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Equity Investment Opportunity Analysis: Case of IT Sector

(A Case of IT Sector)

Diploma in Financial Management (Batch 24) January 2011 to June - 2011

Submitted By Pranab Nanda Ankit Iyer Pratik Parikh Jaydeep Kalaria

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Diploma in Financial Management

Equity Investment Opportunity Analysis: Case of IT Sector

Diploma in Financial Management (Batch 24) The Proposal


Group Members: 1. Pranab Nanda 3. Ankit Iyer 2. Pratik Parikh 4. Jaydeep Kalaria

Project Title:

Equity Investment Opportunity Analysis: Case of IT Sector

I.

Background

People now days are going ahead in investing in Equity markets since it is considered as one of the best asset classes for investment all over the world. The equity market offers more returns to an investor compare to the traditional meagre returns offered by banks for deposits for a specific period of time. Though the equity market offers better returns, it is associated with certain risks also. The higher the return, the higher the risk associated is. The equity market is driven by supply and demand. Most of the investors invest in equity market based on hot tips from friends, phone calls from a broker or recommendations from a TV analyst. They buy equities when the market is hot. But when the market gets cold, they panic, sell equities and bear huge loss. The primary concern of the study is to estimate the return from a particular investment, mainly for long term investment purpose, not for speculation purpose. So the basic idea of conducting this project is to prepare a method which can guide a common man how to identify potential equities for investment purpose.

II. 1. 2. 3. 4.

Objectives: To study three potential public limited companies in a particular Sector To conduct comparative analysis of financial ratios from investment point of view To identify, analyse and evaluate factors that affect equity investment To select the best stock in a particular Sector

III.

Scope:

1. The project covers sectoral analysis and equity analysis of three potential public limited companies of a particular sector;
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Equity Investment Opportunity Analysis: Case of IT Sector

2. The following components of the Equity market will be studied and presented: A. Prevailing policies as per Reserve Bank of India B. Balance Sheet and Profit & Loss Analysis include Changes in Capital Structure, Returns on Investment, Return on Equity, Changes in Capital Structure, Bonus given by Company, Profit relativity, Market Price, Volume Analysis, Dividend Pattern; C. Fundamental analysis of selected companies in a particular sector;

IV.

Methodology:

The entire project is based on exploratory design and the process of the project shall be executed into the following modules: Module 1 2 3 4 Particulars Quick review of 14 sectors of equity market and Selection of a particular sector Selection of three companies of a particular sector and review of history and past performance of three companies Assessment of Profit & Loss Account and Balance Sheet of 3 selected companies for the past five years Analysis of Financial Ratios related to Equity Investment, Dividend Pattern, Volume Analysis of that particular company Project Review and Presentation 1 Incorporation of Inputs from Project Review 1 Analysis of Financial Ratios related to Equity Investment, Dividend Pattern, Volume Analysis of other two companies Project Review and Presentation 2 Incorporation of Inputs from Project Review 2 Preparation of recommendations, strategies and guidelines for selection of Best Stock, its price tend and target of a particular Sector Submission of Final Project Report along with recommendations and strategies Presentation on Final Report

5 6

7 8 9

V.

Relevance/ Significance:

1. To prepare a guideline for a Investor for investing in potential equity; 2. To enhance wealth of Investors and guide them through report; 3. An Investor can assess and determine whether investment in any of the proposed security is worth or not;

VI.

Limitations:

1. The project is based on secondary data available on public domain; 2. Investment in Equity Market is subject to Market risk. The Investor should read our recommendations and the documents of the company carefully before investing;
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Equity Investment Opportunity Analysis: Case of IT Sector

VII.

Project Study Timeframe


W1 (Mar 07- Mar 13) W2 (Mar 14- Mar 20) W3 (Mar 21- Mar 27) W11 (May16 - May22) W12 (May23 - May29) W10 (May9 - May15) W6 (Apr11- Apr17) W7 (Apr18- Apr24) W4 (Mar 28- Apr3) W9 (May2 - May8) W8 (Apr25- May1) W5 (Apr4- Apr10)

Sl. No

Week/ Description

1 2 3

Finalisatin of Project Finalisation of Sector & Finalisation of companies Analysis of Balance sheets & Profit & Loss Account Analysis of Financial Ratios, Dividend Pattern, Volume Analysis of one Company Incorporation of Inputs from Project Review 1 Project Review 2 Analysis of Financial Ratios, Dividend Pattern, Volume Analysis of other two Companies Incorporation of Inputs from Project Review 2 Preparation of Recommendations and Drafting and submission of Project Report Presentation on Project Project Review 1

4 5 6 7 8

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Final Submission & Presentation

W13 &W14

Equity Investment Opportunity Analysis: Case of IT Sector

Acknowledgements

First and foremost, we take this opportunity to express our deep sense of gratitude to Dr. P. V. Desai for his invaluable guidance and encouragement making sure that this project work stayed on track. Under his guidance this project work was a great learning experience itself. Further we are grateful to our faculty members Mr. Snehal Desai and Mr. Divyesh Desai for their important inputs and for augmenting our knowledge in Equity Sector. Our sincere thanks to Mr. Janardan, Registrar, AMA Diploma Programmes and all the staff members of AMA for all their support and help in this project work. We would also like to thank our friends for all their help, support, interests and valuable hints without that this project would never been completed. It would be difficult to sum up in words our gratitude towards our families for being the pillar of strength throughout the project work and compromising their time and the least we could do to reciprocate that in our own way is dedicate this project work to our families.

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Equity Investment Opportunity Analysis: Case of IT Sector

Table of Contents
I. A. B. C. D. E. F. II. A. B. C. III. 1. A. B. C. D. E. F. G. H. 2. A. B. C. D. E. F. G. H. I. 3. A. B. C. D. E. F. G. IV. A. B. C. D. E. F. G. H. V. Introduction: ............................................................................................................................................................. 8 Financial Market- An Introduction................................................................................................................................. 8 Expenditures Vs Investment .......................................................................................................................................... 9 Why Equity Investment ................................................................................................................................................. 9 Investing Principles ........................................................................................................................................................ 9 FIIs and Indian Equity Market ...................................................................................................................................... 10 Rules and Regulations in the Indian Equity Market ..................................................................................................... 11 Selection of IT Sector ................................................................................................................................................13 Why IT Equity Sector ................................................................................................................................................... 13 IT Equity Sector Profile in India.................................................................................................................................... 13 Swot Analysis of Indian IT Sector ................................................................................................................................. 14 Company Profiles of IT Sector ...................................................................................................................................15 Tata Consultancy Services Limited........................................................................................................................15 Background:................................................................................................................................................................. 15 History: ........................................................................................................................................................................ 15 Board of Directors ....................................................................................................................................................... 16 Operations and acquisitions ........................................................................................................................................ 17 Innovation and R&D .................................................................................................................................................... 17 Employees ................................................................................................................................................................... 18 Awards & Recognitions................................................................................................................................................ 18 Subsidiaries.................................................................................................................................................................. 19 Infosys .................................................................................................................................................................21 Background.................................................................................................................................................................. 21 History ......................................................................................................................................................................... 21 Board of Directors ....................................................................................................................................................... 21 Current share holding .................................................................................................................................................. 22 Initiatives ..................................................................................................................................................................... 22 Research ...................................................................................................................................................................... 23 Charity ......................................................................................................................................................................... 23 Global offices ............................................................................................................................................................... 23 Awards & Recognitions................................................................................................................................................ 24 Wipro Ltd .............................................................................................................................................................25 Background.................................................................................................................................................................. 25 History ......................................................................................................................................................................... 25 Board of Directors ....................................................................................................................................................... 25 Innovations .................................................................................................................................................................. 26 Wipro BPO ................................................................................................................................................................... 26 Wipro Group Companies ............................................................................................................................................. 26 Awards & Recognitions................................................................................................................................................ 28 Key Indicators for Stock Selection .............................................................................................................................29 Growth in Profit and Sales ........................................................................................................................................... 30 Earnings per Share ....................................................................................................................................................... 32 Price Earning (P/E) Ratio .............................................................................................................................................. 34 DPS (Dividend per Share)............................................................................................................................................. 36 Return on Net worth (Equity + Reserves) .................................................................................................................... 38 Dividend/ Net Profit .................................................................................................................................................... 40 Return on Long Term Funds (%) .................................................................................................................................. 42 Price Analysis ............................................................................................................................................................... 43 Conclusion & Recommendations ..............................................................................................................................45

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Equity Investment Opportunity Analysis: Case of IT Sector

VI. References................................................................................................................................................................47 VII. Appendices ...............................................................................................................................................................48 Appendix 1 Balance Sheet: Tata Consultancy Services .............................................................................................................. 49 Appendix 2 Profit & Loss Account Statement: Tata Consultancy Services ................................................................................. 50 Appendix 3 Cash Flow Statement: Tata Consultancy Services ................................................................................................... 51 Appendix 4 Balance Sheet: Infosys ............................................................................................................................................ 52 Appendix 5 Profit & Loss Account Statement: Infosys ............................................................................................................... 53 Appendix 6 Cash Flow Statement: Infosys ................................................................................................................................. 54 Appendix 7 Balance Sheet: Wipro Ltd ........................................................................................................................................ 55 Appendix 8 Profit & Loss Account Statement: Wipro Ltd .......................................................................................................... 56 Appendix 9 Cash Flow Statement: Infosys ................................................................................................................................. 57

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Equity Investment Opportunity Analysis: Case of IT Sector

I. Introduction:
A. Financial Market- An Introduction A financial market is a mechanism that allows people to buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis. Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. Financial market also performs an important function of mobilization of savings and channelling them into the most productive uses. The participants in the financial markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers and others who are inter-linked by the laws, contracts and communication networks. The financial markets facilitate: The raising of capital (in the capital markets) The transfer of risk (in the derivatives markets) The transfer of liquidity (in the money markets) International trade (in the currency markets) and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. Financial markets consist of Primary and Secondary Markets. The Primary markets deal in new financial claims and securities and hence are known as new issue markets. The secondary market deals in securities already issued, existing or outstanding. Financial markets are also classified as Money and Capital Markets. Money markets deals with transactions in short-term instruments (with period of maturity one year or less, e.g. treasury bills), while capital market deals with transactions in long-term instruments (with period of maturity above one year, e.g. corporate debentures and government bonds). On the basis of the type of the financial claim, financial markets are classified as Debt and Equity markets. By the timing of delivery, financial markets are classified as Cash or Spot markets and Forward or Future market.

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Equity Investment Opportunity Analysis: Case of IT Sector

Equity is a term whose meaning depends very much on the context. In general, one can think of equity as ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity since he or she can readily sell the items for cash. Stocks are equity because they represent ownership of a company, whereas bonds are classified as debt because they represent an obligation to pay and not ownership of assets.

B. Expenditures Vs Investment To earn money is my duty, but save money is my responsibility & responsibility is always more than duty... - Anonymous

C. Why Equity Investment Equity is a term whose meaning depends very much on the context. In general, one can think of equity as ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity since he or she can readily sell the items for cash. Stocks are equity because they represent ownership of a company, whereas bonds are classified as debt because they represent an obligation to pay and not ownership of assets. Equity investment is preferred as one of the best investment because of the following reasons: the possibility of incredibly high returns and wealth creation. It will not only earn capital appreciation but also dividend yield also. Chances of getting bonus share. Entitle to have benefits of split share from corporate action of company. All dividends are tax free, one has to pay only a 10% short term capital gains tax on profits made within a year, and all profits earned after a year are exempted of long term capital gain tax. the investment is perfectly liquid as one can sell your share and redeem the gains at any time.

D. Investing Principles An investor should always remember the following investing principles: 1) Invest for Real Returns

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Equity Investment Opportunity Analysis: Case of IT Sector

2) Keep an Open Mind 3) Never Follow the Crowd 4) Everything Changes 5) Avoid the Popular 6) Learn from your Mistakes 7) Buy During Times of Pessimism 8) Hunt for Value and Bargains 9) Search Worldwide 10) No-one Knows Everything

The investor should bear in mind that while he makes investment decision, he should have idea of the companys break-even point and companys position in the stock exchange.

E. FIIs and Indian Equity Market The era of FIls investments in India originated in 1993 and the net investment during the year was $827.20 million. FIls of different countries, mainly the US, started operating in India. The number of FIls in India has grown over the year to nearly 500. The big names include Morgan Stanley, Templeton, Capital International, CDC, Warburg, and JFAM. As per the definition of RBI, a FIl is an institution established or incorporated outside India, which proposes to make investments in Indian securities. Such institutions have been permitted to invest in Indian securities markets starting from September 1992 when the then authorities issued suitable guidelines. The FIls are subject to stringent monitoring. They are required to register with RBI and the SEBI before they commence their operations. Foreign Institutional Investors (FIls) during the last one-decade have become an integral part of Indian equity markets. They have been an incredible source of money ever since. The clout of the FIls is such that the market players anticipate their arrival with breathless anxiety. This reputation of the FIls is a well-earned status. The authority of these institutions is evident from the very fact that by the mere news of their arrival it is sufficient for the market to supplement itself with a double-digit growth. Truly, the FIls have emerged as a masculine unit in recent times. FIls support the markets by unlocking their chests and rejuvenating the secondary markets. Performance of the secondary market brings cheer to the new issues market thus allowing companies to raise fresh capital. As evident, a healthy FII activity helps fund new projects and expansions, creating new jobs and triggering all positive things that come

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Equity Investment Opportunity Analysis: Case of IT Sector

as a surprise gift. From the Central Bank's point of view, FIls, investments impart confidence to the economy by providing cushion in the form of forex reserves. This trend of Indian equity markets to that of FIIs investment though encouraging, has to be treated cautiously. Although the investments have provided with the much needed liquidity and depth in the markets, the role played by the fly-by-night operators in creating panic is some of the Asian economies do Indian markets face a risk. Portfolio flows are notoriously volatile compared to other forms of capital flows, as FIls usually pull back portfolio investments at the slightest hint of trouble in the host country often leading to disastrous consequences to its economy. FIls have been blamed for exacerbating small economic problems in a country by making large and concerted withdrawals at the first sign of economic weakness. However, RBI and SEBI has been prudent enough in enforcing strict guidelines for FIls entering India and controlling the repatriation of the investment. Ever since they entered India in 1993, the market has moved nowhere between 1993 and now. Despite an over burdened economy and infrastructure bottlenecks, companies like RIL, HLL, HDFC, Infosys, Ranbaxy, and Dr. Reddy's have given consistently excellent performance over the years and this has encouraged FIls to invest in the stocks of these companies which holds a major weightage in sensex. For global fund managers, top down is the preferred approach as their portfolios consist of securities across many markets, which make it too cumbersome to follow a bottom-up strategy in each market.

F. Rules and Regulations in the Indian Equity Market The Government of India has been trying to improve market efficiency, enhance transparency and bring the Indian Equity Market up to international standards. Many reform measures have been initiated in the 90s. The principal ones are the formation of Securities Exchange Board of India (SEBI), repeal of the Capital Issues (Control) Act, 1947, introduction of screen-based trading, shortening of trading cycle, demutualization of stock exchanges, establishment of depositories disappearance of physical share certificates and better risk management systems in stock exchanges. The formation of Sebi was the first attempt towards integrated regulation of the securities market. Sebi regulates all market intermediaries and has the powers to impose monetary penalties for misconduct of any intermediary. One of the major stumbling blocks in fair pricing of capital issues has been the Capital Issues (Control) Act, 1947. The issuers were denied the opportunity to economically raise money from the capital market. This is now a matter of the past thanks to the repeal of the Act itself. Sebi has also issued Disclosure and Investor Protection (DIP) guidelines to ensure fair prices for the investors, though however, many issuers in the 90s could unfairly price their capital issues at the cost of the poor common investors. The introduction of Screen Based Trading Systems (SBTS) by NSE is a major development in the capital market. This made the markets more efficient. The geographical barriers to trade were dismantled resulting in increased trading volumes. This was possible due to the great advancements in the area of

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Equity Investment Opportunity Analysis: Case of IT Sector

information technology. SBTS electronically matches orders cutting down time, cost and errors, and minimizing the chances of fraud. Very long settlement cycle was another major hindrance in effecting deliveries in the equity market. Often the securities were delivered after 30 days or more due to weekly/fortnightly settlements and carry forward transactions. Sebi has enforced the discipline to compulsorily settle trades in T+3 days since April 2002. This is slated to reduce to T+2 days from April 2003. All scrips are now under rolling settlement since December 2001. The Equity Market is incomplete without products to manage risks in portfolio values. At long last, derivatives trading appeared on Indian exchanges in June 2000. While the product range in derivatives is still limited (futures and options on stocks and stock indices), it is certainly a major step forward in broadening the financial markets. NSE was established as a demutualized structure separating the roles of ownership, management and trading to eliminate any conflict of interest among the stakeholders to improve market efficiency and to focus on investor interest. Another notable development in the Indian equity market has been the introduction of depositories to dematerialize the share certificates. This avoids physical movement of certificates, bad deliveries and quicker transfer of ownership of shares. Presently all actively traded shares are held, traded and settled in demat form. The setting up of National Securities Clearing Corporation Ltd., (NSCCL) in April 1996 has been a major development in managing counterparty risks in the equity market. This has helped in increasing trading volumes since traders are now more confident about default-free settlements. While most of the above measures have helped in reinforcing confidence in the Indian equity market by providing more transparent and efficient buying, selling and transfer of shares. The Government of India has recently released a comprehensive FDI policy document effective from April 1, 2010. The Circular 1 of 2010 consolidates into one document all the prior policies/regulations on FDI which are contained in FEMA, 1999, RBI Regulations under FEMA, 1999 and Press Notes/Press Releases/Clarifications issued by DIPP and reflects the current policy framework on FDI. The government has also promised to bring out an updated FDI policy every six months as stated in a comprehensive press note consolidating the entire regime for foreign investments in one place for easy reference. Furthermore, the government has allowed the Foreign Investment Promotion Board (FIPB), under the Ministry of Commerce and Industry, to clear FDI proposals of up to US$ 258.3 million. Earlier all project proposals that involved investment of above US$ 129.2 million were put up before the Cabinet Committee of Economic Affairs (CCEA) for approval. The relaxation would expedite FDI inflow, according to the Union Home Minister, Mr P Chidambaram

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Equity Investment Opportunity Analysis: Case of IT Sector

II. Selection of IT Sector


A. Why IT Equity Sector Information Technology (IT), a knowledge-based industry, has the tremendous potential of becoming an engine of accelerated economic growth, productivity improvement for all sectors of the economy and means of efficient governance. It enhances access to information, protects consumers, provides access to government services, makes skill formation and training more effective, improves delivery health services, and promotes transparency. It provides tremendous employment potential and linkages between government and the people both at the rural and urban level. Investment in knowledge based industries will determine the level of the countrys dominant position in the world economy in the next two decades. B. IT Equity Sector Profile in India The Indian IT software and service industry has emerged as one of the fastest growing sectors in the Indian economy, with a growth rate exceeding 50 per cent in exports and 40 per cent in the total IT industry over the last five years. Table 1 shows the turnover of this industry including domestic and exports.
Table 1 Indian Software and Service Industry (USb$)

Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01

Domestic 0.35 0.49 0.67 0.95 1.25 1.70 1.96

Exports 0.485 0.734 1.085 1.750 2.650 4.000 6.300

Total 0.835 1.224 1.755 2.700 3.900 5.700 8.260

%Growth rate (export) 51.34 47.82 61.29 51.43 50.94 57.50

% Growth rate (domestic and export) 46.60 43.40 53.80 44.40 46.10 44.90

Source: Based on Hanna (1994), Heels (1995) and Masco (2001) As per recent data net profit growth rate came from refineries, Information technology, mining, automobile, pharmaceuticals, textile etc. reported above 50% growth.

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Diploma in Financial Management

Equity Investment Opportunity Analysis: Case of IT Sector

From the above analysis, it can be observed that in 2000, the Private Equity Investments in India was majorly dominated by IT & ITES. Subsequently the shift takes place to several other sectors esp. manufacturing, financial services, and healthcare increasing significantly. Though the share of new areas of investment takes place which include Engineering & Construction, Textiles, Logistics, Food and Beverages have emerged, there are still substantial private equity investments in IT & ITES sector. C. Swot Analysis of Indian IT Sector Based on the past performances, the SWOT analysis of Indian IT Sector can be categorised as follows: STRENGTHS Large no. of talented graduates Affordable and quality education as compared to developed countries English language benefit Well-developed IT industry Strong customer base of well known companies Powerful venture capital interest in investing in growth opportunity OPPORTUNITIES Horizontal and vertical expansion of existing customer base into new markets Time zone difference between India and target markets Increasing awareness of outsourcing services WEAKNESS Scarce foreign language skills other than English. Lack of customer service culture Expensive and poor quality telecom infrastructure Poor electricity supply Cultural differences High attrition rates, therefore less no. of people with extensive call centre experience THREATS High Billing rates Political instability India's competitors in Eastern Europe, Latin America and the Asia Pacific regions offering cheap BPO services Increasing technology automation

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Equity Investment Opportunity Analysis: Case of IT Sector

III. Company Profiles of IT Sector


1.

Tata Consultancy Services Limited

A. Background: Tata Consultancy Services Limited (TCS) (BSE: 532540, NSE: TCS) is an Indian IT services, business solutions and outsourcing company headquartered in Mumbai, India. TCS is the largest provider of information technology in Asia and second largest provider of business process outsourcing services in India. TCS has offices in 42 countries with more than 142 branches across the globe. The company is listed on the National Stock Exchange and Bombay Stock Exchange of India. TCS is one of the operative subsidiary of one of India's largest and oldest conglomerate company, the Tata Group or Tata Sons Limited, which has interests in areas such as energy, telecommunications, financial services, manufacturing, chemicals, engineering, materials, government and healthcare.

B. History: It began as the "Tata Computer Centre", for the company Tata Group whose main business was to provide computer services to other group companies. F C Kohli was the first general manager. J. R. D. Tata was the first chairman, followed by Nani Palkhivala. One of TCS' first assignments was to provide punched card services to a sister concern, Tata Steel (then TISCO). It later bagged the country's first software project, the Inter-Branch Reconciliation System (IBRS) for the Central Bank of India. It also provided bureau services to Unit Trust of India, thus becoming one of the first companies to offer BPO services. In the early 1970s, Tata Consultancy Services started exporting its services. The company pioneered the global delivery model for IT services with its first offshore client in 1974. TCS's first international order came from Burroughs, one of the first business computer manufacturers. TCS was assigned to write code for the Burroughs machines for several US-based clients. This experience also helped TCS bag its first onsite project - the Institutional Group & Information Company (IGIC), a data centre for ten banks, which catered to two million customers in the US, assigned TCS the task of maintaining and upgrading its computer systems. In 1981, TCS set up India's first software research and development centre, the Tata Research Development and Design Center (TRDDC) in Pune. The first client-dedicated offshore development center was set up for Compaq (then Tandem) in 1985.

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Equity Investment Opportunity Analysis: Case of IT Sector

In 1979, TCS delivered an electronic depository and trading system called SECOM for SIS SegaInterSettle, Switzerland. It was by far the most complex project undertaken by an Indian IT company. TCS followed this up with System X for the Canadian Depository System and also automated the Johannesburg Stock Exchange (JSE). TCS associated with a Swiss partner, TKS Teknosoft, which it later acquired. In the early 1990s, the Indian IT outsourcing industry grew tremendously due to the Y2K bug and the launch of a unified European currency, Euro. TCS pioneered the factory model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party developers and clients to make use of it. In 1999, TCS saw outsourcing opportunity in E-Commerce and related solutions and set up its E-Business division with ten people. By 2004, E-Business was contributing half a billion dollars (US) to TCS. On 9 August 2004, TCS became a publicly listed company, much later than its rivals, Infosys, Wipro and Mahindra Satyam. During 2005, TCS ventured into a new area for an Indian IT services company - Bioinformatics. In 2008, the company went through an internal restructuring exercise that executives claim would bring about agility to the organization.

C. Board of Directors The following are the Board of Directors: a. Non-Executive Board Members 1) Ratan N Tata, Chairman 2) S Ramadorai, Vice Chairman 3) Laura Cha, Director 4) Prof. Clayton M Christensen, Director 5) Aman Mehta, Director 6) Dr. Ron Sommer, Director 7) Venkatraman Thyagarajan, Director 8) Dr. Vijay Kelkar, Director 9) Ishaat Hussain, Director b. Executive Board Members 1) N Chandrasekaran, Chief Executive Officer and Managing Director 2) S Mahalingam, Chief Financial Officer and Executive Director 3) Phiroz A Vandrevala, Executive Director and Head, Global Corporate Affairs

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Equity Investment Opportunity Analysis: Case of IT Sector

D. Operations and acquisitions a. Indian branches TCS had development centres and/or regional offices in the following Indian cities: Ahmedabad, Baroda, Bangalore, Bhubaneswar, Chennai, Coimbatore, Gurgaon, Kochi, Kolkata, Lucknow, Mumbai, Noida, Pune, Thiruvananthapuram, Patna, Jaipur, Jamshedpur, Hyderabad. b. Global units 1) Africa: South Africa, Morocco 2) Asia (Outside India): Bahrain, Beijing[17], Hong Kong, Hangzhou, Shanghai, Indonesia, Israel, Japan, Malaysia, Saudi Arabia, Singapore, South Korea, Taiwan, Thailand, UAE (Dubai) 3) Australia: Australia 4) Europe: Belgium, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom 5) North America: Canada, Mexico, USA 6) South America: Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Peru

E. Innovation and R&D a. Tata Research Development and Design Center TCS established the first software research center in India, the Tata Research Development and Design Center, in Pune, India in 1981. TRDDC undertakes research in Software Engineering, Process Engineering and Systems Research. Researchers at TRDDC also developed Master-Craft (now called TCS Code Generator Framework) a Model Driven Development software that can automatically create code based on a model of a software, and rewrite the code based on the user's needs. Research at TRDDC has also resulted in the development of Sujal, a low-cost water purifier that can be manufactured using locally available resources. TCS deployed thousands of these filters in the Indian Ocean Tsunami disaster of 2004 as part of its relief activities. This product has been marketed in India as Tata swach, a low cost water purifier. b. Innovation In 2007, TCS launched its Co-Innovation Network, a network of TCS Innovation Labs, startup alliances, University Research Departments, and venture capitalists. In addition to TRDDC, TCS has 19 Innovation Labs based in three countries. TCS Innovation Lab, Convergence: Content management and delivery, convergence engines, networks such as 3G, WiMax, WiMesh, IP Testing for Quality of Service, IMS, OSS/BSS systems, and others.

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Equity Investment Opportunity Analysis: Case of IT Sector

TCS Innovation Lab, Delhi: Software Architectures, Software as a Service, natural language processing, text, data and process analytics, multimedia applications and graphics. TCS Innovation Lab, Embedded Systems: Medical electronics, WiMAX, and WLAN technologies. TCS Innovation Lab, Hyderabad: Computational methods in life sciences, meta-genomics, systems biology, e-security, smart card-based applications, Linux and open source, digital media protection, nano-biotechnology, quantitative finance. TCS Innovation Lab, Mumbai: Speech and natural language processing, wireless systems and wireless applications. TCS Innovation Lab, Insurance - Chennai: IT Optimization, Business Process Optimization, Customer Centricity Enablers, Enterprise Mobility, Telematics, Text Analytics, 2D Barcodes, Mashups, Innovation in Product Development and Management (PLM) for Insurance. TCS Innovation Lab, Chennai: Infrastructure innovation, green computing, Web 2.0 and nextgeneration user interfaces. TCS Innovation Lab, Peterborough, England: New-wave communications for the enterprises, utility computing and RFID (chips, tags, labels, readers and middleware). TCS Innovation Lab: Performance Engineering, Mumbai: Performance management, high performance technology components, and others. TCS Innovation Lab, Cincinnati, United States: Engineering and Manufacturing IT solutions. Some of the assets created by TCS Innovation Labs are DBProdem, Jensor, Wanem, Scrutinet In 2008, the TCS Innovation Lab-developed product, mKrishi, won the Wall Street Journal Technology Innovation Award in the Wireless category. mKrishi is a service that would enable India's farmers to receive useful data on an inexpensive mobile device. TCS' Co-Innovation Network partners include Collabnet, Cassatt, MetricStream, academic institutions such as Stanford, MIT, various IITs, and venture capitalists like Sequoia and Kleiner Perkins.

F. Employees TCS is one of the largest private sector employers in India with a core strength in excess of 186,914 individuals. TCS has one of the lowest attrition rates in the Indian IT industry. In the past TCS has been criticised by its employees in Public forums on its Appraisal and Promotion policies.

G. Awards & Recognitions As a brand, TCS is the 76th Most Trusted Brand according to The Brand Trust Report, 2011.

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Diploma in Financial Management

Equity Investment Opportunity Analysis: Case of IT Sector

H. Subsidiaries TCS' directly-held subsidiaries include the following: CMC Limited (India) WTI Advanced Technology Limited (India) APONLINE Limited (India) C-Edge Technologies Limited (India) MP Online Limited (India) Tata America International Corporation (USA) Tata Consultancy Services Netherlands BV (Netherlands) Tata Consultancy Services Belgium SA (Belgium) Tata Consultancy Services Sverige AB (Sweden) Tata Consultancy Services Deutschland GmbH (Germany) TCS Iberoamerica SA (Uruguay) Tata Consultancy Services Asia Pacific Pte Limited (Singapore) TCS FNS Pty. Limited (Australia) Diligenta Limited (UK) Tata Consultancy Services Canada Inc. (Canada) Tata Infotech (Singapore) Pte. Limited *(Singapore) (In Members' Voluntary Liquidation) Tata Consultancy Services Morocco SARL AU (Morocco) Tata Consultancy Services (Africa) (PTY) Limited (South Africa) TCS e-Serve Limited (India)

TCS' indirectly-held subsidiaries include the following: CMC Americas Inc (USA) TCS Italia SRL (Italy) TCS Inversiones Chile Limitada (Chile) TCS Solution Center SA (Uruguay) Tata Consultancy Services Argentina SA (Argentina) Tata Consultancy Services Do Brasil Ltda (Brazil) Tata Consultancy Services De Espaa SA (Spain) Tata Consultancy Services De Mexico SA, De CV (Mexico) Tata Information Technology (Shanghai) Company Limited (China) Tata Consultancy Services Malaysia Sdn Bhd (Malaysia) Tata Consultancy Services Japan Limited (Japan) Tata Consultancy Services Luxembourg SA (Luxembourg) TCS Financial Solutions Australia Holdings Pty Limited (Australia) TCS Management Pty Limited (Australia) Tata Consultancy Services Switzerland Limited (Switzerland) PT Tata Consultancy Services Indonesia (Indonesia) Tata Consultancy Services (China) Co. Limited (China) Tata Consultancy Services (South Africa) (PTY) Limited (South Africa) Tata Consultancy Services (Thailand) Limited (Thailand) Tata Consultancy Services (Philippines) Inc. (Philippines)

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Equity Investment Opportunity Analysis: Case of IT Sector

TCS e-Serve International Limited (India) ERI Holdings Corp (Canada) Tata Consultancy Services Chile SA (Chile) Tata Consultancy Services BPO Chile SA (Chile) Tata Consultancy Services Portugal Unipessoal Limitada (Portugal) TCS Financial Solutions Australia Pty Limited (Australia) PT Financial Network Services (Indonesia) Financial Network Services (Africa) (Pty) Limited (South Africa) Financial Network Services (HK) Limited (Hong Kong) Tata Consultancy Services France SAS (France) TCS e-Serve America, Inc. (USA) Exegenix Research Inc. (Canada) Financial Network Services Malaysia Sdn Bhd (Malaysia) Syscrom SA (Chile) Custodia De Documentos Interes Limitada (Chile) Tata Solution Center SA (Ecuador) Financial Network Services (Beijing) Co. Limited (China)

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Equity Investment Opportunity Analysis: Case of IT Sector

2.

Infosys

A. Background Infosys (BSE: 500209, NASDAQ: INFY) is an information technology services company headquartered in Bengaluru (Bangalore), India. Infosys is one of the largest IT companies in India with 122,468 employees (including subsidiaries) as of 2010. It has offices in 33 countries and development centres in India, China, Australia, UK, Canada and Japan B. History Infosys was founded on 2 July 1981 by seven entrepreneurs, Nagavara Ramarao Narayana Murthy, Nandan Nilekani, Kris Gopalakrishnan, S. D. Shibulal, K Dinesh and with N. S. Raghavan officially being the first employee of the company. The founders started the company with an initial investment of INR 10,000. The company was incorporated as "Infosys Consultants Pvt Ltd." in Model Colony, Pune as the registered office. Infosys went public in 1993. Interestingly, Infosys IPO was under subscribed but it was bailed out by US investment banker Morgan Stanley which picked up 13% of equity at the offer price of Rs. 95 per share. The share price surged to Rs. 8,100 by 1999. By the year 2000 Infosys's shares touched Rs. 310. This, before the catastrophic incident of September 11th, which caused share prices to suddenly fall. According to Forbes magazine, since listing on the Bombay Stock Exchange till the year 2000, Infosys' sales and earnings compounded at more than 70% a year. In the year 2000, President of the United States Bill Clinton complimented India on its achievements in high technology areas citing the example of Infosys. Infosys will invest $100 million (Rs 440 crore) on establishing a 20,000-seater campus in Shanghai. In 2001, it was rated Best Employer in India by Business Today. Infosys was rated best employer to work for in 2000, 2001, and 2002 by Hewitt Associates. In 2007, Infosys received over 1.3 million applications and hired fewer than 3% of applicants. Infosys was the only Indian company to win the Global MAKE (Most Admired Knowledge Enterprises) award for the years 2003, 2004 and 2005, and is inducted into the Global Hall of Fame for the same. C. Board of Directors a. Infosys Members of the Board 1) Srinath Batni, Director and Head, Delivery Excellence 2) K. Dinesh , Director and Head, Communication Design Group, Information Systems and Quality and Productivity 3) S. Gopalakrishnan, Chief Executive Officer and Managing Director

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Equity Investment Opportunity Analysis: Case of IT Sector

4) T. V. Mohandas Pai , Member of the Board of Directors, and Head Administration, Education and Research, Finacle, Human Resources, and Infosys Leadership Institute 5) N. R. Narayana Murthy, Chairman of the Board and Chief Mentor 6) S. D. Shibulal, Chief Operating Officer and Member of the Board b. Independent Directors 1) David L. Boyles, Independent Director 2) Dr. Omkar Goswami, Independent Director 3) Sridar Iyengar, Independent Director 4) K. V. Kamath, Independent Director 5) Jeffrey Sean Lehman, Independent Director 6) Deepak M. Satwalekar, Independent Director 7) R Seshasayee, Independent Director 8) Dr. Marti G. Subrahmanyam, Lead Independent Director D. Current share holding Promoters and their families hold 16%.Govt. of India enterprise with 3.84% can be termed as the single largest share holder. Govt. of UAE and Govt. of. Singapore also holds significant shares. Rest of the shares is owned by Financial institutions, Individual investors. E. Initiatives Infosys has the largest corporate university in the world, located on its Mysore campus. In 1996, Infosys created the Infosys Foundation in the state of Karnataka, operating in the areas of health care, social rehabilitation and rural uplift, education, arts and culture. Since then, this foundation has spread to the Indian states of Tamil Nadu, Andhra Pradesh, Maharashtra, Kerala, Orissa and Punjab. The Infosys Foundation is headed by Mrs. Sudha Murthy, wife of Founder Cum Chief Mentor Narayan Murthy. Since 2004, Infosys has embarked on a series of initiatives to consolidate and formalize its academic relationships worldwide under the umbrella of a program called AcE - Academic Entente. Infosys' Global Internship Program, known as InStep, is one of the key components of the Academic Entente initiative. It offers live projects to interns from the universities around the world. InStep recruits undergraduate, graduate and PhD students from business, technology, and liberal arts universities to take part in an 8 to 24 week internship at one of Infosys' global offices. InStep interns are also provided career opportunities with Infosys. In 1997, Infosys started the "Catch them Young Program", to expose the urban youth to the world of Information Technology by conducting a summer vacation program. The program is aimed at developing an interest and understanding of computer science and information technology. This program is targeted at students in Grade IX level.

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Equity Investment Opportunity Analysis: Case of IT Sector

In 2002, the Wharton Business School of the University of Pennsylvania and Infosys started the Wharton Infosys Business Transformation Award. This technology award recognizes enterprises and individuals who have transformed their businesses and the society leveraging information technology. Past winners include Samsung, Amazon.com, Capital One, RBS and ING Direct. Infosys has the largest corporate education center in the world in Mysore. It can accommodate 14000 candidates at one time. In 2009, Infosys created Infosys Prize for excellence in Physical Sciences, Mathematical Sciences, Engineering and Computer Science, Life Sciences and Social Sciences. F. Research Infosys developed a corporate R&D wing called Software Engineering and Technology Labs (SETLabs). SETLabs was founded in 2000 to carry out applied research for the development of processes, frameworks and methodologies to effectively capture customer requirements and to iron out common critical issues during a project life cycle. Various broad groups are Software Engg Lab, Convergence Lab, Innovation Lab, Center for KDIS, Security and Privacy Lab and Distributed Computing Laboratory. G. Charity In 2005, Infosys donated 10m rupees (about $226,000) to help with the effects of the 2005 Kashmir earthquake in Pakistan. Infosys does not currently have an office in Pakistan. H. Global offices a. Asia Pacific India - Bengaluru, Bhubaneswar, Chandigarh, Chennai , Coimbatore , Hyderabad, Jaipur, Mangalore, Mysore, Pune, Thiruvananthapuram Kolkata(2012),[25] Australia - Melbourne, Sydney and China Beijing, Shanghai, Hong Kong, Tokyo, Mauritius, Wellington- New Zealand, Sharjah- UAE, Taguig CityPhilippines, Suva- Fiji Island and Bangkok- Thailand b. North America Canada - Toronto, USA - Atlanta (GA), Bellevue (WA), Bridgewater (NJ), Charlotte (NC), Southfield (MI), Fremont (CA), Houston (TX), Glastonbury (CT), Lake Forest (CA), Lisle (IL), New York, Phoenix (AZ), Plano (TX), Quincy (MA), Reston (VA) and Mexico - Monterrey c. Europe Czech Republic - Brno, Belgium - Brussels, Denmark - Copenhagen, Finland - Helsinki, France - Paris, Germany - Frankfurt, Stuttgart, Italy - Milano, Norway - Oslo, Poland - d, The Netherlands Amsterdam, Spain - Madrid, Burgos, Sweden - Stockholm, Switzerland - Zrich, Geneva and UK - Canary Wharf, London

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Equity Investment Opportunity Analysis: Case of IT Sector

d. South America Brazil - Belo Horizonte I. Awards & Recognitions

Infosys was ranked among the top 50 most respected companies in the world by Reputation Institutes Global Reputation Pulse 2009. It has been voted the 'Most Admired Indian Company' in The Wall Street Journal Asia 200 every year since 2000. It won Sears Holding Corporation's Partners in Progress award for the second consecutive year. It also won HDS' Diamond Award for 'Best Virtualization Strategy' and Platinum Award for 'Best Green Strategy for a Data Center'. Infosys was listed in the Most Admired Knowledge Enterprises (MAKE) 2008 study and Forbes' Asian Fabulous 50 for the fourth consecutive year. It was ranked among the 'Best Companies for Leaders' in a survey by Bloomberg BusinessWeek and Hay Group in 2009, 'India's Best Companies to Work For - 2009' in a survey by the Great Place to Work Institute and conferred with the NASSCOM gender inclusivity award. Asset magazine acclaimed infosyss Corporate Governance, acknowledging its corporate policies and practices as among the best in the industry.

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Equity Investment Opportunity Analysis: Case of IT Sector

3.

Wipro Ltd

A. Background Wipro Ltd (BSE: 507685, NYSE: WIT) is a giant information technology services corporation headquartered in Bangalore, India. According to the 200809 revenue, Wipro is one of the largest IT services company in India and employs more than 119,491 people worldwide as of September 2010. It has interests varying from information technology, consumer care, lighting, engineering and healthcare businesses. It is 9th most valuable brand in India according to an annual survey conducted by Brand Finance and The Economic Times in 2010. Azim Premji is the Chairman of the board.

B. History The company was established in 1980 as subsidiary of Wipro Limited listed on New York Stock Exchange. Wipro was initially set up in 1945 with main product of producing sunflower Vanaspati Oil and different soaps. At that time Company was called Western India Vegetable Products limited with representative offices in Maharashtra and Madhya Pradesh states of India. During 1970s and 1980s it shifted its focus and begin to look into business opportunities in IT and computing industry which was at nascent stages in India at that time. Wipro was the first company which marketed the first indigenous homemade PC from India in 1975. In 1966 Azim Premji, still the majority shareholder in Wipro, took over as the chairman of the company at the age of 21 and with the passage of time transformed it into one of the finest and largest IT outsourcing services provider of the world.

C. Board of Directors Azim H. Premji, Chairman a. Executive Directors 1) T. K. Kurien, CEO, IT Business & Executive Director, Wipro Limited 2) Suresh C. Senapaty, Executive Director & Chief Finance Officer, Wipro Limited b. Independent Directors 1) Ashok S. Ganguly 3) C. Prabhakar 4) Dr. Henning Kagermann 5) Jagdish N. Sheth 6) N. Vaghul

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Equity Investment Opportunity Analysis: Case of IT Sector

7) P. M. Sinha 8) William Arthur Owens 9) Shyam Saran D. Innovations Wipro Advisory Board provides a strategic direction to the innovative initiatives at Wipro. The incubation of ideas is overseen by the Innovation Council who also look into the process and budgetary flow of the project. Innovation is driven by the various Centers of Excellence (CoEs) that work on projects related to specific domains like, Automotive CRM Data Warehouse Portals and Content Management Security Storage Linux Mobile Multimedia .NET Supply Chain Web Services

E. Wipro BPO Wipro BPO employs over 22,000, of whom 3,150 are at its Hyderabad campus. The planned new recruitments will be from among science and commerce graduates and under-graduates. The majority of Wipro BPOs business comes from the US, followed by Europe. The rest of the world contributes only marginally to its top line. The company posted a turnover of $290 million in FY08. Founded in 2002, Wipro BPO has operations in Delhi, Pune, Kolkata, Chennai, Mumbai, Hyderabad, Navi-Mumbai (Belapur) Greater Noida and Kochi in India. It also has offices in Shanghai and Cebu in Asia and Curittiba in Brazil and Wroclaw in Poland. It has 44 clients in segments such as banking & capital markets, insurance, travel & hospitality, hi-tech manufacturing, telecom and healthcare.

F. Wipro Group Companies (i) Wipro Consumer Care & Lighting Wipro Consumer Care and Lighting (WCCLG), a business unit of Wipro Limited, started with vegetable oil production in 1947 and has since come a long way and established a profitable presence in the branded

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Equity Investment Opportunity Analysis: Case of IT Sector

retail market. With a vast plethora of products spanning soaps, baby care products, health and wellness, Wipro's products have touched the lives of millions of consumers across India and global markets. It is also a leader in institutional lighting in specified segments like software, pharma and retail. Wipro Consumer Care and Lighting has been one of the fastest growing FMCG companies, both organically and through acquisitions. (ii) Wipro EcoEnergy Wipro EcoEnergy, the renewable energy services arm of Wipro, is a one-stop shop for all the renewable and alternative needs of your organization. Our scope of work provides the entire range of sustainable and energy efficient solutions such as, Customized clean-energy solutions for institutional clients Energy Efficiency (reduce) and Renewable Energy (replace) Consulting, implementation and managed services We work on the industrial scale; our technologies are proven, have direct customer relevance, and are commercially viable. We are technology agnostic because we work on best technologies and recommend the same based on your unique environment. Wipro EcoEnergy provides clean and sustainable energy solutions for all kinds of spaces, from factories to institutions and from offices to homes. (iii) Wipro Infrastructure Engineering Wipro Infrastructure Engineering, a division of Wipro Limited, delivers precision-engineered, world-class hydraulic cylinders, components and solutions, and truck hydraulic components to OEMs globally in the infrastructure and related industries. It represents the Kayaba, Kawasaki, Sun Hydraulics and Teijin Seiki range of hydraulic products in India. With state-of-the-art manufacturing facilities and extensive product development and testing facilities, Wipro Infrastructure Engineering has emerged as a leader in the hydraulic cylinders and truck tipping systems market in India. Wipro has recently entered water treatment business and provides ultra pure water treatment systems and solutions for various industries. (iv) Wipro GE Medical Systems Limited Wipro GE Medical Systems Limited is focused on delivering advanced solutions for significant challenges faced by healthcare organizations today. Wipro GE Healthcare, a joint venture between Wipro and GE, is part of GE Healthcare South Asia and caters to customer and patient needs with a commitment to uncompromising quality. We successfully manage a continuum of clinical information across the entire enterprise and our highly energized team provides superior customer and patient satisfaction, maximizing customer productivity with Six Sigma quality and uncompromising integrity.

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Equity Investment Opportunity Analysis: Case of IT Sector

G. Awards & Recognitions In 2011, Wipro won: BPO Excellence Award for Operational Excellence & Quality BPO Excellence Award for Use of Technology for Operational Excellence BPO Excellence Award for Fun at Work BPO Excellence Award for outstanding work in Utilities Company in UK Awarded with DL Shah National Quality Award Wipro's IDAM-in-a-Rack has won the Global Product Excellence Award 2010 in the Identity Management Solution Category.

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Equity Investment Opportunity Analysis: Case of IT Sector

IV. Key Indicators for Stock Selection


An equity investment analysis assumes for the purpose of valuation that a shares current intrinsic value must be calculated not on its potential capital gain but on total future return for which investor holds the share. As the approach is based on relevant factors like economics, climate and trends in financial market, it generally gives more realistic estimate of the value of a stock. This analysis is helpful in establishing basic standards, but cannot be totally relied because uncertainties associated with the economic and market factor. According to Benjamin Graham1, a set of standards should be applied to each purchase, to make sure that one obtains (1) a minimum of quality in the past performance and current financial position of the company, and also (2) a minimum of quantity in terms of earnings and assets per dollar of price. In this key indicator analysis, we will study a set of variables that influence the future of a firm both qualitatively and quantitatively. Here we assess the competitive position of a firm, its earning and profitability, the efficiency with which it operates its financial position and its full with respect to the earning of its shareholders. The fundamental nature of this analysis is that each share of a company has an intrinsic value, which is dependent on the company's financial performance, quality of management and record of its earnings and dividend. It is believed that the market price of share in a period of time will move towards its intrinsic value. If the market price of a share is lower than the intrinsic value, then the share is supposed to be undervalued and it should be purchased but if the current market price shows that it is more than intrinsic value then the share should be sold. This shall be analyzed through the financial statements of the IT companies. The basic financial statements, which are required as tools of this analysis, are the income statement, the balance sheet, and the statement of changes in financial position. These statements are useful for investors, creditors as well as internal management of a firm and on the basis these statements the future course of action may be taken by the investors of the firm. Now we will analyse the following parameters to reveal the intrinsic value of stock: A. B. C. D. E. F. G. H. Growth in Profit and Sales Earnings per Share Price Earning (P/E) Ratio DPS (Dividend per Share) Return on Net worth (Equity + Reserves) Dividend/ Net Profit Return on Long Term Funds (%) Price Analysis

The Intelligent Investor: The Definitive Book on Value Investing by Benjamin Graham, 2003

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Equity Investment Opportunity Analysis: Case of IT Sector

A. Growth in Profit and Sales 1) TCS (Rs. in Crores.) 2010 23044.45 2.86 % 105.19 % 5618.51 19.64 % 106.80 %

Year Net Sales % Rise in NS % rise in NS 06-10 Net Profit % Rise in NP % rise NP 06-10

2006 11230.50

2007 14939.97 33.02%

2008 18533.72 24.05%

2009 22401.92 20.87%

2716.87

3757.29 38.29%

4508.76 20.00%

4696.21 4.16%

2) WIPRO (Rs. in Crores.) 2010 23006.30 6.44% 124.14% 4898.00 64.70% 142.41%

Year Net Sales % Rise in NS % rise in NS 06-10 Net Profit % Rise in NP % rise NP 06-10 3) Infosys

2006 10264.09

2007 13758.5 34.04%

2008 17658.10 28.34%

2009 21612.80 22.39%

2020.48

2842.10 40.66%

3063.30 7.78%

2973.80 - 2.92%

Year Net Sales % Rise in NS % rise in NS 06-10 Net Profit % Rise in NP % rise NP 06-10

2006 9028.00

2007 13149.00 45.64%

2008 15648.00 19%

2009 20264.00 29.49%

(Rs. in Crores.) 2010 21140.00 4.32% 134% 5803.00 -0.27% 139.69%

2421.00

3783.00 56.25%

4470.00 18.16%

5819.00 30.17%

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: Constant growth in sales and profit reflects efficient management policy, competitive marketing strategy, fair pricing model of products, and adoption of modern production technology and good working environment of organization. From above data we can see in WIPRO there is 124.14% rise in sale and 142.41% rise in net profit from the year 2006 to 2010.

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Equity Investment Opportunity Analysis: Case of IT Sector

B. Earnings per Share An Earnings Per Share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased. The Share holder invests their money with expectation of getting dividends and capital appreciation on shares. The formula is EPS = Net Profit/No. of Shares 1) TCS Year Net Profit (Rs. in Crores.) Shares (lakhs) EPS (Rs) Average EPS 06-10 (Rs) 2006 2716.87 4893.05 55.53 2007 3757.29 9786.10 38.39 2008 4508.76 9786.10 46.07 2009 4696.21 9786.10 47.92 2010 5618.51 19572.21 28.62 43.30

2) WIPRO Year Net Profit (Rs. in Crores.) Shares (lakhs) EPS (Rs) Average EPS 06-10 (Rs) 2006 2020.48 14257.54 14.17 2007 2842.10 14590 19.48 2008 3063.30 14615 20.96 2009 2973.80 14649.81 20.3 2010 4898.00 14682.11 33.36 21.65

3) Infosys Year Net Profit (Rs. in Crores.) Shares (lakhs) EPS (Rs) Average EPS 06-10 (Rs) 2006 2421.00 2755.55 87.86 2007 3783.00 5712.10 66.23 2008 4470.00 5719.96 78.15 2009 5819.00 5728.30 101.58 2010 5803.00 5728.35 101.13 86.99

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: This is one of the most important parameter which measures net profit earned per share. EPS is one of the major factors for the dividend policy of the firm and market price of the company. A steady growth in EPS year after year indicates good track of profitability. In the above data Infosys has maintained constant growth in EPS

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Equity Investment Opportunity Analysis: Case of IT Sector

C. Price Earning (P/E) Ratio Price earnings ratio (P/E ratio) is the ratio between market price per equity share and earning per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. This ratio helps the investor in deciding whether to buy or not to buy the shares of a particular company at a particular market price. This ratio also highlights the relationship between the market price of share and current and current earnings per share. Companies with ample opportunity for growth generally have high P/E Ratio. Generally, higher the price earning ratio the better it is. The IT Industrys average P/E Ratio is between 25 to 30.. The formula is P/E Ratio = Current Market Price/EPS 1) TCS Year Avg MP EPS P/E Ratio 2006 1500 55.53 27 2007 1167 38.39 30.39 2008 736 46.07 15.97 2009 555.60 47.92 11.60 2010 937.80 28.62 32.76

2) WIPRO Year Avg MP EPS P/E Ratio 2006 498.5 14.17 35.18 2007 557.50 19.48 28.62 2008 359.80 20.96 17.17 2009 447 20.3 22.01 2010 540.43 33.36 16.20

3) Infosys Year Avg MP EPS P/E Ratio 2006 2510.5 87.86 28.57 2007 1974.32 66.23 29.81 2008 1543.25 78.15 19.74 2009 1862.87 101.58 18.33 2010 2904.50 101.13 28.72

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: This ratio measures the number of times the earnings of the latest year at which the share price of a company is quoted. It signifies the number of years in which the earnings can equal the current market price. P/E ratio is a barometer of the market sentiment. Companies with excellent track record of profitability, professional management and libral distribution policy have high P/E multiple whereas companies with moderate track record, conservative distribution policy and average prospectus quote at low P/E multiple. From above analysis TCS has maintained high P/E multiple for three years 2006, 2007 and 2010 which is near to industry average between 25 to 30.

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Equity Investment Opportunity Analysis: Case of IT Sector

D. DPS (Dividend per Share) The dividend policy of firm determines what proportion of earnings is paid to share holders by way of dividends and what proportion is ploughed back in the firm for reinvestment purpose. DPS = Dividend Amount/No. of Shares A) TCS Year Dividend (Crs.) Shares (lakhs) DPS (In Rs.) Dividend% 2006 660.56 4893.05 13.50 1350% 2007 1125.39 9786.10 11.50 1150% 2008 1370.05 9786.10 14.00 1400% 2009 1370.05 9786.10 14.00 1400% 2010 3914.43 19572.21 20.00 2000%

B) WIPRO Year Dividend (Crs.) Shares (lakhs) DPS (In Rs.) Dividend% 2006 712.88 14257.54 5.00 250% 2007 873.7 14590 6.00 300% 2008 876.50 14615 6.00 300% 2009 586 14649.81 4.00 200% 2010 880.9 14682.11 6.00 300%

C) Infosys Year Dividend (Crs.) Shares (lakhs) DPS (In Rs.) Dividend% 2006 1238.00 2755.55 45.00 900% 2007 649.00 5712.10 11.50 230% 2008 1902.00 5719.96 33.25 665% 2009 1345.00 5728.30 23.50 470% 2010 1434.00 5728.35 25.00 500%

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: Firms dividend policy depends on investor preference for current dividends, interdependency between dividend and investment decision, irrational behavior of investor and firms, different taxation of dividends and capital gains and under pricing of equity issues. From above data Infosys and TCS has maintained high dividend pay-out to the share holder.

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Equity Investment Opportunity Analysis: Case of IT Sector

E. Return on Net worth (Equity + Reserves) This ratio expresses the net profit in terms of the equity share holders funds. This ratio is an important yardstick of performance for equity shareholder since it indicates the return on the funds employed by them. ROE = Net Profit / Networth A) TCS Year Net Profit Net worth RoE 2006 2716.87 5609.33 48.43% 2007 3757.29 8058.99 46.62% 2008 4508.76 11004.81 41.34% 2009 4696.21 13446.25 35.13% 2010 5618.51 15116.62 37.3%

B) WIPRO Year Net Profit Net worth RoE 2006 2020.48 6427.94 31.43% 2007 2842.10 9320.40 30.5% 2008 3063.30 11610.70 26.51% 2009 2973.80 12515.00 31.34% 2010 4898.00 17692.20 25.19%

C) Infosys Year Net Profit Net worth RoE 2006 2421.00 6897.00 36.21% 2007 3783.00 11162.00 33.47% 2008 4470.00 13490.00 33.09% 2009 5819.00 17809.00 34.76% 2010 5803.00 22306.00 25.89%

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: The factor which motivates share holder to invest in a company is the expectation of adequate rate of return on their invested funds and periodically they will want to assess the rate of return in order to decide whether to continue with their investment. If we compare data of last five years of above companies TCS has generated higher return on networth.

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Equity Investment Opportunity Analysis: Case of IT Sector

F. Dividend/ Net Profit Above ratio helps investor to decide that how much company is willing to pay as dividend out of net profit. A) TCS Year Net Profit Dividend (Crs.) 2006 2716.87 660.56 24.31% 2007 3757.29 1125.39 29.95% 2008 4508.76 1370.05 30.38% 2009 4696.21 1370.05 29.21% 2010 5618.51 3914.43 69.67%

B) WIPRO Year Net Profit Dividend (Crs.) 2006 2020.48 712.88 35.28% 2007 2842.10 873.7 30.74% 2008 3063.30 876.50 28.61% 2009 2973.80 586 19.70% 2010 4898.00 880.9 17.98%

C) Infosys Year Net Profit Dividend (Crs.) 2006 2421.00 1238.00 51.13% 2007 3783.00 649.00 17.15% 2008 4470.00 1902.00 42.55% 2009 5819.00 1345.00 23.11% 2010 5803.00 1434.00 24.71%

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments: It indicates the extent of the net profits distributed to the shareholders as dividend. A high ratio signifies a liberal distribution policy and a low ratio reflects conservative distribution policy. From above data TCS is more consistent in distributing dividend out of net profit.

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Equity Investment Opportunity Analysis: Case of IT Sector

G. Return on Long Term Funds (%)

Year TCS WIPRO Infosys

2006 55.97% 35.87% 40.62%

2007 50.12% 33.31% 36.64%

2008 42.96% 23.32% 37.77%

2009 43.27% 37.17% 39.8%

2010 42.46% 30.12% 33.69%

Comments: TCS has given more return on long term funds.

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Equity Investment Opportunity Analysis: Case of IT Sector

H. Price Analysis A) TCS Year HIGH LOW Max Return from low to High 2006 2099 900 133% 2007 1399 935 49.62% 2008 1054 418 155% 2009 755.95 355.25 113% 2010 1179 696.60 69%

B) WIPRO Year HIGH LOW Max Return from low to High 2006 614 383 60% 2007 590 425 62% 2008 537.90 181.70 196% 2009 699 195 258% 2010 753 327.85 130%

C) Infosys Year HIGH LOW Max Return from low to High 2006 3449 1572 119% 2007 2415 1533.65 58% 2008 2046.50 1040 97% 2009 2614 1111.75 135% 2010 3454 2355 47%

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Equity Investment Opportunity Analysis: Case of IT Sector

Comments:
Any wise investor knows the basic principle of investment: buy low, sell high. However, investors often ignore this rule, as they get swept up in prevailing market sentiment. If investor follows market closely he will definitely get opportunity to buy at low and sell at high. WIPRO and TCS have generated Maximum Return from Low to High.

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Equity Investment Opportunity Analysis: Case of IT Sector

V. Conclusion & Recommendations


Sl. No 1 2 3 4 5 6 7 8 Growth in Profit and Sales Earnings per Share P/E Ratio Dividend per Share Return on Net worth Willingness of Company to pay Dividend out of Net Profit Return on Long Term Funds Maximum Return given to Shareholders from 2006-10 Total Score (Points) 6 2 2 Indicator TCS Wipro Infosys

- Performed Well compared to other two Companies (01 Point)

- Performed Average compared to other two Companies (0.5 Point)

- Not Performed Well compared to other two Companies (0 Point)

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- For Investor The basic objective of investor of making investment in stock is to obtain higher returns by selling the stocks at the higher price subsequently. The positive change in price of stocks and income in the form of dividends and interest is expected by the investor to invest his funds in the stock market. TCS and INFOSYS had given high dividends from year 2006 to 2010. TCS and WIPRO had given maximum return from year 2006 to 2010.

- For Shareholder The shareholder invests in the company for long term investment. They are always interested in profit and sales growth of the company, growth in earning per share, positive return on his investment. From analysis TCS and WIPRO had performed well from shareholder perspective.

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Equity Investment Opportunity Analysis: Case of IT Sector

VI. References
"BSE 2010 Data". http://www.bseindia.com. "NASSCOM List". Press Release. NASSCOM. 2006-01-23. "Top 20 IT services exports firms in India: Rediff.com Business". Business.rediff.com. "IT Man of the Year: Standing Tall". Cover Story. Dataquest India. "Star Performer Goes Public". Editorial. The Hindu. Official Website of Tata Consultancy Services Limited. Rakesh R.S. Garia (2010-04-13). "Results for the Fourth Quarter and Year ended 31 March 2010". infosys.com. Infosys. "Top 20 IT-BPO employers in India : Rediff.com Business". Business.rediff.com. Infosys Technologies Limited (2010-06-30). "What We Do | About Us". Infosys. Infosys Technologies Limited. "Fact File | Who We Are | About Us". Infosys. Narayana Murthy. "Learn entrepreneurship the Infosys way! - CNBC-TV18/TiE-Leaders and Learners". Moneycontrol.com. Official Website of Infosys Limited. Official Website of Wipro Technologies Wikipedia Website. http://en.wikipedia.org/wiki/ Quarter Results, Dec2010. "WIPRO_Qtr_result_dec_2010". www.wipro.com. "WIPRO quarter results-Sep 2009". "India's top 10 brands". business.rediff.com. http://www.naukrihub.com/india/bpo/overview

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VII. Appendices

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Appendix 1 Balance Sheet: Tata Consultancy Services


Balance Sheet Mar '01 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 36.44 36.44 0 0 883.76 0 920.2 22 29.7 51.7 971.9 661.9 401.9 260 40.6 17.3 2.6 0 0 2.6 1,172.80 521.4 0 521.4 654 0 971.9 Mar '02 12 mths 36.44 36.44 0 0 1,154.46 0 1,190.90 323.7 47 370.7 1,561.60 791.1 462.5 328.6 10.5 356.2 -114.4 0 0 -114.4 1,439.50 458.8 0 458.8 866.3 0 1,561.60 Mar '03 12 mths 36.44 36.44 0 0 1,244.76 0 1,281.20 568.6 114.7 683.3 1,964.50 831.5 497.8 333.7 30.6 414 -4.9 0 0 -4.9 1,745.00 553.9 0 553.9 1,186.20 0 1,964.50 Mar '04 12 mths ------------------- in Rs. Cr. ------------------Mar '05 Mar '06 Mar '07 12 mths 12 mths 12 mths 48.01 48.01 0 0 3,273.04 0 3,321.05 111.01 9.73 120.74 3,441.79 1,041.09 132.93 908.16 120.28 1,404.42 0 1,463.45 120.66 1,584.11 735.75 783.43 527.58 1,311.01 1,008.93 0 3,441.79 48.93 48.93 0 0 5,560.40 0 5,609.33 26.52 8.98 35.5 5,644.83 1,695.13 525.35 1,169.78 280 1,963.52 22.94 2,326.63 170.61 2,520.18 1,490.57 1,239.24 540.54 1,779.78 2,231.53 0 5,644.83 97.86 97.86 0 0 7,961.13 0 8,058.99 41.76 8.98 50.74 8,109.73 2,315.36 854.75 1,460.61 757.85 3,252.04 12.06 2,799.80 314.66 3,126.52 1,925.74 1,750.46 905.05 2,655.51 2,639.23 0 8,109.73 Mar '08 12 mths 197.86 97.86 0 100 10,806.95 0 11,004.81 9.27 8.98 18.25 11,023.06 3,240.64 1,300.11 1,940.53 889.74 4,509.33 17.19 3,747.01 402.24 4,166.44 3,104.74 2,525.56 1,187.44 3,713.00 3,683.46 0 11,023.06 Mar '09 12 mths 197.86 97.86 0 100 13,248.39 0 13,446.25 32.63 7.74 40.37 13,486.62 4,359.24 1,690.16 2,669.08 685.13 5,936.03 16.95 3,717.73 479.93 4,214.61 3,910.85 3,604.18 1,450.23 5,054.41 4,196.38 0 13,486.62 Mar '10 12 mths 295.72 195.72 0 100 14,820.90 0 15,116.62 29.25 6.49 35.74 15,152.36 4,871.21 2,110.69 2,760.52 940.72 7,893.39 6.78 3,332.30 212.31 3,551.39 4,101.84 3,352.74 3,926.61 7,279.35 3,557.73 0 15,152.36

36.44 36.44 0 0 10.64 0 47.08 0 375 375 422.08 226.5 0.95 225.55 0 417.39 0 0.25 2.25 2.5 9.77 228.2 4.93 233.13 -220.86 0 422.08

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Appendix 2 Profit & Loss Account Statement: Tata Consultancy Services


Profit & Loss account Mar '01 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earnings Per Share (Rs) Equity Dividend (%) Book Value (Rs) 3,061.70 0 3,061.70 78.1 0 3,139.80 0 0 650.8 0 0 1,500.00 0 2,150.80 910.9 989 7.8 981.2 67.9 0 913.3 -91.8 821.5 142.6 862.5 2,150.80 0 0 0 0 0 0 0 Mar '02 12 mths 4,113.50 0 4,113.50 52 0 4,165.50 0 0 759.8 0 0 1,876.50 0 2,636.30 1,477.20 1,529.20 4.5 1,524.70 78.3 0 1,446.40 57.1 1,503.50 244.3 1,145.00 2,636.30 0 0 0 0 0 0 0 Mar '03 12 mths 4,914.70 0 4,914.70 92.9 0 5,007.60 0 0 1,012.70 0 0 2,533.80 0 3,546.50 1,368.20 1,461.10 15.2 1,445.90 92.9 0 1,353.00 -43.9 1,309.10 220.5 1,176.40 3,546.50 0 0 0 0 0 0 0 Mar '04 12 mths 0 0 0 17.74 0 17.74 0 0 0 0 0.01 0.02 0 0.03 -0.03 17.71 0.2 17.51 0.84 0 16.67 0 16.67 1.49 15.18 0.03 0 4.38 0.56 364.4 4.17 12 12.92 ------------------- in Rs. Cr. -----------------Mar '05 Mar '06 Mar '07 12 mths 12 mths 12 mths 8,051.10 0 8,051.10 -152.65 0 7,898.45 0 44.59 3,967.52 487.18 513.88 629.48 0 5,642.65 2,408.45 2,255.80 10.4 2,245.40 133.22 0 2,112.18 0 2,112.18 280.76 1,831.42 5,642.65 0 552.13 74.46 4,801.15 38.15 1,150.00 69.17 11,236.01 5.51 11,230.50 -1.19 4.14 11,233.45 161.5 66.85 5,113.96 793.01 756.39 1,005.52 0 7,897.23 3,337.41 3,336.22 4.49 3,331.73 257.38 0 3,074.35 -38.03 3,036.32 319.45 2,716.87 7,735.73 0 660.56 92.64 4,893.05 55.53 1,350.00 114.64 14,942.09 2.12 14,939.97 216.04 -2.79 15,153.22 22.02 93.89 6,186.85 3,095.82 765.08 472.04 0 10,635.70 4,301.48 4,517.52 3.43 4,514.09 343.41 0 4,170.68 -2.59 4,168.09 410.8 3,757.29 10,613.68 0 1,125.39 169.48 9,786.10 38.39 1,150.00 82.35 Mar '08 12 mths 18,536.55 2.83 18,533.72 440.45 -0.04 18,974.13 45.81 135.57 6,015.19 5,687.82 991.43 632.25 0 13,508.07 5,025.61 5,466.06 3.42 5,462.64 458.78 0 5,003.86 -37.52 4,966.34 457.58 4,508.76 13,462.26 0.08 1,370.05 232.85 9,786.10 46.07 1,400.00 111.43 Mar '09 12 mths 22,404.00 2.08 22,401.92 -456.24 1.73 21,947.41 53.67 164.34 7,370.09 6,947.60 1,218.41 628.71 0 16,382.82 6,020.83 5,564.59 7.44 5,557.15 417.46 0 5,139.69 -103.11 5,036.58 340.37 4,696.21 16,329.15 7 1,370.05 234.02 9,786.10 47.92 1,400.00 136.38 Mar '10 12 mths 23,044.84 0.39 23,044.45 182.1 -1.38 23,225.17 23.75 183.62 7,882.43 6,446.99 1,268.03 571.08 0 16,375.90 6,667.17 6,849.27 9.54 6,839.73 469.35 0 6,370.38 -13.98 6,356.40 737.89 5,618.51 16,352.15 17 3,914.43 657.51 19,572.21 28.62 2,000.00 76.72

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Appendix 3 Cash Flow Statement: Tata Consultancy Services


Cash Flow Statement Mar '02 12 mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 1546035.9 13231.1 1183501.9 -1104314.3 92418.7 88607.9 181026.6 Mar '03 12 mths 1768627.2 -580658.7 3719801.7 -2186400.2 952742.8 181026.6 1133769.4 Mar '04 12 mths 3.22 0.64 -374.5 374.98 1.12 1.13 2.25 ------------------- in Rs. Cr. ------------------Mar '05 12 mths 2308.65 1978.99 -2813.85 953.35 118.49 2.25 120.74 Mar '06 12 mths 3074.35 2344.42 -1464.97 -882.3 -5.1 176.27 171.17 Mar '07 12 mths 4170.68 3551.26 -2076.42 -1075.35 385.97 171.17 557.14 Mar '08 12 mths 5003.86 3827.91 -2404.9 -1424.77 -29.62 557.14 527.52 Mar '09 12 mths 5139.68 4874.12 -3162.22 -1588.25 123.65 417 540.65 Mar '10 12 mths 6370.38 6264.74 -4556.64 -1969.65 -261.55 554.83 293.28

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Appendix 4 Balance Sheet: Infosys


Balance Sheet Mar '00 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 33.08 33.08 0 0 800.23 0 833.31 0 0 0 833.31 284.03 133.65 150.38 56.96 13.83 0 136.18 73.7 209.88 210.13 358.09 778.1 0 67.15 98.82 165.97 612.13 0 833.3 80.64 125.97 Mar '01 12 mths 33.08 33.08 0 0 1,356.56 0 1,389.64 0 0 0 1,389.64 631.14 244.13 387.01 170.65 34.12 0 302.37 66.81 369.18 430.28 318.25 1,117.71 0 134.92 184.93 319.85 797.86 0 1,389.64 158.34 210.05 Mar '02 12 mths 33.09 33.09 0 0 2,047.22 0 2,080.31 0 0 0 2,080.31 960.6 393.03 567.57 150.67 44.44 0 336.73 73.19 409.92 668.09 699.03 1,777.04 0 126.11 333.3 459.41 1,317.63 0 2,080.31 67.3 314.31 Mar '03 12 mths 33.12 33.12 0 0 2,827.53 0 2,860.65 0 0 0 2,860.65 1,273.31 577.15 696.16 76.56 33.2 0 512.14 206.7 718.84 909.59 1,129.53 2,757.96 0 315.25 387.98 703.23 2,054.73 0 2,860.65 101.66 431.84 ------------------- in Rs. Cr. ------------------Mar '04 Mar '05 Mar '06 12 mths 33.32 33.32 0 0 3,220.11 0 3,253.43 0 0 0 3,253.43 1,570.23 803.41 766.82 203.48 1,027.38 0 632.51 338.69 971.2 868.75 1,299.32 3,139.27 0 560.44 1,323.08 1,883.52 1,255.75 0 3,253.43 197.02 488.2 12 mths 135.29 135.29 0 0 5,106.44 0 5,241.73 0 0 0 5,241.73 2,182.72 1,005.82 1,176.90 317.52 1,328.70 0 1,252.82 268.15 1,520.97 1,030.29 1,213.39 3,764.65 0 578.56 767.48 1,346.04 2,418.61 0 5,241.73 289.87 193.73 12 mths 138 138 0 0 6,759.00 0 6,897.00 0 0 0 6,897.00 2,837.00 1,275.00 1,562.00 571 876 0 1,518.00 544 2,062.00 1,308.00 2,735.00 6,105.00 0 808 1,409.00 2,217.00 3,888.00 0 6,897.00 523 250.29 Mar '07 12 mths 286 286 0 0 10,876.00 0 11,162.00 0 0 0 11,162.00 3,889.00 1,739.00 2,150.00 957 839 0 2,292.00 680 2,972.00 1,241.00 4,827.00 9,040.00 0 1,162.00 662 1,824.00 7,216.00 0 11,162.00 670 195.41 Mar '08 12 mths 286 286 0 0 13,204.00 0 13,490.00 0 0 0 13,490.00 4,508.00 1,837.00 2,671.00 1,260.00 964 0 3,093.00 657 3,750.00 2,804.00 5,772.00 12,326.00 0 1,483.00 2,248.00 3,731.00 8,595.00 0 13,490.00 603 235.84 Mar '09 12 mths 286 286 0 0 17,523.00 0 17,809.00 0 0 0 17,809.00 5,986.00 2,187.00 3,799.00 615 1,005.00 0 3,390.00 805 4,195.00 3,303.00 8,234.00 15,732.00 0 1,544.00 1,798.00 3,342.00 12,390.00 0 17,809.00 347 310.9 Mar '10 12 mths 287 287 0 0 21,749.00 0 22,036.00 0 0 0 22,036.00 6,357.00 2,578.00 3,779.00 409 4,636.00 0 3,244.00 929 4,173.00 4,201.00 8,868.00 17,242.00 0 1,995.00 2,035.00 4,030.00 13,212.00 0 22,036.00 295 384.02

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Appendix 5 Profit & Loss Account Statement: Infosys


Profit & Loss account ------------------- in Rs. Cr. ------------------Mar '00 Mar '01 Mar '02 12 mths 12 mths 12 mths 884.35 0 884.35 30.29 0 914.64 2.7 5.01 335.04 23.5 136.25 32.83 0 535.33 349.02 379.31 0.42 378.89 53.23 0 325.66 7.33 332.99 39.46 285.95 532.63 0 29.76 3.27 661.51 43.23 90 125.97 1,900.57 0 1,900.57 49.58 0 1,950.15 5.87 11.78 718.37 89.57 263.4 46.13 0 1,135.12 765.45 815.03 0.59 814.44 112.89 0 701.55 -1.4 700.15 71.31 628.81 1,129.26 0 66.16 8.7 661.58 95.05 200 210.05 2,603.59 0 2,603.59 66.41 0 2,670.00 3.24 18.96 1,117.87 103.67 278.48 43.03 0 1,565.25 1,038.34 1,104.75 0.71 1,104.04 160.65 0 943.39 0 943.39 135.43 807.96 1,562.01 0 132.36 5.06 661.86 122.07 400 314.31 Mar '03 12 mths 3,622.69 0 3,622.69 75.84 0 3,698.53 6.46 22.6 1,677.12 175.67 418.38 49.67 0 2,349.90 1,272.79 1,348.63 0.75 1,347.88 188.95 0 1,158.93 -1.5 1,157.43 199.5 957.93 2,343.44 0 178.81 12.3 662.43 144.61 540 431.84 Mar '04 12 mths 4,760.89 0 4,760.89 117.72 0 4,878.61 9.13 28.72 2,367.35 240.17 499.86 31.26 0 3,176.49 1,584.40 1,702.12 0.75 1,701.37 230.9 0 1,470.47 0.49 1,470.96 227.49 1,243.47 3,167.36 0 862.46 110.5 666.41 186.59 2,590.00 488.2 Mar '05 12 mths 6,859.66 0 6,859.66 172.79 0 7,032.45 13.55 40.2 3,183.25 563.47 697.15 35.84 0 4,533.46 2,326.20 2,498.99 1.09 2,497.90 268.22 0 2,229.68 -4.59 2,225.09 325.3 1,904.38 4,519.91 0 309.8 42.17 2,705.71 70.38 230 193.73 Mar '06 12 mths 9,028.00 0 9,028.00 144 0 9,172.00 16 62 4,274.00 792 773.49 120.51 0 6,038.00 2,990.00 3,134.00 1 3,133.00 409 0 2,724.00 0 2,724.00 303 2,421.00 6,022.00 0 1,238.00 174 2,755.55 87.86 900 250.29 Mar '07 12 mths 13,149.00 0 13,149.00 379 0 13,528.00 22 88 6,316.00 1,290.00 1,050.53 156.47 0 8,923.00 4,226.00 4,605.00 1 4,604.00 469 0 4,135.00 -5 4,130.00 352 3,783.00 8,901.00 0 649 102 5,712.10 66.23 230 195.41 Mar '08 12 mths 15,648.00 0 15,648.00 683 0 16,331.00 18 106 7,771.00 1,443.00 1,214.00 132 0 10,684.00 4,964.00 5,647.00 1 5,646.00 546 0 5,100.00 0 5,100.00 630 4,470.00 10,666.00 0 1,902.00 323 5,719.96 78.15 665 235.84 Mar '09 12 mths 20,264.00 0 20,264.00 502 0 20,766.00 20 125 9,975.00 1,697.00 1,367.00 172 0 13,356.00 6,908.00 7,410.00 2 7,408.00 694 0 6,714.00 -1 6,713.00 895 5,819.00 13,336.00 0 1,345.00 228 5,728.30 101.58 470 310.9 Mar '10 12 mths 21,140.00 0 21,140.00 967 0 22,107.00 22 122 10,356.00 1,993.00 992 293 0 13,778.00 7,362.00 8,329.00 2 8,327.00 807 0 7,520.00 0 7,520.00 1,717.00 5,803.00 13,756.00 0 1,434.00 240 5,738.25 101.13 500 384.02

Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

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Appendix 6 Cash Flow Statement: Infosys


Cash Flow Statement Mar '00 12 mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 325.65 259.41 -146.16 -21.54 91.71 416.66 508.37 Mar '01 12 mths 696.03 540.32 -452.22 -39.82 69.37 508.37 577.74 Mar '02 12 mths 943.39 820.96 -280.23 -104.77 449.22 577.74 1026.96 Mar '03 12 mths 1158.93 915.96 -153.41 -151.97 611.55 1026.96 1638.51 ------------------- in Rs. Cr. ------------------Mar '04 12 mths 1470.47 1633.97 -1332.01 -94.48 200.89 1638.51 1839.4 Mar '05 12 mths 2184.49 1359.7 -939.88 -580.1 -156.32 1839.4 1683.08 Mar '06 12 mths 2724 2237 -392 244 2096 1683 3779 Mar '07 12 mths 4129 3256 -1065 -316 1871 3779 5650 Mar '08 12 mths 5100 3816 -978 -777 2079 5610 7689 Mar '09 12 mths 6714 5152 -195 -2430 2600 7689 10289 Mar '10 12 mths 7472 5876 -3314 -1486 1008 10289 11297

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Equity Investment Opportunity Analysis: Case of IT Sector

Appendix 7 Balance Sheet: Wipro Ltd


Balance Sheet Mar '00 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 70.83 45.83 0 25 594.75 104.71 770.29 49.23 8.67 57.9 828.19 675.79 292.87 382.92 70.88 193.59 134.02 446.94 74.5 655.46 122.66 0.23 778.35 0 404.76 192.79 597.55 180.8 0 828.19 36.74 27.95 Mar '01 12 mths 46.49 46.49 0.23 0 1,829.46 89.01 1,965.19 40.06 4.74 44.8 2,009.99 902.02 379.37 522.65 79.8 163.64 115.25 617.67 437.93 1,170.85 599.27 8.41 1,778.53 0 481.34 53.3 534.64 1,243.89 0 2,009.98 62.13 80.71 Mar '02 12 mths 46.49 46.49 0.24 0 2,486.05 0 2,532.78 25.49 1.37 26.86 2,559.64 961.55 450.39 511.16 116.26 478.46 74.84 643.49 283.51 1,001.84 1,041.64 10.03 2,053.51 0 536.66 63.1 599.76 1,453.75 0 2,559.63 44.09 108.94 Mar '03 12 mths 46.51 46.51 0.12 0 3,283.70 0 3,330.33 52.56 17.19 69.75 3,400.08 1,161.71 597.39 564.32 94.83 1,440.72 77.37 792.59 267.94 1,137.90 687.98 141.77 1,967.65 0 591.07 76.36 667.43 1,300.22 0 3,400.09 133.46 143.2 ------------------- in Rs. Cr. ------------------Mar '04 Mar '05 Mar '06 12 mths 12 mths 12 mths 46.55 46.55 0 0 3,461.04 0 3,507.59 94.75 5.94 100.69 3,608.28 1,333.68 678.66 655.02 139.71 2,456.03 102.08 1,062.34 290.09 1,454.51 583.9 0.01 2,038.42 0 856.32 824.57 1,680.89 357.53 0 3,608.29 387.99 150.7 140.71 140.71 1.21 0 4,751.73 0 4,893.65 21.59 40.5 62.09 4,955.74 1,763.49 855.53 907.96 250.24 2,859.51 127.37 1,406.51 536.89 2,070.77 602.08 0.01 2,672.86 0 1,211.14 523.7 1,734.84 938.02 0 4,955.73 676.65 69.54 285.15 285.15 7.49 0 6,135.30 0 6,427.94 45.06 5.1 50.16 6,478.10 2,364.53 1,246.27 1,118.26 612.36 3,459.20 148.65 1,968.07 822.42 2,939.14 1,136.96 0.58 4,076.68 0 1,776.83 1,011.56 2,788.39 1,288.29 0 6,478.11 509.18 45.03 Mar '07 12 mths 291.8 291.8 3.5 0 9,025.10 0 9,320.40 23.2 214.8 238 9,558.40 1,645.90 0 1,645.90 989.5 4,348.70 240.4 2,582.30 1,849.20 4,671.90 1,666.50 0 6,338.40 0 2,998.90 765.2 3,764.10 2,574.30 0 9,558.40 661.6 63.86 Mar '08 12 mths 292.3 292.3 58 0 11,260.40 0 11,610.70 4 3,818.40 3,822.40 15,433.10 2,282.20 0 2,282.20 1,335.00 4,500.10 448.1 3,646.60 3,732.10 7,826.80 4,231.30 0 12,058.10 0 3,361.60 1,380.70 4,742.30 7,315.80 0 15,433.10 749.9 79.05 Mar '09 12 mths 293 293 1.5 0 12,220.50 0 12,515.00 0 5,013.90 5,013.90 17,528.90 5,743.30 2,563.70 3,179.60 1,311.80 6,895.30 459.6 4,446.40 1,902.10 6,808.10 4,202.00 2,507.10 13,517.20 0 5,564.30 1,810.70 7,375.00 6,142.20 0 17,528.90 1,045.40 85.42 Mar '10 12 mths 293.6 293.6 1.8 0 17,396.80 0 17,692.20 0 5,530.20 5,530.20 23,222.40 6,761.30 3,105.00 3,656.30 991.1 8,966.50 606.9 4,754.70 1,938.30 7,299.90 5,519.40 3,726.00 16,545.30 0 4,706.00 2,230.80 6,936.80 9,608.50 0 23,222.40 778 120.49

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Appendix 8 Profit & Loss Account Statement: Wipro Ltd


Profit & Loss account Mar '00 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 2,372.39 86.49 2,285.90 -26.21 -4.95 2,254.74 887.75 21.53 256.74 3.72 598.62 107.76 -13.06 1,863.06 417.89 391.68 28.67 363.01 69.85 0 293.16 0 293.16 50.1 248.26 975.31 2.56 6.87 1.04 2,291.56 10.72 15 27.95 Mar '01 12 mths 3,139.61 82.63 3,056.98 62.37 -8.34 3,111.01 843.2 31.04 421.9 44.75 810.98 114.85 -11.79 2,254.93 793.71 856.08 6.89 849.19 97.94 0 751.25 -2.43 748.82 91.4 666.35 1,411.73 1.8 11.62 1.38 2,324.33 28.59 25 80.71 Mar '02 12 mths 3,486.55 61.16 3,425.39 117.15 -13.83 3,528.71 799.07 32.1 508.37 133.61 905.66 74.19 -7.63 2,445.37 966.19 1,083.34 2.89 1,080.45 141.89 0 938.56 0.82 939.38 73.26 866.11 1,646.31 0 23.25 0 2,324.66 37.26 50 108.94 Mar '03 12 mths 4,047.49 55.48 3,992.01 68.8 9.87 4,070.68 756.08 28.84 642.47 281.74 1,236.13 81.34 -15.6 3,011.00 990.88 1,059.68 2.93 1,056.75 137.94 0 918.81 -16.27 902.54 89.3 813.23 2,254.92 0 23.26 2.98 2,325.64 34.97 50 143.2 ------------------- in Rs. Cr. ------------------Mar '04 Mar '05 Mar '06 Mar '07 12 mths 12 mths 12 mths 12 mths 5,190.40 55.51 5,134.89 91.92 11.79 5,238.60 858.07 35.91 864.44 378.72 1,764.47 116.62 -13.99 4,004.24 1,142.44 1,234.36 3.52 1,230.84 151.6 0 1,079.24 -23.11 1,056.13 141.27 914.88 3,146.15 0 675 86.48 2,327.59 39.31 1,450.00 150.7 7,276.18 43.02 7,233.16 93.32 9.29 7,335.77 1,194.77 46.54 2,878.53 511.53 657.32 135.64 -37.12 5,387.21 1,855.24 1,948.56 5.57 1,942.99 185.97 0 1,757.02 -7.06 1,749.96 255.15 1,494.82 4,192.44 0 351.79 49.34 7,035.71 21.25 250 69.54 10,264.09 36.97 10,227.12 151.92 24.21 10,403.25 1,391.88 86.46 4,279.03 934.24 801.07 274.76 0 7,767.44 2,483.89 2,635.81 3.13 2,632.68 292.26 0 2,340.42 -33.85 2,306.57 286.1 2,020.48 6,375.55 0 712.88 99.98 14,257.54 14.17 250 45.03 13,758.50 74.6 13,683.90 288.7 86.3 14,058.90 1,975.30 0 5,768.20 120.5 27.6 2,624.10 0 10,515.70 3,254.50 3,543.20 7.2 3,536.00 359.8 0 3,176.20 0 3,176.20 334.1 2,842.10 8,540.40 0 873.7 126.8 14,590.00 19.48 300 63.86 Mar '08 12 mths 17,658.10 165.5 17,492.60 326.9 187 18,006.50 3,139.30 0 7,409.10 299.8 557.8 2,558.00 0 13,964.00 3,715.60 4,042.50 116.8 3,925.70 456 0 3,469.70 0 3,469.70 406.4 3,063.30 10,824.70 0 876.5 148.9 14,615.00 20.96 300 79.05 Mar '09 12 mths 21,612.80 105.5 21,507.30 -480.4 -3.8 21,023.10 3,438.80 154 9,249.80 1,687.80 1,523.00 691.4 0 16,744.80 4,758.70 4,278.30 196.8 4,081.50 533.6 0 3,547.90 0 3,547.90 574.1 2,973.80 13,306.00 0 586 99.6 14,649.81 20.3 200 85.42 Mar '10 12 mths 23,006.30 84.3 22,922.00 875.3 111 23,908.30 4,140.40 141.4 9,062.80 2,071.80 1,475.10 640 0 17,531.50 5,501.50 6,376.80 108.4 6,268.40 579.6 0 5,688.80 0 5,688.80 790.8 4,898.00 13,391.10 0 880.9 128.3 14,682.11 33.36 300 120.49

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Appendix 9 Cash Flow Statement: Infosys


Cash Flow Statement Mar '00 12 mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents 350.67 466.63 -163.65 -266.2 36.78 37.95 74.73 Mar '01 12 mths 765.55 602.31 -768.85 538.15 371.61 74.73 446.34 Mar '02 12 mths 962.54 857.82 -988.21 -22.93 -153.33 446.87 293.54 ------------------- in Rs. Cr. ------------------Mar '03 12 mths 978.76 736.66 -635.38 14.88 116.16 293.54 409.7 Mar '04 12 mths 1082.27 913.91 1062.09 28.57 -119.61 409.7 290.09 Mar '05 12 mths 1757.02 1666.42 -874.58 -550.61 246.8 290.09 536.9 Mar '06 12 mths 2340.43 1912.25 1694.42 59.8 277.63 545.38 823 Mar '07 12 mths 3176.2 2674.6 -1881.9 238.5 1031.2 818 1849.2 Mar '08 12 mths 3469.7 715.9 -1127.5 2290.9 1879.3 1852.8 3732.1 Mar '09 12 mths 3547.9 4344.5 -3662.7 -70.7 611.1 3798.1 4409.2 Mar '10 12 mths 5688.8 4477.4 -3064.6 -96.2 1316.6 4347.7 5664.3

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