Warsaw School of Economics

Financial Management

Prepared by:

ANUBHAV JAIN (id 70286)

Warsaw

2015

2

Table of Content;

1. COMPANY’S PROFILE…………………………………………….…3

2. FINANCIAL HIGHLIGHTS…………………………………………...4

3. FINANCIAL ANALYSIS

3.a. Current Ratio………………………………..…..5

3.b. Quick Ratio……………………………………...5

3.c. Net Profit Margin…………… ………………….6

3.d. Return on Equity Ratio………………………….7

3. e. Return on Assets Ratio…………………………..8

3. f. Debt-Equity Ratio………………………………..9

3. g. Asset Turnover Ratio…………………………....9

4. RECOMMENDATIONS FOR INVESTORS...………….10

5. APPENDIX………………………………………………11-13

6. BIBLIOGRAPHY ………………………………………...14

3

1. Company’s Profile

Name of the company: INFOSYS

Year of establishment: July 2, 1981

Founder: Narayan Murthy

CEO: Vishal Sikka

Type: Public

Location: Pune, India

Headquarters: Bengaluru, India

Subsidiaries: Infosys BPO Limited, Panaya, Lodestone Management Consultants

Contact: https://www.infosys.com/

Stock price: INFY (NSE) $ 16.17

Number of employees: 187,976 (September 2015)

Operating income: Increase US$ 2.25 billion (2015)

Profit Increase: US$ 2.01 billion (2015)

Total assets: Increase US$ 10.61 billion (2015)

Total equity: Increase US$ 8.76 billion (2015)

Revenue: Increase US$ 8.71 billion (2015)

Services: IT, business consulting & outsourcing services

Area Served: Worldwide

4

2. Financial Highlights (In US $ Millions)

Increase in gross profit: 904 (September 30, 2015) 848 (September 30, 2014)

Increase in net profit: 519 (September 30, 2015) 519 (September 30, 2014)

Decrease in Non-current Liabilities: 30 (2015) 364(2014) in Cr.

Increase in Revenues: 2392 (September 30, 2015) 2201 (September 30, 2014)

Decrease in Current Investment: 749 (2015) 2749(2014) in Cr.

Increase in Operating Profit: 610 (September 30, 2015) 575 (September 30, 2014)

Increase in cash flow from operating activities: 152 (2013) 320 (2014)

Increase in Cost of Sales: 1,488 (September 30, 2015) 1353 (September 30, 2014)

Main Competitors

1. Wipro is an Indian multinational IT consulting and System Integration Services

Company headquartered in Bangalore, India. As of March 2015, the company has

158,217 employees servicing over 900 of the Fortune 1000 corporations with a presence

in 67 countries. On 31 March 2015, its market capitalization was approximately $ 35

Billion, making it one of India's largest publicly traded companies and seventh largest IT

Services firm in the World.

2. Fidelity National Information Services is an international provider of financial services

technology solutions and outsourcing services. FIS has over 14,000 clients in more than

130 countries.FIS is 426 on the Fortune 500 and is a member of Standard & Poor’s 500

Index.

3. Tata Consultancy Services Limited (TCS) is an Indian multinational information

technology (IT) service, consulting and business solution.

4. International Business Machines Corporation (commonly referred to as IBM) is

an American multinational technology andconsulting corporation, with headquarters

in Armonk, New York. IBM manufactures and markets computer hardware, middleware

software and offers infrastructure, hosting and consulting services in areas ranging

from mainframe computers to nanotechnology.

5

3. Financial Analysis

(a).Current Ratio

The Current ratio is the ratio of current asset to current liabilities; indicates a company’s ability to satisfy

its current liabilities with in current assets:

Current Ratio = Current Assets / Current Liabilities

The Current ratio indicates a company ability to meet short term debt , though it has decreased

from last couple of years, it indicates company might not be using C.A or its short term finance

efficiently, that also indicate problem in working capital management of the company

(b).Quick Ratio

The Quick (aki acid) Ratio is used as a solvency metric to determine a firm's ability to pay down

current liabilities.

Date Range Current

Assets

Current

liabilities

Current Ratio

Infosys

Wipro Fidelity National

Info

Sept. 30, 2015 742.61M 199.08M 3.730 2.570 1.556

June. 30, 2015 7.311B 2.067B 3.537 2.683 1.480

Mar. 31, 2015 7.554B 1.821B 4.149 2.661 1.475

Dec. 31, 2014 7.651B 1.792B 4.270 2.760 1.547

Sept. 30, 2014 7.656B 1.731B 4.421 2.677 1.744

June. 30, 2014 7.244B 1.656B 4.374 2.724 1.666

Mar. 31, 2014 7.157B 1.519B 4.711 2.605 1.577

Dec. 31, 2013 6.542B 1.444B 4.531 2.592 1.406

Sept. 30, 2013 6.421B 1.456B 4.409 2.285 1.577

June. 30, 2013 6.206B 1.240B 5.003 2.337 1.795

Mar. 31, 2013 6.507B 1.158B 5.617 2.124 1.504

Dec. 31, 2012 6.076B 1.106B 5.492 2.146 1.467

Date Range Quick Ratio

Infosys

Quick Ratio

Wipro

Quick Ratio Fidelity

National Info

6

The Quick Ratio is considered more realistic to judge the financial strength of the company.

Since it only include the most liquid assets. So it can show the real strength of the company to

pay off its current debt. The liquid ratio 3.608 of Infosys shows that it’s slightly lower than its

current ratio which is 3.70. It means that most of its assets are in form of liquid assets so it has

the capability to pay off its debt very easily as compare to its competitors (Wipro 2.078, Fidelity

National Info 1.386).

(c).Net Profit Margin

Net Profit Margin is one of the key indicators in assessing the company's profitability, which

shows how good a company is at converting revenue into profits available for the shareholders

Profit Margin = Net Income / Revenue

Sept. 30, 2015 3.608 2.078 1.386

June. 30, 2015 3.229 2.323 1.174

Mar. 31, 2015 4.024 2.243 1.154

Dec. 31, 2014 4.023 2.330 1.396

Sept. 30, 2014 4.402 2.232 1.381

June. 30, 2014 4.073 2.292 1.266

Mar. 31, 2014 4.539 2.35 1.195

Dec. 31, 2013 4.374 2.253 1.279

Sept. 30, 2013 3.829 1.988 1.152

June. 30, 2013 4.916 2.024 1.585

Mar. 31, 2013 5.558 1.866 1.349

Dec. 31, 2012 5.190 1.845 1.334

Date Range Net

Income

Net

Revenue

Infosys Wipro Fidelity

National Info

Sept. 30, 2015 52.33M 240.76M 21.73% 17.86% 11.10%

June. 30, 2015 478.77M 2.269B 21.10% 17.88% 15.14%

Mar. 31, 2015 479.04M 2.077B 23.06% 18.71% 7.13%

Dec. 31, 2014 534.77M 2.272B 23.53% 18.28% 11.56%

Sept. 30, 2014 51.13M 220.34M 23.20% 17.84% 9.38%

June. 30, 2014 484.41M 2.144B 22.60% 18.89% 11.18%

Mar. 31, 2014 432.13M 1.833B 23.57% 19.10% 10.16%

Dec. 31, 2013 461.29M 2.092B 22.05% 17.87% 4.57%

7

The Net profit ratio of Infosys 21.73% is much higher than its competitors its almost double of

the Fidelity National Info that has the ratio of the 11.10%.This shows the Financial efficiency of

Infosys its better in converting revenues into net profit which will ultimately leads to the higher

dividends and earning per share, which is due to increase in net sales and the efficiency of

management in manufacturing, selling, administrative and other activities of the firm.

(d).Return on Equity

The higher the return, the more efficient is company.

If we compare the recent quarter result of Infosys from last 1 year quarter result, it shows that the

increase in ROE is due to increase in their sales, operating income and net profit.

And the last thing is EPS which increase from -72.56% to 12.14% from previous year if see in

Indian market which is positive sign from investors point view to invest in company.

Sept. 30, 2013 388.06M 2.093B 18.54% 17.94% 11.49%

June. 30, 2013 451.29M 2.150B 20.99% 16.68% 6.93%

Mar. 31, 2013 437.44M 1.910B 22.90% 17.99% 9.75%

Dec. 31, 2012 439.23M 1.934B 22.71% 18.04% 9.11%

Date Range Infosys Wipro Fidelity National Info

Sept. 30, 2015 22.36% 21.87% 11.16%

June. 30, 2015 18.57% 22.19% 10.78%

Mar. 31, 2015 18.90% 23.05% 9.80%

Dec. 31, 2014 19.03% 23.91% 10.40%

Sept. 30, 2014 18.68% 24.53% 8.49%

June. 30, 2014 23.96% 24.91% 8.78%

Mar. 31, 2014 23.88% 24.58% 7.63%

Dec. 31, 2013 24.70% 23.52% 7.45%

Sept. 30, 2013 24.69% 22.93% 8.41%

June. 30, 2013 25.84% 22.23% 7.12%

Mar. 31, 2013 25.74% 21.81% 7.81%

Dec. 31, 2012 26.56% 21.40% 6.98%

8

(e).Return on Assets Ratio

Return on Assets (ROA) ratio is a financial indicator, which tells the investors how much profit a

company generates for each $1 of assets. The higher the return, the more efficient is company.

Return on assets ratio shows that how much company is efficient to utilize its assets. The overall

result shows that it is using its assets in a good way but Wipro has shown more consistency in its

ROA ratio. Based on the financial highlights for the last year, there is an increase in sales

revenue, profit, EPS, market caputurerization and net cash flow. But on the other hand, the

decrease in ROA shows that how much company is efficient to utilize its assets shows that it is

using its assets in a good way.

(f).Debt/Equity Ratio

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by

total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is

Date Range Net

Income

Total

Assets

Infosys Wipro Fidelity

National Info

Sept. 30, 2015 52.33M 1.073B 3.53 13.65 4.92

June. 30, 2015 478.77M 10.61B 17.95 14.06 6.67

Mar. 31, 2015 479.04M 10.62B 18.39 15.49 3.06

Dec. 31, 2014 534.77M 10.01B 20.86 15.51 5.45

Sept. 30, 2014 51.13M 10.03B 2.06 15.50 4.21

June. 30, 2014 484.41M 9.625B 20.38 16.52 4.98

Mar. 31, 2014 432.13M 9.491B 19.36 18.21 4.38

Dec. 31, 2013 461.29M 8.744B 21.74 17.13 2.02

Sept. 30, 2013 388.06M 8.480B 18.16 15.92 4.88

June. 30, 2013 451.29M 8.132B 20.38 13.98 3.05

9

using to finance its assets relative to the amount of value represented shareholders ‘equity.

Debt - Equity Ratio = Total Liabilities / Shareholders' Equity

Generally speaking, as a firm's debt-to-equity ratio increases, it becomes more risky because if it

becomes unable to meet its debt obligations. But if we compare debt ratio of Infosys with its

competitor Wipro is now slightly up but in late 2012-13 it’s performing well to compete with

their competitor.

(g).Asset Turnover Ratio

Like return on assets (ROA), the asset turnover ratio tells you how good the company is at using

its assets to make products to sell. For example, if Company A reported $100,000 of sales and

owns $50,000 in assets, its asset turnover ratio is 2x. Forever $1 of assets it owns, it can generate

$2 in sales each year.

Date Range

Total

Liabilities

Shareholders’

Equity

Infosys Wipro Fidelity National

Info

Sept. 30,2015 205.19M 867.68M 0.2362 0.2292 0.7613

June. 30,2015 2.130B 8.482B 0.2511 0.1905 0.7831

Mar. 31, 2015 1.854B 8.766B 0.2114 0.1934 0.8169

Dec. 31, 2014 1.810B 8.201B 0.2207 0.1746 0.7729

Sept. 30,2014 1.804B 8.223B 0.2193 0.153 0.7705

June. 30, 2014 1.725B 7.900B 0.2183 0.1291 0.7549

Mar. 31, 2014 1.584B 7.907B 0.2003 0.1502 0.7313

Dec. 31, 2013 1.504B 7.240B 0.2077 0.1442 0.6791

Sept. 30,2013 1.512B 6.968B 0.2169 0.184 0.7253

June. 30,2013 1.298B 6.834B 0.1899 0.1784 0.7208

Mar. 31, 2013 1.208B 7.334B 0.1647 0.2249 0.6933

Dec. 31, 2012 1.140B 6.803B 0.1675 0.191 0.6604

Date Range Total

Revenue

Total

Asset

Infosys Wipro Fidelity

National Info

10

The Asset turnover ratio of the company Infosys is a picture of its return on asset ratio as was the

case in ROA ratio same is reality in above table. The most consistent company seems Wipro

which has a consistency in its conversion while Infosys has two very interesting fluctuation in

September 2014 the ratio is 0.02 and in September 2015 the ratio is 0.04. Since this fluctuation is

exactly after one year so it seems company might have disposed off its assets after a one year this

is purely a subjective observation of mine and have no financial proof of this fact.

4. Recommendations for Investors Buy

A financial highlight of the company Infosys shows that it has continues and gradual increase in

all the ratios which are considered important by the individuals before investing in any company.

i. Based on the financial ratios that are calculating for Infosys, a risk-average person who

tends to protect his capital may invest in Infosys for long term because it has good

financial fundamental as compares to other IT firms. The fact that all ratios are above the

industry average suggests that the company is more profitable, efficient and liquid in its

peer group. Moreover, in the comparison with the main competitor in the IT industry

(Wipro, India) also shows good indicators in the categories, such as Asset ratio and asset

turnover ratio.

ii. Based on the financial highlights for the last couple of year, Infosys may be chosen for

investing, due to these factors that is increase sales revenue, profit, EPS, market

caputurerization and net cash flow.

Sept. 30, 2015 240.76M 1.073B 0.04 0.19 0.11

June. 30, 2015 2.269B 10.61B 0.21 0.20 0.11

Mar. 31, 2015 2.077B 10.62B 0.20 0.21 0.11

Dec. 31, 2014 2.272B 10.01B 0.22 0.21 0.12

Sept. 30, 2014 220.34M 10.03B 0.02 0.22 0.11

June. 30, 2014 2.144B 9.625B 0.23 0.22 0.11

Mar. 31, 2014 1.833B 9.491B 0.21 0.24 0.11

Dec. 31, 2013 2.092B 8.744B 0.25 0.24 0.11

Sept. 30, 2013 2.093B 8.480B 0.25 0.22 0.11

June. 30, 2013 2.150B 8.132B 0.24 0.21 0.11

Mar. 31, 2013 1.910B 8.542B 0.22 0.22 0.11

Dec. 31, 2012 1.934B 7.943B 0.24 0.21 0.11

11

iii. According to the historical data , Fidelity National Info had showed consistent

performance which result it give not more profit for Long – Term investor as compare to

Infosys because its net profit margin is not much higher than Infosys which directly result

to earing per share and to give to dividend to their investors .

iv. The evidence that Fidelity National Info operates mainly in U.S Market, makes the

investing is quite attractive but on the other hand the Infosys also operate in Indian Stock

Market and plays a vital role in IT Industry in India which directly lead to generating

more revenues because now a days Indian IT market is blooming so fast as comparative

to other Asian market.

v. Infosys Foundation USA, a non-profit organization focused on bridging the digital divide

in America, announced on 18 November 2015, a new strategic grant partnerships

with Girls Who Code, CodeNowand ScriptEd. These organizations focus on delivering

computer science and coding education to middle and high school students through

curricular and extracurricular programs nationwide which may help to generate more

revenues and market caputurerization .

vi. The political and country risks, which are always undesirable by private investors and

Foreign investors are pretty low as comparative than other competitors.

5. Appendix

In comparison with Technology sector and other competitors, the Infosys Company’s shares are

more attractive for investors due to their historical primary growth.

12

1. Infosys retreated from a record high hit earlier in the day and closed 3.81 percent lower,

posting its biggest single-day percentage fall since Aug. 24, a day when global markets

reeled after steep falls in China's sharesthis is all happen due to steep fall in china’s

market.

2. Infosys, which provides IT services to clients such as Apple Inc, Volkswagen AG and

Wal-mart Stores Inc , posted a net profit of 33.98 billion rupees ($525.07 million) in its

fiscal second quarter to Sept. 30, compared with 30.96 billion rupees a year ago.

3. If we see in graph on October 19, 2015, the Infosys performing the rapid growth in there

share price as comparative to technology sector and other companies is due to the

Infosys completed the acquisition with US-based oil and gas consulting firm Noah

Consulting for USD 70 million (about Rs 453.5 crore) in an all-cash deal .

SWOT Analysis

Strengths

Since the company is based in India its competitive advantage is enhanced. The Indian economy,

despite weak economic indicators such as relatively high rates of inflation, has low labor costs.

The workforce has relatively high skills levels in Information Technology. Couple these two

elements together and you have an operational basis that offers low-cost based, highly skilled

competitive advantage. Trained Indian personnel often speak very good English and are sensitive

to Western culture.

Infosys is in a strong financial position. The business turned over more than $4 billion in 2008.

This means that it has the capital to expand, and also the basis to leverage potential investors

Weaknesses

Infosys on occasion struggles in the US markets, and has particular problems in securing United

States Federal Government contracts in North America. Since these contracts are highly

profitable and tend to run for long periods of time, Infosys is missing out on lucrative business.

Added to this is the fact that its competitors do well in terms of securing the same Federal

business (and one should also take into account that many of its competitors are domiciled in the

US and there could be political pressure on the US Government to award contracts to domestic

organizations).

13

Despite being a huge IT company in relation to its Indian competitors, Infosys is much smaller

than its global competitors. Infosys generated $4 billion in 2008, which is relatively low in

comparison with large global competitors such as Hewlett-Packard ($91 billion), IBM ($91

billion), EDS ($21 billion) and Accenture ($18 billion).

It is sometimes argued that Infosys is weaker when it comes to high-end management

consultancy, since it tends to work at the level of operational value creation. Competitors such as

IBM and Accenture tend to dominate this space.

Opportunities

At a time of recession in the global economy, it may appear that some companies will reduce

take up of services that Infosys offers. However, in tough times clients tend to focus upon cost

reduction and outsourcing – with are strategies that Infosys offers. So hard times could be

profitable for Infosys.

The strategic alliance between Infosys and Schlumberger gives the IT company access to

lucrative business in the gas and oil industries which is their new strategy to roll-up in global

market

Threats

Other global players have realized that India has the benefit of low-cost, highly-skilled labor that

often speaks English and is culturally sensitive to Western practices. As with all global IT

players, Infosys has to compete for skilled labor and this may have the effect of driving up wage

levels, and making it more difficult to recruit and retain staff.

14

6. Bibliography

http://www.bloomberg.com/markets

https://www.infosys.com/about/management-profiles/Pages/founders.aspx

http://terminal.moneycontrol.com/index.php

https://www.infosys.com/investors/reports-filings/annual-report/

https://www.infosys.com/investors/reports-filings/quarterly-results/2014-2015/q4/Pages/ind-

gaap.aspx

https://www.infosys.com/investors/reports-filings/

http://www.wipro.com/investors/financial-information/annual-reports/

http://www.investor.fisglobal.com/phoenix.zhtml?c=180304&p=irol-reportsannual

http://www.investopedia.com/terms/d/debtequityratio.asp

http://economictimes.indiatimes.com/infosys-technologies-ltd/stocks/companyid-10960.cms

http://www.moneycontrol.com/news/business/infosys-completes-acquisitionnoah-

consulting_4236721.html?utm_source=ref_article

Keown, J Arthur&Martin, John D&Petty, William J&Scott, David Financial Management:

Principles and Applications, 10th Edition.