IT Sector Analysis:

Introduction:
India is the world's largest sourcing destination for the information technology (IT) industry,
accounting for approximately 67 per cent of the US$ 124-130 billion market. The industry
employs about 10 million workforce. More importantly, the industry has led the economic
transformation of the country and altered the perception of India in the global economy. India's
cost competitiveness in providing IT services, which is approximately 3-4 times cheaper than the
US, continues to be the mainstay of its unique selling proposition (USP) in the global sourcing
market. However, India is also gaining prominence in terms of intellectual capital with several
global IT firms setting up their innovation centers in India.
The IT industry has also created significant demand in the Indian education sector, especially for
engineering and computer science. The Indian IT and ITeS industry is divided into four major
segments IT services, business process management (BPM), software products and engineering
services, and hardware.
The IT-BPM sector in India grew at a Compound Annual Growth rate (CAGR) of 15 per cent
over 2010-15, which is 3-4 times higher than the global IT-BPM spend, and is estimated to
expand at a CAGR of 9.5 per cent to US$ 300 billion by 2020.
Market Size
The Indian Information Technology (IT) sector is expected to grow 11 per cent per annum and
triple its current annual revenue to reach US$ 350 billion by FY 2025, as per National
Association of Software and Services Companies (NASSCOM).
India, the fourth largest base for new businesses in the world and home to over 3,100 tech startups, is set to increase its base to 11,500 tech start-ups by 2020, as per a report by NASSCOM
and Zinnov Management Consulting Pvt Ltd.
Indias internet economy is expected to touch Rs 10 trillion (US$ 151.6 billion) by 2018,
accounting for 5 per cent of the countrys gross domestic product (GDP), according to a report
by the Boston Consulting Group (BCG) and Internet and Mobile Association of India (IAMAI).
Indias internet user base reached over 350 million by June 2015, the third largest in the world,

while the number of social media users grew to 143 million by April 2015 and smartphones grew
to 160 million.
Investments
Indian IT's core competencies and strengths have attracted significant investments from major
countries. The computer software and hardware sector in India attracted cumulative Foreign
Direct Investment (FDI) inflows worth US$ 18.17 billion between April 2000 and September
2015, according to data released by the Department of Industrial Policy and Promotion (DIPP).
Indian start-ups are expected to receive funding worth US$ 5 billion by the end of 2015, a 125
per cent increase in a year, according to a report by IT Industry association NASSCOM.
The private equity (PE) deals increased the number of mergers and acquisitions (M&A)
especially in the e-commerce space in 2014. The IT space, including e-commerce, witnessed 240
deals worth US$ 3.8 billion in 2014, as per data from Dealogic.
Some of the major developments in the Indian IT and ITeS sector are as follows:
Indias top-tier information technology (IT) company, Infosys Ltd, has bought a minority
stake worth US$ 3 million in Whoop, which is a US-based start-up that makes activity
trackers worn by athletes.
Microsoft Ventures is planning to incubate 500 start-ups in India in the next five years
with a vision to create a viable and profitable business out of the booming start-up sector
in India.
National Association of Software and Services Companies (NASSCOM) plans to open
four more tech start-up incubation centres in different parts of India, in addition to
existing three, in support of Government of Indias Start-up India initiative.
Nasscom Foundation, a non-profit organisation which is a part of Nasscom, has partnered
with SAP India to establish 25 National Digital Literacy Mission (NDLM) centres in 12
cities across India, as a part of Government of India's Digital India initiative.
Infosys, Indias second largest Information Technology services company has acquired
US-based Noah Consulting, a provider of advanced information management consulting
services for the oil and gas industry.
US-based Callidus Software Inc, a cloud-based sales, marketing, learning and customer
experience solutions provider, has opened its centre in Hyderabad and also launched its
The Lead to Money suite in Indian markets.
Wipro Ventures, Wipros US$ 100 million corporate venture arm, plans to invest in earlystage venture capital (VC) funds based in the US to pursue a strategy of
investing/partnering country-focussed VCs.
A recent study by research firm International Data Corporation (IDC) suggests that India
may soon be able to catch up with the global technology trends that have disrupted
enterprises, industry and the way consumers behave and transact.
Reliance is building a 650,000 square feet (sq ft) data centre in Indiaits 10th data centre
in the countrywith a combined capacity of about 1 million sq ft and an overall
investment of US$ 200 million.
Intel Corp plans to invest about US$ 62 million in 16 technology companies, working on
wearable, data analytics and the Internet of Things (IoT), in 2015 through its investment
arm Intel Capital. The Indian IoT industry is expected be worth US$ 15 billion and to
connect 28 billion devices to the internet by 2020.

Indian e-commerce industry is expected to grow at a CAGR of 35 per cent to reach US$
100 billion size in the next five years, as per a study by AssochamPricewaterhouseCoopers.

India's growing market size

Indias technology and BPM sector (including hardware) is estimated to have generated US$
146 billion in revenue during FY15 compared to US$ 118 billion in FY14, implying a growth
rate of 23.72 per cent
The contribution of the IT sector to Indias GDP rose to approximately 9.5 per cent in FY15
from 1.2 per cent in FY98
The top six firms contribute around 36 per cent to the total industry revenue, indicating the
market is fairly competitive, with TCS being the leader accounting for about 10.1 per cent

Five Porter Analysis of IT Industry:

The IT Industry landscape is characterised by intense completion for conventional IT services:
Application Development & Maintenance, IT Infrastructure Management Services, Network
Management Services, Data-center Services etc. leading therefore to commoditization. There
are several firms in the market offering similar services and it is difficult to differentiate based
on these service offerings. The existing competition comes from both domestic players (Infosys,
TCS, Wipro, HCL technologies, Tech Mahindra, Mindtree and so forth) and international ones
(IBM, Accenture, Capgemini, Cognizant and so forth).
It is in the context of non-conventional
services,
i.e.
the
ones
focussed
(Digitization) on emerging technologies
and trends such as Analytics, Cloud
computing, Social Media, Enterprise
Mobility, Internet of Things etc. where the
opportunity
for
differentiation
through niche-specialization occurs.

1. Supply

Abundant supply across segments, mainly lower-end, such as

ADM. Lower supply in higher-end areas like IT/Business

Consulting, but competition is very tough.

2. Demand

The global downturn had put considerable pressure on global IT

spending but the situation is now improving.

3. Barriers to entry

Low, particularly in the ADM & BPO segments as these are prone
to relatively easy commoditization. It's high in value-added
services like IT/Business Consulting and R&D where in-domain
expertise creates a barrier. The size of a particular
company/scalability and brand-image also creates barriers to entry;
as such firms have built up long-term relationships with major
clients.

4. Competition

Competition is global in nature and stretches across boundaries

and geographies. It is expected to intensify due to the attempted
replication of the Indian offshoring model by MNC IT majors as
well as small startups.
IT continues to be a driving force towards all aspects connected
with our lives. While a particular technology may become obsolete
and a particular company specializing in it may suffer, the obsolete
technology can only get substituted by a newer technology offered

5. Substitution of IT
services and
products

Competition

Name
TCS
Infosys
Wipro
HCL Tech
Tech Mahindra
Oracle Fin Serv
Mindtree
MphasiS
Hexaware Tech
Tata Elxsi
Cyient

Last Price Market Cap.

(Rs. cr.)
2,279.20
449,099.94
1,083.40
248,850.98
546.50
135,007.48
826.40
116,465.99
504.45
48,776.80
3,688.65
31,288.31
1,499.70
12,580.83
448.00
9,415.56
227.20
6,851.51
1,932.60
6,017.77
486.05
5,467.25

Sales
Turnover
73,578.06
47,300.00
41,635.00
17,153.44
19,162.65
3,341.10
3,547.40
3,026.45
1,154.56
849.40
1,294.01

Net Profit

Total Assets

19,256.96
12,164.00
8,193.10
6,345.95
2,256.23
1,058.02
534.30
553.03
318.39
102.90
271.16

45,666.71
48,068.00
40,655.20
19,432.97
12,486.50
2,990.75
2,013.50
4,174.51
1,037.39
283.36
1,580.62

PROFIT AND LOSS OR INCOME STATEMENT

Tech Mahindra Ltd. key Products/Revenue Segments include Software Services. Looking at the
Profit and loss of the Tech Mahindra the position of the company is quite good and stable. The
operating profit of the company is not stable but it is fluctuating year by year. Operating profit
and net profit of the company is continuously showing increasing and stable
trend which leads to high and good efficiency of company. The company operating income
increases with expansion of their clients over the globe. The only important high expenditure for
company is its employee cost which cant be disadvantage as it is a key factor for growth. The
sales of the company are increasing.

SALES TURNOVER
The sales of the company are increasing year by year which had affected their profits. This has
lead to increase in manpower and employee cost. The sales have increased from 105.88 cr to
256.23 from 2011 to 2015. There is a drastic but positive change in sales.

OPERATING PROFIT
The company is earning good profit so far. But the other expenses like employee cost and selling
& administrative have affected their profits at the starting period of company i.e. 2011. The
profits are fluctuating year by year but from 2012 it is continuously improving. In 2011 profit
was 0.57cr and in 2015 it is 106.72 cr.

EXPENDITURE
The company does not spending much on raw materials but there are huge expenses like
power,fuel,employee cost etc. These are the basic expenses of the company. The expenses of the
company are increasing year by year which is a good for a company as more manpower will help
to generate more efficiency and sales. The expenditure of company in 2011 was 106.99cr and in
2015 it is 159.96 cr. It is good sign for a company. As employee efficiency improves profit will
increase.

 GROSS PROFIT
Gross profit of the company is once again increasing year by year. It is increased by almost
13.5%. IN 2011 the GP was negative 5.39 cr and in 2015 it is 106.72cr.

INTEREST
As the company has taken loans from banks and financial institution it has to pay huge amount
of interest in the year 2011. As the borrowing of loan is decreasing year by year payment of
interest is also decreasing. The amount of interest was 5.96cr in 2011 and in 2015 interest
payable is 0, as company is also earning good and huge profit.

DIVIDEND
Year on year, growth in dividends per share increased 20.00% while earnings per share excluding
extraordinary items fell by 15.65 %. The positive trend in dividend payments is noteworthy since
very few companies in the Software & Programming industry pay a dividend. Additionally when
measured on a five year annualized basis, dividend per share growth is above the industry
average relative to its peers, while earnings per share growth are in-line with the industry
average.

TAX

As it is compulsory for every company to pay tax to government. Tech Mahindra is paying taxes
to the company on regular basis.

BALANCE SHEET
Looking at the balance sheet of tech the position Mahindra of the company look good. The
company has failed to invite shareholders, this is the reason the share capital of the company is
unchanged. The reserves of the company are decreasing year by year, the company might use it
to pay dividend or for payment of interest. The company has taken huge loan from banks and it is
increasing year by year, plus they have to pay interest on such loans. Coming towards the
application of funds the investments of company has increased. The debtors of the company are
increasing it means we are not able to recover our money from debtors. They have a good
amount of cash and bank balance. The inventory of the company is reducing which is good it
means there is demand for the stock. The company has not acquired too much asset plus the cash
balance is reducing this puts an the liquidity of the company.

SHARECAPITAL

The share capital of the company is 33.1 in 2011, 2012, 2013, 2014 & 2015. It means that the
company has not raised any capital through issue of shares. The company is not raising its capital
from public.

RESERVES & SURPLUS

The reserve and surplus of the company are increasing day by day. The company is using this
reserve to pay dividend and there is no loan to company to pay interest. The reserve were -264.82
cr in 2011 which is increased to -65.36 cr in 2015

LOAN
The company has borrowed secured and unsecured loans from bank and financial institution in
the year 2011. The amount of loan has decreased year by year. In 2011 secured loans were 220 cr
which is decreased to 162 cr.

INVESTMENT
There is no investment. The company has not invested in any bonds and assets. The investment
of the company is nil.

SUNDRY DEBTORS
Debtors are those from which we will get money. The debtors of the company are increasing it
means that much amount is blocked with them. It has increased from 26.19cr to 46.46cr from
2011 to 2015. The company has failed to recover money from debtors.

CASH AND BANK BALANCE

The cash balance of the company is increasing year by year. It has increased from 10.62 cr to
32.55cr in the span of 5yrs. Its almost a 35% increase in cash balance. In 2015, cash reserves at
Tech Mahindra Ltd fell by 2.46bn. However, the company earned 26.36bn from its operations for
a Cash Flow Margin of 11.65%. In addition the company used 20.92bn on investing activities
and also paid 7.90bn in financing cash flows.

CURRENT ASSETS

The current assets of the company are increasing year by year which is good from the side of
company. In 2011 the current assets were 56.67cr and in 2015 current assets are 115.68cr. The
total increase in current asset is 59.01cr.

CURRENT LIABILITIES
The current liabilities of the company are decreasing year by year which is good. This means that
the company is paying off its liabilities. In 2011 the CL were 32.09 cr and in 2015 CL are 18.32
cr. The total difference is 13.77cr.

CASH FLOW - Tech Mahindra BPO Ltd

Cash and Cash Equivalents at Beginning of the year
It is opening cash balance of company it is increasing year by year. There is no any
loan for company it leads to more liquidity in company. It increases from 3.92 cr in
2011 to 60.03 cr in 2015.

Net Profit before Tax & Extraordinary Items

In the year 2011 net profit was negative due to high amount of interest and as
company was on development stage so cash was more involved in investments.
There is increase in net profit with increase in sales and cash balance. It was
increasing from -162.52 cr in 2011 to 102.24 cr in 2015.

Op. Profit before Working Capital Changes

Operating profit before working capital changes is net profit before tax minus
Depreciation, Interest rental charges, trade receivable and trade payable. For tech
Mahindra depreciation is the only item which is deduction from net profit. Tech
Mahindra has less fixed assets such as computers, building, and chairs etc. so the

depreciation amount is also decreasing year to year. That is the reason as net profit
of company is increasing as well as operating profit is also improving.

Cash Generated from/(used in) Operations

Cash generated from used in operations is operating profit basically after deducting
all extra ordinary items from net profit. It is showing stable and continuous improving
as net profit is also increasing due to growth in sales. It is increased from -48.02 cr in
2011 to 73.83 cr in 2015.

Cash Flow before Extraordinary Items

It is remaining cash after paying taxes. It is increasing from year 2012 from 7.25 cr to
73.83 cr in 2015.

Net Cash Used in Investing Activities

It is a total of company money using for investment. Tech Mahindra basically deals in
foreign exchange transaction there is no any other investment activities. The company
also earning some amount from other investments. It is increasing from -3.8 cr in year
2011 to 1.3 cr in 2015.

Net Cash Used in Financing Activities

Here it is cash used in various other financing activities such as interest received,
proceed from other long term borrowings, share application money, interest paid and
payment of long term borrowings. It is decreasing year to year as less cash used in all
this activities as there is no remaining long term borrowed fund and no interest required
to pay. It is decreased from 57.34 cr in 2011 to 100 cr in 2015. It is a good sign for
company.

Cash and Cash Equivalents at End of the year

It is cash amount remaining after deducting all extra ordinary expenses from net profit of
company. It is in increasing and improving year by year as profit of the company is also
good. Compare to which as company dont have any loans and other financial expense
so it is good. Cash position of company growing from 8.35 cr to 32.55cr in 2015.the
available balance for next year utilization is company is pretty good.

Management Discussion:
Introduction:
Tech Mahindra Limited (Tech Mahindra) is a specialist in digital transformation,
consulting and business re-engineering solutions and part of the US$16.9 billion
Mahindra Group.
Tech Mahindras revenue was at Rs 22,621 crore (US$ 3,686 million) for the financial
year ended 31st March 2015, registering a growth of 20.1% on YoY basis. The
Companys Profit after Tax (PAT) was at Rs 2,628 crore (US$ 427 million)
Industry and Structured Development:
Disruptive technologies, expanding competition and rapidly changing customer
requirements have impacted the IT-BPM sector immensely. Erratic movements in
global commodity prices, in3ation, unemployment, digitization, currency movements,
changing customer experience and expectations is changing the face of this industry.
It provides both opportunities and challenges for the global technology industry.
Outlook
The future of the global technology industry will be shaped by economic forces
especially in the advanced countries. As per the IMF global growth remains moderate,
with uneven prospects across the main countries and regions. It is projected to be
3.5% in 2015 versus 3.4% growth of 2014. Relative to last year, the outlook for
advanced economies is improving, while growth in emerging market and developing
economies is projected to be lower, primarily re3ecting weaker prospects for some
large emerging market economies and oil-exporting countries. Factors like lower oil

prices, exchange rate swings, and country/region specific.factors have affected the
global activity in 2014 and are still shaping the outlook.

Opportunities and Risks

India has continued to retain its 3rst mover advantage and maintained its leadership
position. It remains a high potential market worldwide, offering multiple opportunities
for unmet needs. With the second largest population in the world, India also presents a
large end user market. It continues to remain an excellent delivery centre for the ITBPM industry. Currency movements and increased operational ef3ciency have
ensured that Indias position as the most cost competitive market has only become
stronger over the past years. It has established a global delivery chain of ~ 640 ODCs
across 78 countries. The variety and scale of offer in India allows multiple
collaborative models to exist. The Indian technology industry is today a global digital
skill hub. India has ~ 7,000 digital focused on with start-ups investing in futuristic
technologies. All this together reinforces Indias leadership position in the global
sourcing market
Discussion on Financial Performance with respect to Operational Performance
Overview
The financial statements have been prepared in compliance with the requirements of
the Companies Act, 1956 and Generally Accepted Accounting Principles (GAAP) in
India.
The Consolidated financial statements have been prepared in compliance with the
Accounting Standard AS 21 and AS 23 issued by the Institute of Chartered
Accountants of India (ICAI).
The discussion on financial performance in the Management Discussion and Analysis
relate primarily to the standalone accounts of Tech Mahindra Limited. Wherever it is
appropriate, information pertaining to consolidated accounts for Tech Mahindra
Limited & its subsidiaries is provided for the current year and previous year. For the
purpose of comparison with other 3rms in this industry as well as to see the

positioning and impact that Tech Mahindra Limited has in the marketplace, it is
essential to take the figures as reflected in the Consolidated Financial Statements

Auditors Report:

ANNEXURE TO THE INDEPENDENT AUDITORS REPORT Re: TECH

MAHINDRA LIMITED
(Referred to in paragraph 1 under Report on Other Legal and Regulatory
Requirements section of our report of even date)
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars, including
quantitative details and situation of fixed assets.
(b) The major portions of the fixed assets were physically verified during the year by
the Management in accordance with a regular programme of verification, which, in
our opinion, provides for physical verification of all the fixed assets at reasonable
intervals. According to the information and explanations given to us, no material
discrepancies were noticed on such verification.
(ii) In our opinion and according to the information and explanations given to us,
having regard to the nature of the Companys business / activities during the year,
clause (ii) of paragraph 3 of the Order is not applicable to the Company.

(iii) The Company has not granted any loans, secured or unsecured, to companies,
firms or other parties covered in the Register maintained under Section 189 of the Act.
Accordingly the provisions of sub clauses (a) and (b) of Clause (iii) of paragraph 3 of
the Order are not applicable to the Company.
(iv) In our opinion and according to the information and explanations given to us,
there is an adequate internal control system commensurate with the size of the
Company and the nature of its business for the purchase of fixed assets and for the
sale of goods and services and during the course of our audit we have not observed
any continuing failure to correct major weaknesses in such internal control system.
There are no purchases of inventories during the year.
(v) In our opinion and according to the information and explanations given to us, the
Company has not accepted deposits. Therefore, the provisions of the clause (v) of
paragraph 3 of the Order are not applicable to the Company. (vi) According to the
information and explanations given to us, the provisions of the clause (vi) of
paragraph 3 of the Order are not applicable to the Company as the Company is not
covered by the Companies (Cost Records and Audit) Rules, 2014.
(vii) According to the information and explanations given to us, in respect of statutory
dues:
(a) The Company has generally been regular in depositing undisputed statutory dues,
including Provident Fund, Employees State Insurance, Income-tax, Sales Tax, Wealth
Tax, Service Tax, Customs Duty, Excise Duty, Value Added Tax, Cessand other
material statutory dues applicable to it with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund,
Employees State Insurance, Income-tax, Sales Tax, Wealth Tax, Service Tax,
Customs Duty, Value Added Tax, Cess and other material statutory dues in arrears as
at March 31, 2015, for a period of more than six months from the date they became
payable.