010-11 2011-12 2012-13 2013-14
Return on risk free investment
(%) 8.5% 8.50% 8.5% 8.50% 8.5%
Return on Market (%) 13.00% 13.50% 14.00% 14.50% 15.00%
Market Premium (%) 4.50% 5.00% 5.50% 6.00% 6.50%
Beta 0.23 0.53 0.75 0.68 0.72
Cost of Equity (%) 9.53% 11.13% 12.60% 12.58% 13.18%
Average Debt/Capital --- --- --- --- ---
Cost of Debt - Net of Tax N/A N/A N/A N/A N/A
Weighted Average Cost of
Capital (WACC) 9.53% 11.13% 12.60% 12.58% 13.18%
Average Capital Employed 20,041.0 22,621.0 27,303.0 32,878.0 37,589.0
Economic Value Added 2009-10 2010-11 2011-12 2012-13 2013-14
Operating Profits 7362 8414 10061 11015 12527
Less: Taxes 1717 2378 3110 3241 3808
Less: Cost of Capital 1,910.69 2,516.71 3,439.86 4,136.05 4,954.23
Economic Value Added (EVA) 3,734.31 3,519.29 3,511.14 3,637.95 3,764.77
• The EVA of the Infosys stock has been almost constant since last 5 years.
• However the ratio between the EVA and the Average capital employed has been
steadily decreasing since last 5 years.
Risk & Return Analysis (Contd.)

20. Debt Equity Ratio

21. Turnover Ratio

22. • The recent Rating of Infosys is A-
Interest coverage ratio
> ≤ to Rating is Spread is
8.50 100000 Aaa/AAA 0.40%
6.5 8.499999 Aa2/AA 0.70%
5.5 6.499999 A1/A+ 0.85%
4.25 5.499999 A2/A 1.00%
3 4.249999 A3/A- 1.30%
2.5 2.999999 Baa2/BBB 2.00%
2.25 2.49999 Ba1/BB+ 3.00%
2 2.2499999 Ba2/BB 4.00%
1.75 1.999999 B1/B+ 5.50%
1.5 1.749999 B2/B 6.50%
1.25 1.499999 B3/B- 7.25%
0.8 1.249999 Caa/CCC 8.75%
0.65 0.799999 Ca2/CC 9.50%
0.2 0.649999 C2/C 10.50%
-100000 0.199999 D2/D 12.00%
Rating, Default Spread & Interest Rate

23. Year Tax Diff of tax
Tax Rate
(w.r.t base year)
2014 3808 594 18.48%
2013 3214 104 0.033440514
2012 3110 732 30.78%
2011 2378 661 38.49%
2010 1717
Avg. MTR 22.77%
 Infosys is a debt-free company. It doesn't have any outstanding debt or fixed
deposits. So no long term bonds are available.
Marginal Tax Rate & Yield to Maturity

24. • The EVA of the Infosys stock has been almost constant since last 5
years.
• However the ratio between the EVA and the Average capital employed
has been steadily decreasing since last 5 years which indicate
increase in the cost of capital employed.
• Company has no debt which is very strong point.
• Company has low interest coverage ratio.
Conclusion

25. Infosys is the incredible story of success and
successful execution of business model, the
company has entered red ocean market
with insignificant stake and power in
market, but because of successful market
re-definition company managed to achieve
to be the first among the first ones and be
remarkable example for rivals.