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Financial Analysis of

(Based on Standalone Balance Sheet)


Submitted By :
Name Roll No.
Parth Prajapati 44
Jaimin Chauhan 09
Md husain Marchawala 26
Bhavin Rathod 49
Vishnu Chaudhari 05
Aftab Surti 64

Batch : 2017 – ‘19


Submitted To :
Prof. (Dr.) Surendra Sundararajan

Faculty of Management Studies


The Maharaja Sayajirao University of Baroda
Liquidity Ratio [All Amounts are in Rs. (Cr.)]
Ratio 2014-15 2015-16 2016-17 2017-18
Current Ratio = 42,752/9,595 = 46,097/11,588 47,682/11,786 44,090/11,662
Current Assets/ 4.4556 = 3.9777 = 4.0456 = 3.7806
Current Liability
Liquidity of Receivables
Average Collection (8,627 x 9,798 x (10,960 x (12,151 x
Period = 365)/47,300 = 365/53,983 = 365)/59,289 = 365)/61,941 =
(Receivables x Days 66.57 Days 66.42 Days 67.47 Days 71.60 Days
in year)/Annual (67) (66) (67) (72)
credit sales
(Assuming all sales
as credit sales)
Turnover Ratio
Fixed Asset 47,300/7,347 53,983/8,248 = 59289/8605 = 61,941/9,027 =
Turnover Ratio = = 6.43 6.54 6.89 6.86
Net sales/Fixed
asset

Profitability Ratio
Gross Profit Ratio 19,472/47,300 20,574/55,983 22,232/59,289 22,803/61,941
= Gross Profit/Sales = 41.16% = 36.75% = 37.50% = 36.81%

Net Profit Ratio = 12,164/47,300 12,693/55,983 13,818/59,289 16,155/61,941


Net Profit/ Sales = 25.71% = 22.67% = 23.31% = 26.08%

Profitability in Relation to Investment


Return on Equity 12,164/52,191 12,164/52,191 13,818/68,017 16,155/63,502
= = 23.306% = 23.31% = 20.32% =25.44%
(Net Profit after tax-
preferred stock
holders)/
shareholders’ equity

Return on Capital 13,962/52,218 14,594/61,144 15,786/68,099 16,478/64,215


Employed = [EBIT/ = 26.737% = 23.868% = 23.31% = 25.66%
(TA-TL)] x 100

Market-Value Ratio
Price/Earning 1,108.3/105.91 121.95/55.26 = 1,020.80/60.16 1,134.4/71.28
Ratio = Market = 10.46 times 22.04 times = 16.97 times = 15.91 times
share price /
Earning per share

Earning per Share 12,164/114.8 = 12,693/229.6 = 13,818/229.6 16,155/218.4 =


= Net profit / no of 105.95 ₹ 55.28 ₹ = 60.18 ₹ 73.96 ₹
share outstanding
Dividend Yield 42.987/1108.03 29.795/1217.95 30.348/1020.8 34.3177/1134.4
Ratio = Dividend = 3.87% = 2.446% = 2.97% = 3.025%
per share/ Market
share price

Key points of Ratio Analysis :


Current Ratio : Current ratio has decreased over 4 years from 4.46 in 2014-2015 to 4.04 in
2016-2017 due to overall increase in current assets and current liabilities. The ratio has
decreased significantly from 4.04 in 2016-2017 to 3.78 in 2017-18. This means company’s
ability to meet its short term obligation has gone down as compared to previous years.
Average Collection Period : Average collection period is same for the years 2014-15 and
2015-16. So there is no change in credit policy of company. Average collection period has
increased from 67 days in 2016-2017 from 72 days in 2017-2018. It means company has
liberalised credit policy and receivables will be blocked for a longer period of time.
Fixed Asset Turnover Ratio : Over the 4 years fixed asset turnover ratio has increased from
6.43 in 2014-2015 to 6.89 in 2016-2017 and again it has decreased to 6.86 in 2017-2018. It
shows that company has not utilised its fixed asset efficiently to improve its sales.
Gross Profit Ratio : Gross profit ratio has decreased from 41.16 % in 2014-15 to 36.75 % in
2015-16 due to increase in gross is comparatively lower than increase in sales. Ratio has
increased 0.75 % in 2016-2017 & decrease 0.69 % in 2017-18 compared to respective
previous years. It shows efficiency of operations of the company has reduced.
Net Profit Ratio : Net profit ratio has decreased from 25.71 % in 2014-15 to 22.67 % in
2015-16. Ratio has increased 0.64 % in 2016-2017 & increase 2.77 % in 2017-18 compared
to respective previous years. It shows company is more efficient at converting sales into
actual profit.
Return on equity Ratio : Return on equity ratio has decreased from 23.31% in 2014-15 to
20.78 % 2015-2016. Ratio has increased from 20.32 in 2016-2017 to 25.44% in 2017-18. It
shows that company is utilizing shareholder’s fund very carefully. It also indicated that 25.44
% return is generated for the amount they have invested in company.
Return on Capital Employed : Growth of EBIT in the year 2015-2016 and 2016-2017 is
lower than the growth of net assets of company. Hence in these years RoCE has touched
lower levels.
Price/Earning Ratio : In the year 2015-2016 due to issue of bonus shares, EPS has
decreased and subsequently P/E Ratio has increased to approximately 22 times because of
lower denomination in P/E ratio.
Earning Per Share Ratio : EPS has decreased from 105.95 ₹ to 55.28 ₹ in the year 2017-
2018. The reason behind it is issue of bonus shares which resulted into increase in no. of
shares and consequently decrease in EPS.
Dividend Yield Ratio : The fluctuation in ratio is based on changes in dividend per share &
market share price but changes in dividend per share has played crucial role in such
fluctuation. Average of 4-years dividend per share is 34.37 rupees.

From the graph, we can say that


70000
Sales & PAT Infosys’ sales (in Rs.) and profit
59289 61941
60000 55983 amount (in Rs.) have constantly
Amount in Rs.(Cr.)

47300
50000 increased year after year. This
40000 shows that company is
30000 performing well and generates
20000 13818 16155
12164 12693 good return for the Shareholders.
10000
0
2014-2015 2015-2016 2016-2017 2017-2018
Sales PAT

From the graph, it can be clearly


EPS inferred that EPS has decreased
120 105.95 in year 2015-16 drastically. Then,
Earning per Share in Rs.

100 it is gradually increasing year by


80
73.96 year. EPS has decreased from
55.28
60.18 105.95 ₹ to 55.28 ₹ in the year
60
2017-2018. The reason behind it
40 is issue of bonus shares in
20 December, 2014 which resulted
0 into increase in no. of shares and
2014-2015 2015-2016 2016-2017 2017-2018 consequently decrease in EPS.

In the graph share prices show


Market-Share Price(as on 31st March) the volatility (fluctuations) in the
1250 1217.95 prices in last couple of years.
Market Share Price (in Rs.)

1200 This may be due to major


1150 1134.4 changes in company’s
1108.3
1100
management.
1050 1020.8
1000

950

900
2014-2015 2015-2016 2016-2017 2017-2018
Capital Asset Pricing Model
Here EPS (only Basic has been considered) is fluctuating continuously, so it shows that
Infosys has utilized share holders’ fund properly.

Expected Investor’s required rate of return,


RoR = E (Ri) = Rf + [(E (Rm) – Rf) ß]
= 6.49 + [(11.1285 – 6.49) * 0.7487]
= 9.96%
Term Term Represented Source

Risk Free Rate


Rf https://www.rbi.org.in
Treasury Bill Rates = 6.49% p.a
E Rate of Return from market =
https://www.bseindia.com
(Rm) 11.1285% p.a
Index of Systematic Risk (For
ß https://www.moneycontrol.com
INFY= 0.7487)

Dividend Policy

● The board has recommended a special dividend of Rs.10 per equity share resulting in
pay-out of approximately Rs.2600 in June 2018.
● The company's current policy is to pay dividends of up to 50% of the post-tax profits of
the fiscal.
● Compound annual growth rate of total dividend for last 4 years (CAGR) is 13.08%.
● The aggregate dividend works out to Rs.43.50 per share resulting in an aggregate
dividend pay-out of approximately Rs. 11,371 crore including DDT.

Financial Year 2017-18 2016-17 2015-16 2014-15


#
Phase Final Interim Final Interim Final Interim Final Interim
Recommended
final dividend (per 20.5 13 14.75 11 14.25 10 29.5* 30
equity share)
Dividend (%) 410 260 295 220 285 200 590 600

Note1- # subjected to approval of shareholders in AGM, to be held on June 23, 2018.


Approval would result in the cash flow of approximately Rs. 7949 crores (exclusive dividend
paid on treasury shares) inclusive dividend distribution tax.

Note2- * equivalent to Rs. 14.75/- per share after 1:1 bonus issue.