Financial Analysis 2010-2012

< credits >

Companys Backdrop
Started in 1981 by 7 people with Revenue (in million $) Rs 12,000 8000 1987 - First international office 7000 6000 setup in Boston 5000 1993 - Goes public 4000 1999 - Became the first Indian 3000 company to get listed in NASDAQ 2000 1000 2004 - Revenue crosses $ 1 billion 0 2008 - Annual net profit crosses $ 1 billion 2012 - Forbes ranks Infosys among the world's most innovative companies
2006
1999 2000 2001 2004 2008 2010

2011

INFY from investors POV

Share Price History
4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 2005 2006 2007 2008 2009 2010 2011 2012 1,125.00 2,099.00 3,000.00 3,449.00 2,606.00 2,763.90

2,242.00
1,758.00

Current share Price BSE: Rs 2495.90 NSE: Rs 2495.30 Market Cap Rs 1,43,322 crores No. of shares 57, 42, 29, 742 Income 2012 Rs 33,567 crores

er than 1 is considered as safe. It because accounts payable has sed. But its still healthy. Category

Ratios
Ratios 2012 2011

Net Income has shareho

Profitability Overall Measures Performance Measure

Price / Earning
Return on Assets Return on Invested Capital

28.34x
27.09 % 32.59 %

19.24x
19.01 % 29.45 %

sing because of evenue.

Test of Investment Utilization

Return on Shareholders Equity 28.48 %times 26.29 People were willing to pay 19.24 the % actual earnings per increased share in 2011, which The ROA ratio has in as % Gross Margin Percentage 34.58 %2012 35.36 ROI of Infosys is high indicating that invested increased in 2012 to 28.34 times which is a compared to 2011 which is a % positive Profit Margin 25.60 24.28 % capital has been efficiently used. The increase very good indication, also indicates higher earning The ROE hasit increased assign. compared to 2011 2011 to 2012 by 3.14 %147.50 only goes on to Earning Per Share from Rs Rs 112.22 power & low costs. which indicates thatinterest Infosys is profitable, A drop of 1%capital the gross is not a major show the hasmargin been used ably to benefiting the shareholders. This value Cash Realization thereby 1.03x 1.09x Despiteas ofthe marginal fall in gross profit margin, concern sales revenues have increased by generate higher income. is higher than the industry standards, indicating Asset Turnover the net profit 0.87x 0.87x has grown by more than 1 23%margin over the previous year. Infosys good use of debt to increase the % point. The company is retaining Invested Capital Turnover 1.04xmore amount 1.03x returns for equity holders. of it sales revenue. Equity Turnover 1.05x 1.03x Capital Intensity 7.72x 6.25x

Ratios continued..
Category Ratios 2012 2011

Days Cash

337 Days

326 Days

63when Days compared 61 Days The ratio has decreased to Despite a decrease in dividend payout and Working Capital Turnover2011, which indicates 1.39x that it may face 1.45x The days cash has increased when yield percentage as compared to the difficulties in future if4.72 this ratio further compared to 2011. This does hold much The value is zero because the actual value Current Ratio 4.94 previous year, the EPS has increased by 31%. When compared tocompany local competitor Tech drops down. Infosys is covering the interest of a value as the instead of is infinitely small. This means that the Hence shareholders have been benefitted. The working capital turnover declined Acid-test Ratio 4.72 4.94 Mahindra, it was seen that the days charges by acash, relatively low margin of safety. retaining should have invested in company is completely funded by equity This has receivables been reflected in the price per marginally due to increase in cost of sales. lesser. Financial Leverage Ratio Thus if it attempts to 1.20x borrow additional 1.18x securities to get better returns. which is a was good sign. earnings ratio which has substantially funds, may face difficulties. Debt / Equity Ratio 20.36 % 17.77 % This value is it very healthy as compared to increased from 19.24 times to 28.34 times. Infosys has a lower financial leverage ratio industry standard. This company Debt / Capitalization Ratio 0means % 0% indicating that it has long financial base can easily meet theacurrent liabilities. This value is healthy as compared to Times Interest Earned and 7.45x 9.12x hence it would easily be able to pay . The value is pretty healthy, either industry standard. The percentage of its Test of Dividend Yield 1.08 % 2.08% current is debts. less or current assets equity &liability debt that the company uses to Dividend are high. It has short-term assets finance its enough assets has increased. Dividend Payout 23.76 % 48.98 % Policy to cover its immediate liabilities.

Test of Investment Utilization Test of Financial Condition

Days Receivables

DuPont Equation
Profit Margin * Asset Turnover * Equity Multiplier
2012 25.60 * 0.87 * 1.20 = 26.72 2011 24.28 * 0.87 * 1.18 = 24.92

Infosys made 25.60% on each rupee of sales for 2012 while in 2011 it was 24.28%. The profit margin has increased by 1.32 % as a result of a whooping increase in sales. While the asset turnover remains unchanged, the common equity marginal increased by 0.02 The change in profit margin has lead to a positive change and indicates the assets & shareholders equity is being used effectively and profitability.

SWOT Analysis
STRENGTHS High skill level in IT Strong financial position Positioned as high-end differentiated player Large work force of 1,51,151 WEAKNESSES Struggles to grab high profit US Federal govt. projects Much smaller(revenue) than its global competitors(HP, IBM, Accenture) Weak in high-end management consultancy, Accenture rules this space

OPPORTUNITIES New emerging market in China, Korea Greater scope for product innovation Domestic demand for IT products growing at 20 %

THREATS Global economic slowdown Management transition from founders to professionals Increased competition from lowwage countries like China, Indonesia

Infosys Financial Position

Despite the dividend yield & dividend payout has decreased the earnings per share has increased by 31 % as compared to 2011. Thus overall the shareholders have benefited & hence the price per earning ratio has increased significantly in 2012.

Conclusion
In the year 2012, the ROA ,ROIC ,ROE, and Profit margin has increased. Hence the net income of Infosys has increased by 21% as compared to 2011. Thus Infosys has been profitable. Infosys has also retained maximum form of its profit in the form of cash, thus increasing days cash. Considering the global slowdown, its decision of not investing is wise.