A Summer Project Report on EQUITY RESEARCH ON IT COMPANIES

At Asit C Mehta Intermediates.

Submitted in partial fulfillment of the requirements for Master of Management Studies (M.M.S.) University of Mumbai

By -

Ghotgalkar Shantanu Sadanand

Roll No. 1075 Batch of 2010-12

Oriental Institute Of Management Plot No.149, Sector 12, Vashi, Navi Mumbai 400703.

July 2011

Acknowledgement
I take this opportunity to thank Ms.Saryu Pathania, (Project Guide), for her commitment, guidance, contribution and close supervision though being very busy in their daily schedule. We together have done every possible effort to make this presentation error free. However if you find any mistakes, please let me know, because that will help me to improve further.

I would like to thank equity researchers of Asit C Mehta for their constant inputs which made the task interesting. It was a pleasure working with them. I would also like to extend my gratitude to our Director General, Dr. M.G. Shirahatti, who gave us this opportunity and platform to explore our abilities and conquer new horizons. No formal word is sufficient to convey my sincere thanks and heartiest gratitude to Prof. Rashmi Soni (Project Guide) for giving valuable time and precious suggestions. Her motivation has really been a great help in developing this project. Last but not the least; our Librarian has always been helpful whenever I needed reference books to gather relevant information for my project work.

Declaration

I, Mr. Ghotgalkar Shantanu Sadanand Roll No. 1075 student of MMS 1st Year hereby certify that this project work titled Equity Research on IT Companies carried out by me, in partial fulfillment of the requirements of the program is an original work of mine under the guidance of Industry mentor Ms. Saryu Pathania &Institute mentor Prof.Dr Rashmi Soni. I further declare that it is not a reproduction from any existing work of any person and it has not been submitted to any other university or institute for the award of a degree or diploma or any other similar title of recognition.

_____________________ (Student`s Signature) Date: .. July 2011

Certificate

This is to certify that, Mr. Ghotgalkar Shantanu Sadanand Roll No. 1075 is a fulltime bonafide student of Oriental Institute of Management and pursuing Masters Of Management Studies (MMS). The project report titled Equity Research on IT Companiesis completed by him/her under the guidance of Prof.Dr Rashmi Soni in the partial fulfillment of the requirements for the award of the degree of Master in Management Studies of Mumbai University is an original work done.

________________________ (Signature of the Project Guide) Oriental Institute of Management, Vashi, Navi Mumbai 400703.

__________________________ (Signature of the Director) Oriental Institute of Management, Vashi, Navi Mumbai 400703.

Table of Contents

1. Objectives and Need of the study. 2 2. Scope and Limitations of the study ........................................................................... 3 3. Introduction ................................................................................................................ 4
a. Industry Analysis b. Company Analysis

4. Research Methodology....... 19
a. Collection of Data b. Sample Design & Method

5. Data Analysis and Interpretation of the study 21

a. IT Industry Analysis b. Infosys Company Analysis c. TCS Company Analysis

6. Comparative Analysis and Valuation.42 7. Suggestions and Conclusion.. ............ 50 8. References...... 51

Executive Summary
The Project titled Equity Research on IT companies involves the study of IT industry of India using the fundamental analysis and to study the stocks of two major IT companies i.e Tata Consultancy Services Ltd & Infosys Technology Ltd. In the initial part of the study we discuss the current scenario of IT industry with regard to various parameters like the sources of revenues, the macro economic factors affecting the business of IT industry, the required man power, etc. Also we try to study the future outlook of the industry with regard to its growth rate and global economic factors affecting that may affect the industry. In the second part we study the company profiles of Infosys and TCS. Here we take into consideration every aspect of company i.e the journey of the company right from its inception, its business model, the products and services offered by them, their achievements, and milestones. We also try the financial data like their EPS, Revenues, Market capitalization, etc. of both the companies. Also the ratio analysis of both the companies has been done in order to get the idea of the actual financial position of these companies. In the comparative analysis we try to compare the stocks of both the market companies with respect to BSE sensex. Through these comparison we can analyze how the stock prices of both the companies have performed from last five years i.e from 2007-2011. In the last part we try evaluate estimated intrinsic value of both the companies using the Earning Multiplier Approach of valuation of stocks. Based on these intrinsic values the suggestions and conclusions for the investment in these stocks has been made.

Objectives of the study

To study the concept of equity research

To study the techniques of equity research and its implications

To analyze the stocks of TCS and Infosys.

Need of the Study

The Indian it industry is the one of the most booming sector of the Indian economy. It is growing at a CAGR rate of around 22% as per NASSCOM reports 2011. Hence the IT companies are the most preferred stocks by investors in their portfolio. Hence the continous study of IT companies is required. Therefore the project Titled Equity research on IT Companiesis done in order to study the IT sector and the compare the stocks of the top IT companies as per as Market Capitalization listed in the Bombay stock Exchange.

Scope of the Study

This research primarily focuses on software services companies in India

IT-hardware &IT-ES domains are excluded from the ambit of this research

Limitations of the study

This research was carried out for limited period of 2 months.

The fundamental analysis is based on the secondary data collected only during period of 20072011

Industry Analysis
OVERVIEW OF STOCK MARKET

Right from the beginning the stock broking industry has undergone a drastic change. Gone are the days when the individuals were acting as a stock broker & just were serving a limited region. The industry structure has changed so much as the corporate giants entered in the stock broking industry.

Broking Insights The Indian broking industry is one of the oldest trading industries that have been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalizations period, the industry has found its way towards sustainable growth. With the purpose of gaining a deeper understanding about the role of the Indian stock broking industry in the countrys economy, here are some of the Industry insights gleaned from analysis of data received through primary research.
In tune with the global stock markets that began to recover from the second half of 2003; Indian stock markets too witnessed rapid growth. Indias two leading indices, the most popular BSE Sensex, and the one most used by the markets the National Stock Exchanges S&P CNX Nifty rose to record levels. Both primary and secondary market activity experienced sharp surge. Much progress was made in further strengthening and streamlining risk management, market regulation and supervision. A few aspects of the major developments in the Indias stock markets are described below. Indian securities market is fairly large as compared to several other emerging markets. There are 22 stock exchanges in the country, though the entire liquidity is shared between the countries two national level exchanges namely, the National Stock Exchange of India and the Bombay Stock Exchange Ltd. The regional stock exchanges are in pursuit of business models that make them viable and vibrant. Meanwhile, these exchanges have become members of the national level exchanges through formation of subsidiaries whose business is showing continuous growth and progress.

The number of brokers in various stock exchanges rose from 6,711 in 1994-95 to 9772 in FY10. The number of brokers in all the exchanges together peaked to 10,213 in the year FY01 but gradually declined thereafter when the regional stock exchanges began to lose business in the light of wide ranging market structure reforms introduced since then. In FY01, when the markets were in upswing, several regional stock exchanges were generating business owing to the availability of deferral products, such Badla and different settlement calendars prevailing at that time in these exchanges. For instance in FY01, the Delhi Stock Exchange registered cash market turnover of Rs 838.71 Bn; Uttar Pradesh Stock Exchange, Rs 247.47 Bn, Ludhiana Stock Exchange Rs 97.32 Bn, Pune Stock Exchange Rs 61.71 Bn as against Rs 13,395.11 Bn of the turnover at the National Stock Exchange and Rs 10,000.32 Bn turnover at the Bombay Stock Exchange. With the abolition of the deferral products and introduction of uniform T+2 settlement cycle, the liquidity in these exchanges flowed to the national level system consisting of NSE and BSE.

Terminals Almost 52% of the terminals in the sample are based in the Western region of India, followed by 25% in the North, 13% in the South and 10% in the East. Mumbai has got the maximum representation from the West, Chennai from the South, New Delhi from the North and Kolkata from the East. Mumbai also has got the maximum representation in having the highest number of terminals. 38% terminals are located in Mumbai while 12% are from Delhi, 10% from Ahmedabad, 9% from Kolkata, 4% from Chennai and 27% are from other cities in India.

% of terminals in major cities

Kolkata 9% Ahmedabad 10% Delhi 12% Other Cities 27% Chennai 4% Mumbai 38%

Branches & Sub-Brokers By the Western region, with 31% branches. Around 24% branches are located in the South and East constitutes for The maximum concentration of branches is in the North, with as many as 40% of all branches located there, followed 5% of the total branches of the total sample. In case of sub-brokers, almost 55% of them are based in the South. West and North follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total sub-brokers.

% of branches in each region

40 35 30 25 20 15 10 5 0 EAST WEST SOUTH region NORTH

percentage

Series1

% of sub brokers present in each region

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Companies%

50 40 30 20 10 0 SOUTH WEST NORTH EAST Region Series1

In tune with the global stock markets that began to recover from the second half of 2003; Indian stock markets too witnessed rapid growth. Indias two leading indices, the most popular BSE Sensex, and the one most used by the markets the National Stock Exchanges S&P CNX Nifty rose to record levels. Both primary and secondary market activity experienced sharp surge. Much progress was made in further strengthening and streamlining risk management, market regulation and supervision. A few aspects of the major developments in the Indias stock markets are described below.

Indian securities market is fairly large as compared to several other emerging markets. There are 22 stock exchanges in the country, though the entire liquidity is shared between the countries two national level exchanges namely, the National Stock Exchange of India and the Bombay Stock Exchange Ltd. The regional stock exchanges are in pursuit of business models that make them viable and vibrant. Meanwhile, these exchanges have become members of the national level exchanges through formation of subsidiaries whose business is showing continuous growth and progress. The number of brokers in various stock exchanges rose from 6,711 in 1994-95 to 9,335 in FY06. The number of brokers in all the exchanges together peaked to 10,213 in the year FY01 but gradually declined thereafter when the regional stock exchanges began to lose business in the light of wide ranging market structure reforms introduced since then. In FY01, when the markets were in upswing, several regional stock exchanges were generating business owing to the availability of deferral products, such Badla and different settlement calendars prevailing at that time in these exchanges. For instance in FY01, the Delhi Stock Exchange registered cash market turnover of Rs 838.71 Bn; Uttar Pradesh Stock Exchange, Rs 247.47 Bn, Ludhiana Stock Exchange Rs 97.32 Bn, Pune Stock Exchange Rs 61.71 Bn as against Rs 13,395.11 Bn of the turnover at the National Stock Exchange and Rs 10,000.32 Bn turnover at the Bombay Stock Exchange. With the abolition of the deferral products and introduction of uniform T+2 settlement cycle, the liquidity in these exchanges flowed to the national level system consisting of NSE and BSE.

List of Stock Exchanges in INDIA:

There are 22 stock exchanges in India. These are shown below

Bombay Stock Exchange National Stock Exchange Bangalore Stock Exchange Bhubaneswar Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange
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Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange Jaipur Stock Exchange Ludhiyuana Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange Magadha Stock Exchange Mangalore Stock Exchange Meerut Stock Exchange OTC Stock Exchange Pune Stock Exchange Saurasthra Stock Exchange Uttar Pradesh Stock Exchange Vadodara Stock Exchange

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Company Overview
About Asit C. Mehta The company is jointly promoted by noted stock market professionals Mr. Asit C. Mehta and Mrs. Deena A. Mehta, and is a part of the Mumbai-based Nucleus Group of Companies. The founders have over 25 years of experience in the fields of finance, investments and technology. The other group companies are engaged in IT and IT-related services such as database development, back-office applications for banks, insurance and finance companies, content acquisition and corporate document management solutions. Mr. Asit C. Mehta, the Group Chairman is a Chartered Accountant and a Seasoned Capital Market Professional. He also has several shot-term/ diploma courses in management, securities laws & investment management. He started his career in the corporate finance markets in the year 1983 by associating with the leading Government Security broker of those times. He concentrated on Corporate Debt comprising of ICDs, Bill Discounting, Syndication of Loans, Issue of commercial papers, Short-term debentures,etc. Mrs. Deena Mehta, a Chartered Accountant and an MBA, is a co-promoter of Asit C. Mehta Investment Interrmediates Limited (ACMIIL). Currently, she is on the board of ACMIIL as its managing director. Over the last 25 years, she has successfully developed the capital market investment business of the Nucleus Group. Her core functions include the supervision of the Retail and Institutional Equities and Derivatives Businesses, MF distribution, Business Development, Marketing, Strategic Planning & MIS, Company accounts, Compliance, Operations, Software Development, HR and Administration. She has been actively involved in various capital market-related reforms in the country and is currently a member of the governing board of the Bombay Stock Exchange as its trading member director. In 2001, Mrs. Deena Mehta became the first woman president of the Bombay Stock Exchange prior to its corporatization.

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Vision: To be a Trusted Financial Intermediary Corporate Purpose: To reach appropriate financial products, services and solutions to every Indian entity. Reach & Access Presence in all major cities including Tier-II and Tier-III locations in 26 states Over 100 branches across India Over 700 Business Associates Over 315,000 Client accounts with almost 140,000 unique Clients Over 950 Employees

Board of Directors Chairman Managing Director : : Asit C. Mehta Mrs. Deena A. Mehta Kirit H. Vora Mr. Shirish Shah (Former MD of Shah Constructions, an International constructions company. Prof. N. Venkiteswaran (Former Professor at IIM Ahmedabad and Director at Thiagarajar School of Management Mr. Shashidhar Ullal (Former Vice-Chairman of HECL Ltd.) C. L. Jain (Former Finance Director of Hoechst Ltd.)

Whole time Director : Independent Directors :

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Membership & Licenses NSE: Capital, Derivatives, Debt & Currency Derivatives. BSE: Cash & Derivatives. FEDAI: Foreign Exchange. SEBI: PMS & Merchant Banking Category I. Commodities: NCDEX, MCX,DGCX CDSL: Depository Participant

Corporate Social Responsibility Investor Education newsletters in various regional languages Medical camps at remote locations in Gujarat Earthquake relief camps at Bhuj, Kachchh Detection-cum-corrective surgery for the physically challenged

Achievements One of the first limited liability Companies to acquire membership on Bombay Stock Exchange (BSE). One of the first multiple seat holders and multiple exchange members. One of the first private VSAT network users. The first to utilize a franchisee business model for Associates. The first to achieve the ISO quality certification for business processes from SGS. Currently we are an "ISO 9001:2008" certified company. The first to receive a CRISIL grading for quality of operations and services. Currently we are at the highest broker quality grading "BQ1". Company Managing Director Mrs. Deena A. Mehta was the first lady to be elected to the governing board of the BSE and first and only lady to be the President of BSE. Mrs. Deena A. Mehta is also currently the First lady as the Trading Member in the BSE Governing Board (post corporatization).
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ACMIIL Advantage Investor First -Unbiased investment advise as per investors financial goals Transparent and fair dealing Financial Market expertise & vast experience of Founders & Top management Full-service full-product range brokerage house with a larger & sharper market view Wider options for investments - All financial instruments through all technology mediums like Internet, Broadband, Call-2-Invest, VSAT, etc. An ISO 9001:2008 certified company reflecting high quality standards of service Graded BQ1 highest quality grading BQ1 from Crisil reflects the quality of operations & services Best risk management systems in the industry by grading clients and providing VAR-based margining system (as followed by exchange) for risk exposure We are present in 26 states and over 700 locations across India.

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Business Strategy Continuously assimilate, analyse and apply knowledge to power superior financial decisions. Focus on core competence in financial services. Ensure de-risked business through multiple products and diverse revenue streams. Customer Strategy Drive stickiness through high quality research & service. Maintain cutting-edge proprietary technology. Wide, multi-modal network serving as one-stop shop to customers
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People Strategy Attract exceptionally talented and driven people . Ensure conducive environment. Liberal Ownership-sharing.

Business Model

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Managerial depth Promoted by first generation professional entrepreneurs. Highly qualified and experienced Management team with an impeccable track record.

Distribution reach Presence in 26 states and over 715 locations. Buy and sell in BSE & NSE in both cash and derivaties. Multiple segments : Cash,Derivatives, Commodities & Forex. Pay through the internet payment gateway connected to 15 banks. 24*7 online access to account information.

Owner-mindset
The top management is driven by pride and reward of ownership.

To think and work like an owner is part of organizations DNA.

Technology edge Uniquely placed with proprietary front, mid and back office software. Effectively harnessed technology to facilitate processes and provide superior customer experience.

De-risked De-risked and diversified business model across multiple revenue streams. Multiple products across all segments of financial services.

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Services provided by Asit C. Mehta It provides comprehensive range of investment services. Thats advantage of having all the services investor need under one roof. 1. Equity 2. Derivatives 3. Commodity 4. Currency 5. Future and Option 6. Internet Trading 7. IPO 8. Mutual Fund 9. Other Investment Products. Major Competitors of Asit C. Mehta Sharekhan Indiabulls ICICI Direct Karvy Motilal oswal Relience money Religare Securities ltd. IL&FS Investsmart (HSBC Invest mart)

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RESEARCH METHODOLOGY

Collection of primary data: Analysis of this project is based on secondary data i.e Income statements and balance sheets etc. therefore primary data has not been considered

Collection of secondary data: 1. The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made. 2. Most of the calculations are made on the financial statements of the company provided statements. 3. Referring standard texts and referred books collected some of the information regarding theoretical aspects.

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Sampling Method
The sampling Method used in these report is Judgement Sampling method

In Judgement sampling, the researcher or some other "expert" uses his/her judgement in selecting the units from the population for study based on the populations parameters.

The reason for selecting Infosys & TCS are that these companies are having the most market capitalization in the computer software industry market. Hence the collection of data and analysis is easier.

MARKET CAPITALIZATION OF TOP IT COMPANIES

TCS INFOSYS OTHER BSE IT INFO COMPAINES

34%

39%

27%

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IT Industry Analysis
The Indian information technology (IT) industry has played a key role in putting India on the global map, the IT industry has grown fast over the last 15 years. India is a preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is a financially attractive location when viewed in combination with the business environment it offers and the availability of skilled people. The Indian IT industry has witnessed a strong recovery over last few quarters after facing a bleak outlook following the onset of global economic slowdown in the last quarter of 2008. The industry faced a difficult year but started moving towards recovery by second half of the last fiscal and operating atmosphere for the industry has continuously improved since then. The recovery which started with pent up demand and cost cutting initiatives by large MNCs is now progressing as major companies across the world start hiking IT budgets gradually. The performance of industry leaders has been particularly on the upside of estimates and while recovery is slower in the mid-cap space, here too things are better on a year-on-year basis.No twithstanding the fact that IT majors have historically generated better part of their revenue from exports, the industry is set to renew its focus on opportunities at home. Indias domestic market has become a force to reckon with and the existing IT infrastructure is evolving in terms of both technology and penetration. In fact, in the developed economies, the government is a major buyer of IT. Even in emerging nations, governments are becoming major client for IT companies. China has for long had a software industry larger than India despite the fact that it compares nowhere with Indias IT exports. This is because its IT industry is powered mainly by domestic demand that is far larger than that of India. From a long term point or view, the Indian IT industry is slowly decreasing its dependence on the US economy. While it is looking at other opportunities in Europe and Japan, the next big driver for the industry in the long run will come from the domestic demand. Indian economy is close to reaching the threshold level where demand for the IT services takes-off in a big way and over the next few years the inflexion point will be reached which provides strong growth visibility in the longer run.

World-wide spending on technology and related products and services is estimated to have crossed US$ 1.6 trillion in 2010, a growth of 4.0% over 2009, with growth driven by emerging verticals and

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emerging geographies in addition to USA. Global IT services spend increased from US$ 566 billion in 2009 to US$ 574 billion in 2010. The geographic revenues break-up for IT services was as follows: - Americas share 43.0% in 2010 (42.8% in 2009) - Europe Middle-East and Africa revenues 39.7% in 2010 (40.2% in 2009) - Asia-Pacific revenues 17.3% in 2010 (17.0% in 2009)

Global Business Process Outsourcing (BPO) services spend has increased from US$ 152 billion in 2009 to US$ 158 billion in 2010. The geographic revenues break-up for BPO spend was as follows: - Americas share at 55.3% in 2010 (55.8% in 2009) - Europe Middle-East and Africa revenues 25.9% in 2010 (26.0% in 2009) - Asia-Pacific revenues 18.8% in 2010 (18.2% in 2009)

Trends in global sourcing remained positive and showed a growth rate of 10.4% in 2010 over 2009 and the global sourcing market size was in the range of US$ 102 to 106 billion in 2010. IT sourcing grew at 10.3% to a market size of US$ 62 to 64 billion and BPO sourcing grew at 10.6% to a market size of US$ 40 to 42 billion. There is enough potential for growth. Estimate of the addressable global sourcing market is in the range of US$ 500 billion (US$ 280 billion for IT services and US$ 220 billion for BPO services). (Source: NASSCOM Strategic Review 2008 - 2011) One of the major beneficiary countries of the global sourcing trend continues to be India whose expertise and capability in the area of Information Technology (IT) and Information Technology Enabled Services (ITES) has made it a leading destination for global corporations looking for technology partners.

Growth forecasts for IT Services Industry IT services spend is expected to increase from US$ 566 billion in 2009 to US$ 684 billion by 2014 at a CAGR2 of 3.9%. US$ 225 billion in 2009 to US$ 239 billion in 2014 at a CAGR of 1.1%. US$ 31.1 billion in 2009 to US$ 42.8 billion in 2014 at a CAGR of 6.6%. BPO spend is expected to increase from US$ 152.1 billion in 2009 to US$ 201.5 billion in 2014 at a CAGR of 5.8%.
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 IT spend forecasts by global technology analyst firms like Gartner, Forrester, IDC and others indicate a growing market for IT and ITES for industry verticals, service offerings and geographies of interest to the Company and excellent prospects for growth in the future

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INFOSYS TECHNOLOGIES
COMPANY PROFILE Introduction Infosys Technologies was set up in 1981 by seven people with $250. Today it is one of India's largest IT companies with 130,820 employees covering 88 nationalities. Headquartered in state of the art facilities in Bangalore, it has offices in 32 countries and development centres in India, China, Australia, the UK, Canada and Japan. Recent times have been characterized by remarkable growth: a frequently quoted statistic, well worth mentioning, is that it took 23 years for Infosys to reach its first $1bn in revenues and only 23 months to hit $2bn. It expects sales of more than $4billion in 2011. Infosys was the first company to successfully provide computing services from India to clients around the world, often at much lower cost. As the pioneer in IT outsourcing, it has paved the way for what has now become a $41bn industry. Today, the company handles a wide range of IT contracts for many of Europe and Americas leading corporations from software development to system maintenance for multiple clients. It also provides back office support to many more, extending from order processing and customer support call centres through to high-end actuarial analysis for the insurance industry

Infosys employs an ever-expanding army of low-cost but highly educated Indian engineers and attracts the best of the best by offering relatively high salaries and significant perks. It is creative in the way it sources talent, drawing on the top graduates from smaller colleges. Many employees have less than 3 years experience which, given their ability and intellectual rigour, allows the company to provide its clients with a very cost-effective, yet efficient service Some have argued that Infosys should focus on greater intellectual property creation and move beyond a conventional service model where payment is largely made for time and material inputs. They see an opportunity to move to payment for outputs, the basis of gains that their IT services can deliver. Perhaps they will: it is noticeable that Infosyss Software Engineering and Technology Labs which spearhead the companys commitment to innovation and Intellectual Property development, generated over 80
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invention disclosures and filed over 20 patents in 2007. More significantly in terms of its value chain, Infosys is moving into higher value-adding services such as establishing an R&D partnership to jointly create next-generation solutions for the power sector with ALSTOM, a global leader in power generation and rail transport infrastructure. Its canny ability to see change and adapt to it means that Infosys is keeping ahead of the game. As it has quickly migrated from support service to value-creating software development and outsourced R&D, it has consistently been able to compete with the likes of Accenture and IBM and pre-empt new developments. For example, it has opened offices in China and Mexico to counter the wage inflation and skills shortage it is facing in India and is mitigating the possible threat of competition from other developing countries. It is also now considering acquisition and, as several other Indian firms in recent years have done, there have been rumOurs that it will acquire a large European firm to further underpin its future global growth ambitions. Business
new engagement model

- Saas - Learning - Consulting - Business Process Management IT Outsourcing Systems Integration Independent Valuation Services Infrastructure Management Product Lifecycle Management

Technoloagy Consulting Technology Enabled BPR Enterprise Solutions

Application Development and Maintainence Software Re-engineering

INFOSYS GLOBAL DELIVERY MODEL

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Products and Services offered by the company: IT Services

Application Services Architecture Services Enterprise Quality Services Independent Validation Services Information Management Services Infrastructure Services Packaged Application Services SOA Services Systems Integration Services

Engineering Services

Product Engineering Manufacturing Process and Plant Solutions Lifecycle Management Consulting Services Information & Technology Strategies Product Innovation Next Generation Commerce Core Process Excellence Learning & Complex Change

BPO Services

Business Platforms Customer Service Outsourcing Finance and Accounting Human Resource Outsourcing
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Knowledge Services Legal Services Order Management Sourcing and Procurement Outsourcing

Product and Platforms

Collaborative Analytics Finacle Infosys ActiveDesk Infosys mConnect Infosys Unified Communications and Collaboration (UC)

Subsidiaries of the company:

Infosys BPO Infosys Consulting Infosys Australia Infosys China Infosys Mexico

Milestones

1981-Infosys was incorporated by N R Narayana Murthy and six engineers in Pune, India with an initial capital of $250. In the same year, the company received an order from its first client Data Basics Corporation of New York.

1999- The company generated revenues of $100 million. In 1999, Infosys was listed in NASDAQ. Later in the year 2006, the company became part of NASDAQ-100; it was first Indian and only the company to be part of any of the major global indices. It achieved a CMM Level 5 certification. The same year the company commissioned various offices in Germany, Sweden, Belgium, Australia, and two development centers in the US. The company launched Infosys Business Consulting Services.
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2000- The companys revenues touched $200 million mark. Infosys opened offices in France and Hong Kong, a global development center in Canada and UK, and three development centers in the US. It company re-launched its universal banking solution- Banks 2000 as Finacle.

2001- The company touched $400 million revenues mark. It set up offices in UAE and Argentina, and a development center in Japan. Infosys was rated as the Best Employer by Business World/Hewitt

2002- Infosys touched $ 500 million revenues mark. Nandan M Nilekani takes over as CEO from N R Narayana Murthy, who is appointed Chairman and Chief Mentor. The company opened offices in the Netherlands, Singapore and Switzerland. Infosys collaborated with the Wharton School of the University of Pennsylvania to set up The Wharton Infosys Business Transformation Awards (WIBTA). The same year, company launched Progeon, that offers business process outsourcing services.

2003- The company established subsidiaries in China and Australia. It expanded its operations in Pune and China and established a Development Center in Thiruvananthapuram

2004- The company touched $1 billion revenues mark. Infosys Consulting Inc was launched. 2005- The company records the largest international equity offering of $1 billion from India. 2006- Infosys celebrated 25 years of its existence. The company touches $2 billion revenues mark. The employee strength grew to 50,000+. N R Narayana Murthy retired from the services of the company and board of directors appointed him as an Additional Director. He continues Board of Directors appoints him as an Additional Director.

2007- Infosys crossed revenues of $3 billion. Employees strength grew to over 70,000+. Kris Gopalakrishnan, COO became CEO and Nandan M Nilekani was appointed as Co-Chairman of the board of directors. The company set up a new subsidiary in Latin America.

2008- Infosys crossed revenues of $4.18 billion.

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Achievements/ recognition: Certification The company's certifications include SEI-CMMI Level 5, CMM Level 5, PCMM Level 5, TL 9000 and ISO 9001-2000. Awards

Infosys was ranked among the top 50 most respected companies in the world by Reputation Institutes Global Reputation Pulse 2009.

Infosys won Sears Holding Corporation's Partners in Progress award for the second consecutive year.

Infosys also won HDS' Diamond Award for 'Best Virtualization Strategy' and Platinum Award for 'Best Green Strategy for a Data Center'.

Infosys was also listed in the Most Admired Knowledge Enterprises (MAKE) 2008 study and Forbes' Asian Fabulous 50 for the fourth consecutive year.

The company was conferred with the NASSCOM gender inclusivity award and the Asset magazine acclaimed their Corporate Governance, acknowledging their corporate policies and practices as amongst the best in the industry

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DATA ANALYSIS AND INTERPRETATION OF INFOSYS: EPS of INFOSYS (Rs)

120 100 80 78.15 60 40 20 0 2007 2008 2009 2010 2011 66.03 112.25 101.73 100.26

The EPS of INFOSYS in 2011 was Rs 112.25 as against Rs 100.26 in year 2010 a growth rate of 12%. In year 2010 due to global economic crisis the revenues of the company had got effected hence there was decline in EPS in 2010.

REVENUES OF INFOSYS
30000 25000 REVENUES (RS) 20000 20264 15000 10000 5000 0 2007 2008 2009 FINANCIAL YEAR 2010 2011 13149 15648 21140 25385

Infosyss total income increased to Rs 25,385 crore from Rs 21,140 crore in the previous year, at a growth rate of 20.1%. Their software export revenues aggregated to Rs 24,791 crore, up by 18.8% from Rs 20,871 crore in the previous year. Out of the total revenue 66.2% came from North America, 20.7%
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from Europe and 10.7% from the Rest of the World. Their revenues from India have increased from Rs 269 crore to R 594 crore, with a growth rate of 120.8% which is higher than that of the other regions.

MARKET CAPITALIZATION OF INFOSYS

200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 MARKET CAPITALIZATION 186100 150110 115307 82362 75837

2007

2008

2009 FINANCIAL YEAR

2010

2011

INFOSYS
4000 3500 3000 2500 2000 1500 1000 500 0 01/04/2009 01/05/2009 01/06/2009 01/07/2009 01/08/2009 01/09/2009 01/10/2009 01/11/2009 01/01/2010 01/02/2010 01/03/2010 01/04/2010 01/05/2010 01/06/2010 01/07/2010 01/08/2010 01/09/2010 01/10/2010 01/11/2010 01/12/2010 01/01/2011 01/03/2011

01/12/2009

The current market price as on 31st mar 2011 was Rs 3236 as against Rs 2049 on 1st april 2007. Thus the market price has grown at the rate of 12.10% CAGR.
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01/02/2011

Ratio analysis of Infosys

2007 2008 78.15 33.25 12.35 42.55 32.6 32.59 28.57 36.26 36.26 41.38 1.27 5.81 3.73 1.84 0.27 62.8 0 0.93 19.01 22.79 23.51 18.35 18.35 0 3.28 3.28 0 2009 101.73 23.5 13.33 23.1 33.14 33.13 28.72 37.18 37.18 42.92 1.29 6.25 3.86 1.65 0.26 58.39 0 0.67 29.5 31.22 31.66 30.18 30.18 0 4.72 4.72 0 2010 100.26 25 22.98 24.93 35.35 35.35 27.22 28.89 28.89 37.52 1.06 6.37 3.43 1.61 0.29 57.27 0 0.23 4.32 11.75 11.29 -1.1 -1.44 0 4.46 4.46 0 2011 112.25 60 26.96 53.45 34.75 34.75 25.38 27.69 27.69 37.91 1.09 6.81 3.82 1.38 0.26 53.6 0 0.4 20.08 15.47 18.04 11.95 11.95 0 5.22 5.22 0

Operational & Financial Ratios

Earnings Per Share (Rs) DPS(Rs) Tax Rate(%) Dividend Pay Out Ratio(%) 66.03 11.5 8.53 17.42 31.41 31.4 28.72 41.83 41.83 45.74 1.46 6.9 3.91 1.84 0.26 52.88 0 0.86 45.65 46.75 51.56 56.01 -24.72 0 4.91 4.91 0

Margin Ratios
EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%)

Performance Ratios
ROA (%) ROE (%) ROCE (%) Asset Turnover(x)

Inventory Turnover(x)
Debtors Turnover(x) Sales/Fixed Asset(x) Working Capital/Sales(x)

Efficiency Ratios
Fixed Capital/Sales(x) Receivable days Inventory Days Payable days

Growth Ratio
Net Sales Growth(%) Core EBITDA Growth(%) EBIT Growth(%) PAT Growth(%) EPS Growth(%)

Financial Stability Ratios

Total Debt/Equity(x) Current Ratio(x) Quick Ratio(x) Interest Cover(x)

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TATA CONSULTANCY SERVICES LTD

COMPANY PROFILE INTRODUCTION Established in 1968, Tata Consultancy Services a member of the Tata Group has grown to its current position as the largest IT services firm in Asia based on its record of outstanding service, collaborative partnerships, innovation, and corporate responsibility. It was founded by Jamsetji Tata in 1848 and it is one of Indias most respected institutions today. Their mission reflects the Tata Group's longstanding commitment to providing excellence. To help customers achieve their business objectives by providing innovative, best-in-class consulting, IT solutions and services, and to actively engage all stakeholders in a productive, collaborative, and mutually beneficial relationship. TCS' ability to deliver high-quality services and solutions is unmatched. They are the worlds first organization to achieve an enterprise-wide Maturity Level 5 on both CMMI and P-CMM, using the most rigorous assessment methodology - SCAMPISM. Additionally, TCS Integrated Quality Management System integrates process, people and technology maturity through various established frameworks and practices including IEEE, ISO 9001:2000, CMMI, SW-CMM, P-CMM and 6-Sigma. It is largest IT employer in India ,having total manpower strength of 1,21,610 employees. It provides services to wide range of segment like banking & financial services, energy ,resources & utilities, government ,telecom, media & information services, etc. TCS acquired Citigroup Global Services(CGSL), India based BPO for $505 million. The acquisition broadened TCSs portfolio of end-to-end IT and BPO services in the global Banking and Financial Services (BFS) sector. TCSs enhanced scale and expertise will be providing service improvements to Citi and Citis customers. CGSL has more than 12,000 employees located in India and expected to generate revenues of approximately $278 million in 2008. Tata Consultancy Services is an IT services, business solutions and outsourcing organization that delivers real results to global businesses, ensuring a level of certainty no other firm can match.TCS offers a consulting-led, integrated portfolio of IT and IT-enabled services delivered through its unique Global Network Delivery Model, recognized as the benchmark of excellence in software development. TCS has over 143,000 of the world's best trained IT consultants in 42 countries. Revenue of $6.0 billion (fiscal year ending 31 March, 2009).

33

Products and services offered by the company: Technology Products

Exegenix Intelligent Document Conversion Solutions Support Central - Business Social Productivity Platform TCS Digital Certification Services / Public Key Infrastructure (PKI) Suite TCS Tax Mantra Integrated Tax Solution TCS Data Cleansing Framework TCS Business Rules Engine TCS Experience Based KM (Knowledge Management) TCS Call Management Solution TCS Certificate Validation Server TCS File Authentication Solution TCS eLearning Effectiveness Measurement Solution TCS Code Generator Framework TCS Saakshi (Time Stamping Solution) TCS Form Authentication Solution TCS eVOLv Multimedia Authoring Solution TCS Direct Metal Deposition CAM

Other Products

TCS Clin-e2e TCS Hospital Management Solution TCS Silicone Ambulatory ECG Device and Solution TCS Enterprise Integration and Control Environment Solution/ Energy and Utilities TCS Bio-informatics Solution VERICUT - Machine Simulation Software

Services: IT Services

Custom Application Development Application Management Migration & Re-engineering System Integration Testing Performance Engineering

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Infrastructure Services

Infrastructure Readiness Assessment IT Service Desk Data Center Management End User Computing Services Database Services Application Management Services Command Center Services Managed Security Services

Enterprise Solutions

Supply Chain Management Master Data Management Customer Relationship Management RFID Call Management Oracle SAP

Consulting

Business Consulting IT Consulting Business Solutions

Business Process Outsourcing

Customer Interaction Management (CIM) Finance and Accounting Human Resources Outsourcing Knowledge Process Outsourcing Supply Chain Management Reconciliations Benefits Administration Payroll Industry-specific Offerings

Business Intelligence & Performance Management

Business Intelligence Business Process Management Enterprise Data Management Integration Services
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Knowledge Management / Enterprise Content Management

Engineering & Industrial Services

New Product Development Solutions Product Lifecycle Management Plant Solutions & Services Geospatial Technology Solutions Industry-specific Offerings

Small and Medium Business Subsidiaries: TCS' directly-held subsidiaries include:

AP Online Limited (India) C-Edge Technologies Limited (India) CMC Limited (India) Diligenta Limited (UK) Tata Consultancy Services Canada Inc. (Canada) Tata America International Corporation (USA) Tata Consultancy Services Asia Pacific Pte Limited (Singapore) Tata Consultancy Services Belgium S.A. (Belgium) Tata Consultancy Services Deutschland GmbH (Germany) Tata Consultancy Services France S.A. (France) Tata Consultancy Services Netherlands B.V. (Netherlands) Tata Consultancy Services Sverige AB (Sweden) Tata Consultancy Services Switzerland Ltd (Switzerland) Tata Infotech (Singapore) Pte. Limited * (Singapore) Tata Infotech Deutschland GmbH * (Germany) TCS FNS Pty. Limited (Australia) TCS Iberoamerica S.A. (Uruguay) WTI Advanced Technology Limited (India)

Achievements/ recognition:

TCS is the only IT services organization to be a part of ISO 15926 real time interoperability network grid (iRING) Version 1.0.0 TCS achieves Gold status in Business in the Community's (BitC) Corporate Responsibility Index (CRI) 2007-08. Largest IT services firm in Asia. They are the worlds first organization to achieve an enterprise-wide Maturity Level 5 on both CMMI and P-CMM, using the most rigorous assessment methodology - SCAMPISM.
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TCSs Integrated Quality Management System integrates process, people and technology maturity through various established frameworks and practices including IEEE, ISO 9001:2000, CMMI, SW-CMM, P-CMM and 6-Sigma. TCS tops the Data Quest DQTop20 list of IT Services providers in India for 2008 TCS ranked among Top 25 in Business Week's 2007 Information Technology 100 TCS awarded top position in 2007 'Global Services' 100 ,Top 10 Best Performing IT Services providers category

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DATA ANALYSIS & INTERPRETATION OF TCS

TOTAL REVENUE OF TCS

40000 35000 30000 REVENUE 25000 20000 15000 10000 5000 0 FY 2007 FY2008 FY 2009 YEAR FY 2010 FY 2011 18685 22620 27813 30029 37325

NET WORTH OF TCS

30000 25000 NET WORTH 20000 15000 10000 5000 0 FY 2007 FY2008 FY 2009 YEAR FY 2010 FY 2011 8850 12300 18467 15700 24505

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EPS of TCS
50 45 40 35 30 25 20 15 10 5 0 46.73 36.06 25.39 21.12 26.87 EPS

EPS Rs

2007

2008

2009 FINANCIAL YEAR

2010

2011

TCS
1400 1200 MARKET PRICE 1000 800 600 400 200 0 TCS

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MARKET CAPITALIZATION OF TCS

250 MARKET CAPITALIZATION 200 150 100 50 0 FY 2007 FY2008 FY 2009 FINANCIAL YEAR FY 2010 FY 2011 121 79 53 157 232

4000 3500 3000 MARKET PRICE 2500 2000 1500 1000 500 0

COMPARISON OF TCS & INFOSYS

TCS INFOSYS

PERIOD

40

RATIO ANALYSIS OF TCS

Year End 2007 2008 2009 2010 2011

Operational & Financial Ratios

Earnings Per Share (Rs) DPS(Rs) Adjusted Book Value (Rs) Dividend Pay Out Ratio(%) Margin Ratios EBIT Margin(%) Pre Tax Margin(%) PAT Margin (%) Cash Profit Margin (%) 26.37 26.32 22.77 25.12 53.69 57.3 62.18 2.36 305.71 4.95 5.38 4.31 0.19 73.75 1.19 40.87 41.33 40.16 41.95 -29 0.06 2.24 2.23 521.45 25.98 25.84 22.37 24.86 44.9 48.07 52.15 2.01 538.37 4.68 4.61 4.07 0.22 78.07 0.68 21.06 19.97 19.24 18.93 19.31 0.04 2.24 2.23 195.8 22.22 22.11 19.1 21.12 36 38.21 41.88 1.89 703.86 4.83 3.79 3.69 0.26 75.54 0.52 22.96 4.71 5.15 4.97 4.45 0.04 2.26 2.26 215.59 27.66 27.61 23.62 25.82 39.99 41.76 46.83 1.69 1104.21 5.01 3.2 4.06 0.31 72.87 0.33 7.97 32.98 34.42 33.54 -33.48 0.01 1.88 1.88 515.88 29.6 29.53 24.62 26.59 41.8 42.97 50.25 1.7 1838.19 5.31 3.61 2.61 0.28 68.72 0.2 24.3 31.4 33.01 29.57 29.69 0 2.88 2.87 417.19 41 21.12 11.5 45.22 26.71 25.39 14 62.33 27.26 26.87 14 79.71 26.1 36.06 20 93.84 56.05 46.73 14 124.69 30.25

Performance Ratios
ROA (%) ROE (%) ROCE (%) Asset Turnover(x) Inventory Turnover(x) Debtors Turnover(x) Sales/Fixed Asset(x) Working Capital/Sales(x)

Efficiency Ratios
Fixed Capital/Sales(x) Receivable days Inventory Days

Growth Ratio
Net Sales Growth(%) Core EBITDA Growth(%) EBIT Growth(%) PAT Growth(%) EPS Growth(%)

Financial Stability Ratios

Total Debt/Equity(x) Current Ratio(x) Quick Ratio(x) Interest Cover(x)

% change 0.25 0.2 0.15 0.1 0.05 0 -0.05 -0.1 -0.15 -0.2 -0.25

% change

0.4 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 Period

COMPARATIVE ANALYSIS

% change in infosys

%change in TCS

Period

Date 03/05/2007 02/07/2007 03/09/2007 01/11/2007 01/01/2008 03/03/2008 02/05/2008 01/07/2008 01/09/2008 03/11/2008 01/01/2009 02/03/2009 04/05/2009 01/07/2009 01/09/2009 03/11/2009 04/01/2010 02/03/2010 03/05/2010 01/07/2010 01/09/2010 01/11/2010 03/01/2011

% change in infosys

%change in TCS

42

% change 0.4 0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 % change 0.1 0.2 0.3 0 -0.3 -0.2 -0.1

% change in BSE SENSEX

COMPARISION OF INFY & TCS

Period Period % change in infosys %change in TCS

Date 03/05/2007 02/07/2007 03/09/2007 01/11/2007 01/01/2008 03/03/2008 02/05/2008 01/07/2008 01/09/2008 03/11/2008 01/01/2009 02/03/2009 04/05/2009 01/07/2009 01/09/2009 03/11/2009 04/01/2010 02/03/2010 03/05/2010 01/07/2010 01/09/2010 01/11/2010 03/01/2011 Date 03/05/2007 02/07/2007 03/09/2007 01/11/2007 01/01/2008 03/03/2008 02/05/2008 01/07/2008 01/09/2008 03/11/2008 01/01/2009 02/03/2009 04/05/2009 01/07/2009 01/09/2009 03/11/2009 04/01/2010 02/03/2010 03/05/2010 01/07/2010 01/09/2010 01/11/2010 03/01/2011 % change in BSE

43

% change 0.1 0.2 0.3 0

-0.3

-0.2

-0.1

COMPARISION OF SENSEX &INFY

Period

Date 03/05/2007 02/07/2007 03/09/2007 01/11/2007 01/01/2008 03/03/2008 02/05/2008 01/07/2008 01/09/2008 03/11/2008 01/01/2009 02/03/2009 04/05/2009 01/07/2009 01/09/2009 03/11/2009 04/01/2010 02/03/2010 03/05/2010 01/07/2010 01/09/2010 01/11/2010 03/01/2011

% change in infosys

% change in BSE SENSEX

44

VALUATION
The Earning Multiplier Approach
In the Earning Multiplier the Goal is to find out the value anchor which is nothing but the intrinsic value of the share in appropriate terms. Step 1 We need to find the estimated figures for the next year. This can be done by calculating the CAGR of all the required parameters. Once the CAGR is calculated then this represents an appropriate growth figure which can give us the projected figures. Going in the normal flow the PAT can be calculated. Once the PAT is figured out we can subtract preference dividend from it and divide it by the number of outstanding shares to calculate the estimated EPS. Step 2 We need to calculate the P/E ratio for the estimated year. As a result we use the formula of Dividend payout ratio divided by the difference of required return on equity and the Expected growth rate in dividend. Price earning ratio = (Dividend payout ratio) (Required return on equity Expected growth rate in dividend) d. The Dividend Payout Ratio can be calculated by dividing the dividend / share by the earning /share. e. Required return on equity = Risk Free Return + ( Beta of equity x Expected Market Risk Premium) f. Expected Growth Rate in dividend= Retention Ratio x Return on equity g. Step 3 We have both the Projected EPS and the Appropriate P/E. Multiplying them will give us the Value Anchor which is the intrinsic value of the share.

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ESTIMATED PROFIT & LOSS ACCOUNT OF TCS LTD

Year End Operating Income EXPENDITURE : Power & Fuel Cost Employee Cost Cost of Software developments Operating Expenses General and Administration Expenses Selling and Marketing Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure PBIDT (Excl OI) Other Income Operating Profit Interest Gross Profits Depreciation Profit Before Taxation & Exceptional Items Exceptional Income / Expenses Profit Before Tax Provision for Tax PAT 1158.6 89959.8 3182.2 28077 12374.2 325.8 386 0 135463.6 51388.5 2290.5 53679 94.5 53584.5 4401.7 49182.8 0 49182.8 6639.6 42543.2 1582.2 113999.7 4662.3 32652.9 15354.3 357.1 487.4 0 169095.9 57099.3 7297.4 64396.7 300.1 64096.6 5637.1 58459.5 0 58459.5 7863.1 50596.4 1962.3 144704 4235.1 34647.3 19494.3 305.2 8896.2 0 214244.4 63884.4 3543.7 67428.1 286.6 67141.5 5640.8 61500.7 0 61500.7 8389.5 53111.2 2505.9 150657.5 4642.4 34684.7 18586.2 65.9 4148.9 0 215291.5 84997.7 4668.5 89666.2 161 89505.2 6608.9 82896.3 0 82896.3 11969.7 70926.6 3020.8 187127.9 5241 44972.2 21614.1 203.7 685.3 0 262865 110380.1 7443.5 117823.6 264.8 117558.8 7352.6 110206.2 0 110206.2 18308.3 91897.9 114114.6 2007 186852.1 2008 226195.2

CAGR 2012 E 278128.8 300289.2 373245.1 0.188842 443729.3

2009 2010 2011

0.270712 0.200943 0.132848 0.124989 0.149622 -0.11078 0.154312

3838.567 224730 5937.257 50593.24 24848.04 181.1344 791.0503 0 310919.3 132810 9993.99 122816.1 342.6017 122473.5 8358.841 114114.6

0.18026 0.342647 0.293813 0.136855

0.288625 -0.22965

23592.53 114114.6
329.48

less:-Minority Interest
NET PROFIT EPS

1214.5 41328.7 21.12

909.9 49686.5
25.39

540 52571.2 26.87

344.2 70582.4 36.06

427.7 91470.2 46.73

113785.1 58.13

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Analysis Table
The following table will give us the Appropriate Figures. EPS Dividend Payout Ratio Risk Free Rate (Rf) Beta of TCS () 58.13
33.274

7.5 1.04 18.45 26.688 58.15 43.2

Expected Market Risk Premium Required return on equity

Retention Ratio ROE

Expected Growth Rate of dividend 25.1208 Estimated P/E Value Anchor Current Market Price 21.33 1239.73 1182.5

The Market return has been calculated by taking into consideration the average return of all the listed stocks on sensex and turns out be around 18.45%. The Value Anchor turns out be around 1239.73 compared with the market price as of today 1182.5 as a result we can conclude that this share is highly undervalued. I recommend a strong buy call since its value anchor is higher than the current market price & hence investor can expect returns on the investment. All the above figures have been reconfirmed with other professional research report and are more or less the same. Hence we conclude that all these figures are true to the date.

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ESTIMATED P&L A/C OF INFOSYS

Year End Operating Income EXPENDITURE : Power & Fuel Cost Employee Cost Cost of Software developments Operating Expenses General and Administration Expenses Selling and Marketing Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure PBIDT (Excl OI) Other Income Operating Profit Interest Gross Profits Depreciation Profit Before Taxation & Exceptional Items Exceptional Income / Expenses Profit Before Tax Provision for Tax PAT EPS 970 71080 5180 7070 7570 2110 1050 0 95030 43900 3720 47620 10 47610 5140 42470 0 42470 3860 38610 67.31 1220 88530 5160 8500 8800 1000 1340 0 114550 52370 7060 59430 10 59420 5980 53440 0 53440 6850 46590 96000 1470 112450 7570 10660 10290 1020 5900 0 149360 67570 9140 76710 30 76680 7610 69070 0 69070 9190 59880 104.69 1450 120750 7250 7550 9960 930 920 0 148810 78610 9450 88060 20 88040 9050 78990 0 78990 16810 62180 108.71 2007 138930 2008 166920 2009 216930 2010 227420

CAGR 2012 E 326202 275010 0.186146 0 1670 0.145477 1912.946 178474 148460 0.202169 10920 0.204962 13158.18 10250 0.097302 11247.34 12210 0.126951 13760.07 1210 -0.12979 1052.958 -0.1342 510.8198 590
2011

0 220116.3 185310 106085.7 89700 0.34323 16266.51 12110 122352.2 101810 20 20 122332.2 101790 8540 0.135334 9695.753
0

112636.4 0 0 112636.4 93250 39682.8 24900 0.593687 72953.62 68350 119.49 0.154285 127.7647
93250

48

Analysis Table
The following table will give us the Appropriate Figures. EPS Dividend Payout Ratio Risk Free Rate (Rf) Beta of Infosys () 127.76
32.29

7.5 0.94 18.45 24.843 66.61 34.37

Expected Market Risk Premium Required return on equity

Retention Ratio ROE

Expected Growth Rate of dividend 22.894 Estimated P/E Value Anchor Current Market Price 16.57 2116.59
3236.75

The Value Anchor of Infosys turns out be around 2116.59 but the market price as of today is around 3236.75 as a result we can conclude that this share is highly overvalued. Its nothing but the demand and the market forces that have taken the share to so much heights. I recommend a strong sell call since its value is highly hyped and the stock price can a take a beating anytime in the near future. . All the above figures have been reconfirmed with other professional research report and are more or less the same. Hence we conclude that these figures are true to the date.

49

Conclusion
Infosys and TCS are the blue chips companies of Indian IT industry. They are having the most market capitalization in BSE INFOTECH Index. The intrinsic value of Infosys is lower than its current market price. Hence we can conclude that it is overvalued and hence would recommend to sell the Infosys stocks in the long run. While on the other hand the intrinsic value of TCS is higher than its current market price(CMR). But the the difference between the intrinsic value and the CMR of TCS is very less i.e around 50. Hence we would recommend the investors, in the short to buy the stocks of TCS but in the long run not to purchase the stocks of TCS.

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Bibliography
Books and magazines

Damodaran on Valuation (second edition) .by Aswath Damodaran Securities and Portfolio Management.....by Fisher and Jordon

Websites:

www.nseindia.com www.investopedia.com www.bseindia.com www.moneycontrol.com

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