Académique Documents
Professionnel Documents
Culture Documents
(Infosys)
Submitted By:
Vivek Kumar Bhagat
Adity Tehri
Kumar Pulkesin
Amit Nayyar
Table of Contents
INDUSTRY ANALYSIS .............................................................................................................................. 3
Trend of dividend payout in IT industry for last 5 years ................................................................. 3
Dividend Payout Policy of Infosys Limited (How Much to Pay?) ............................................................ 4
Infosys Limited .................................................................................................................................... 4
Capital History ..................................................................................................................................... 5
Shareholding Pattern .......................................................................................................................... 5
Financials............................................................................................................................................. 6
Dividend History of Infosys ..................................................................................................................... 6
Comparison with Selected Manufacturing Firms (Leyland and Tata Motors) ........................................ 9
Dividend Payout and Market capitalization.......................................................................................... 10
Dividend Growth (Way Forward) .......................................................................................................... 11
INDUSTRY ANALYSIS
In Industry analysis, Information technology industry is studied in terms of its problems
and prospects. India is considered as world’s leading sourcing destination for the
information technology industry, as ion figures it comes to just about 67 percent of the US $
124-130 billion market. The IT industry has shaped momentous command in education
sector, in particular for engineering and computer sciences.
Government can make their interference into the technology sector which has its own
effect in the industry. Government interference and intervention can be explained in two
fundamental parts i.e. directly and indirectly. Direct method means support given by the
government for the development of new technology and market mechanisms to present
incentives for change done by the industry. On the other hand, indirect approach deal with
the persuasion to regulate project standards and direct government purchases by the IT
sector.
Infosys Limited
Infosys limited is the second largest software exporter of India with net operating revenue
of`62,441 crores and net profit of `13,681 crores for FY2016. It is listed on the National
Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) in India and the New York
Stock Exchange (NYSE), Euronext London and Euronext Paris markets. On FY2016
closing, it had market capitalization of `279,796 crores and employed over 200,000 by
March 2017. Infosys has 85 sales offices around the world as on March 31, 2016, of which
only 3 are in India. Its major revenue earning centers are America and Europe.
The Infosys limited, co-founded by seven engineers; N. R. Narayana Murthy, Nandan Nilekani,
N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora in 1981 as
“Infosys Consultants Pvt. Ltd.” with a capital of `10,000 ($250) in Model Colony, Pune as the
registered office. In over a 35-year span, the company transformed itself into an industry leader.
The Infosys signed its first client, Data Basics Corporation, in New York City. The company’s
corporate headquarters was relocated from Pune to Bengaluru in 1983. In 1987, the company
opened its first international office in Boston, US. During fiscal 2012, company changed its
name from Infosys Technologies Limited to Infosys Limited to mark the transition from being a
technology services provider to a business transformation partner.
Management also changed hands over the period. In 2002, Nandan Nilekani took over as
CEO from Narayana Murthy, who was appointed Chairman and Chief Mentor.
K. Gopalakrishnan became CEO in 2007 and in 2011, Shibulal succeeded him and, during the same
year, Murthy also handed over chairmanship to K.V.Kamath. Currently Dr. Vishal Sikka is serving
as the CEO and MD of the company and N. R. Narayana Murthy as the Executive Chairman of
the Board.
Capital History
The Infosys went public in 1993 with an offer price of `95 per share against book value of
`20. The Infosys Initial Public Offer (IPO) was under-subscribed but Morgan Stanley “bailed out”
by picking up 13% of equity at the offer price. The Infosys shares were listed in stock
exchanges in June 1993 with opening price at `145. The company further issued 550,000
shares in 1994 to institutional and corporate investors at `450 (face value of `10). Later, in
March 1999, it issued 2,070,000 American Depository Shares (ADS) (equivalent to 1,035,000
equity shares of par value of `10 at $34) and got listed on NASDAQ. Subsequent American
Depository Receipts (ADR) issues were made in 2003, 2005 and 2006. In 2012, Infosys
transferred the listing of its ADS from the NASDAQ to the NYSE, Euronext London and
Euronext Paris markets.
Shareholding Pattern
Shares of the company are widely held and traded. As on March 2016, the Promoters’ holding was
just 12.75% and the majority of the shares were held by institutional investors (40.10%), retail
(30.37%) and foreign investors as custodians (16.78%). Promoters’ holding shrank mainly due to
expansion of equity base through overseas listing and Employees Stock Option Plans (ESOP).
Exhibit I shows declining trend in promoters shareholdings from FY2001 to FY2016. Infosys with
huge cash on its balance sheet and low promoters’ shareholdings may be a case of potential
acquisition. Large idle cash also reduces the enterprise value of the firm and has adverse impact over
Return on Equity (ROE). Though Infosys defends such questions by saying that the cash is needed
for precautionary measures and future acquisitions, but in reality, Infosys has gone for only small
acquisitions in past equivalent to only a small fraction of cash lying on its balance sheet.
Financials
Infosys reported increasing revenue and profits year after year. The net revenue grew from
`1,900 crores in FY2001 to `62,441 crores in FY2016, registering a CAGR of 26%. During the
same period, the PAT increased from `628 crores to `13,681 crores with impressive CAGR of 23%.
For the FY2015, Infosys reported net revenue of `53,319 crores and PAT of `12,373 crores. The
Balance Sheet size of the firm as on FY2016 closing was `75,141 crores. Infosys remained ZERO
debt firm and shareholders’ funds constituted more than 77% of the balance sheet. Cash and cash
equivalents constituted over 43% of the total assets. The company generated
`9,399 crores from operating activities and after meeting investing and financing expenses, it
added `1,454 crores to cash balance. The summarized Profit and Loss account and Balance
Sheet Statement for last three financial years are given in Annexure I and II respectively.
13-04-12 Final 640 Includes Special dividend of 200% - BPO operations completing
10 years
10-10-00 Interim 50
26-04-00 Final 60
In addition to cash dividend, the company issued bonus share by capitalization of reserves and
surplus. The company also split each equity share of the face value `10 in to two equity shares of
the face value `5 each in FY2000. Exhibit III shows details of bonus issues and stock split since
incorporation.
FY86 1:1
FY89 1:1
FY91 1:1
FY92 1:1
FY94 1:1
FY97 1:1
FY99 1:1
FY2000 2 for 1
FY05 3:1
FY07 1:1
FY15 1:1
FY16 1:1
Bonus and stock split have minimal impact on the financials of any company. Both just increase the
number of equity shares and subsequently the higher liquidity in the stock market. As share price
comes down proportionally, these actions help in keeping share price within physiological level for
small shareholders who form a major chuck of shareholding and are more active in share trading.
Infosys follows fixed payout as dividend to its shareholder. Earlier, it was up to 20% which was
increased to 30% in 2008 board meeting and then to 40%. In 2015 board meeting, it was
further raised up to 50% of the PAT. The dividend payouts increased in line with profits in
accordance with the dividend payout policy. Exhibit IV shows dividend parameters for Infosys
from FY2001 to FY2016.
Exhibit IV: Dividend Payout Parameters of Infosys Limited
The Infosys went public in FY1993 with an offer price of `95 per share. Each share allotted in the
maiden IPO in 1993 at issue price of `95, adjusted for bonuses and split and multiplied to 512
shares by 31st March 2016, at the market share price of `1,217.95 translates to `623,590. The
company surely generated value for the investors by generating huge capital appreciation besides
paying regular dividends. The market value of Infosys equity share has increased many fold.
Unadjusted quarterly closing share price on the BSE is given in Annexure III.
EPS (`) 60 3 1
All in ` Cr.
REVENUE
EXPENSES
All in ` Cr.
Current Liabilities
Annexure III: Share Price of Infosys on BSE (Adjusted for Stock Splits)