CMP 2808.00

Target Price 3145.00

ISIN: INE009A01021

JULY 12th

, 2013

INFOSYS LIMITED Consolidated Result Update: Q1 FY14

BUYBUYBUYBUY

Stock Data

Sector IT

BSE Code 500209

Face Value 5.00

52wk. High / Low (Rs.) 3010.00/2101.65

Volume (2wk. Avg ) 73000.00

Market Cap ( Rs in mn ) 1526210.40

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 403520.00 464048.00 515093.28

EBITDA 127880.00 138264.12 150382.61

Net Profit 94210.00 102315.45 110080.07

EPS 164.70 178.87 192.45

P/E 16.20 14.92 13.86

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX INFOSYS LTD

SYNOPSIS

Infosys Ltd. is a global leader company in the

"next generation" of IT and consulting Services &

is recognized for its world-class management

practices and work ethics.

During the quarter, the robust growth of Net Sales

is increased by 17.17% to Rs. 112670.00 million.

During the quarter, 66 new clients were added by

Infosys and its subsidiaries.

During the first quarter, Infosys applied for 18

unique patent applications in India and the U.S.

Robinsons Bank has selected Infosys Finacle as its

transformation partner to support its branch

network expansion and business growth.

Infosys announced a partnership with IPsoft to

offer autonomics-based managed IT service to

clients.

Union National Bank (UNB), Abu Dhabi has

implemented Infosys Finacle to power its

Treasury and Capital Markets business.

Infosys won the IBM Smarter Commerce Business

Partner of the Year Award for Australia and New

Zealand.

Infosys is collaborating with SAP on development

of mobile applications for the retail industry.

Golomt Bank, Mongolia has selected Infosys

Finacle to power its technology transformation.

Net Sales and PAT of the company are expected to

grow at a CAGR of 15% and 10% over 2012 to

2015E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Infosys Ltd 2808.00 1526210.40 164.70 16.20 3.83 840.00

TCS Ltd 1604.00 3143296.90 65.15 24.65 12.70 2200.00

HCL Technologies Ltd 857.60 596573.20 41.89 20.46 9.03 600.00

Wipro Ltd 369.20 913254.60 23.72 15.63 3.75 350.00

Investment Highlights CONSOLIDATED

Results updates- Q1 FY14,

Infosys Ltd. is a global leader company in the "next

generation" of IT and Consulting Services & is

recognized for its world-class management practices

and work ethics, reported its consolidated financial

results for the quarter ended 30th June, 2013.

Months Jun-13 Jun-12 % Change

Net Sales 112670.00 96160.00 17.17

PAT 23740.00 22890.00 3.71

EPS 41.50 40.02 3.71

EBITDA 118440.00 100920.00 17.36

The company’s net profit increased to Rs.23740.00 million against Rs.22890.00 million in the corresponding

quarter ending of previous year, an increase of 3.71%. Revenue for the quarter rose 17.17% to Rs.112670.00

million from Rs.96160.00 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.41.50 a share during the quarter, registering 3.71% decrease over previous year period.

EBITDA is Rs.118440.00 millions as against Rs.100920.00 millions in the corresponding period of the previous

year.

Segment Revenue

Particulars (Value in Rs. Millions) Q1 FY14 Q1 FY13

Financial Services & Insurance (FSI) 37980.00 33020.00

Retail, Logistics, Consumer Product Group, Life Sciences & Health Care Enterprises (RCL)

27830.00 22790.00

Energy, Utilities & Telecommunication Services (ECS) 21470.00 19150.00

Manufacturing enterprises (MFG) 25390.00 21200.00

Latest Updates

CareFirst BlueCross BlueShield awarded the Company a three-year managed services contract to create a

cost-effective delivery model and drive efficiencies in application support. Infosys Public Services will set up

a secure facility within its newly established delivery center in Rockville, Maryland to service the contract

and help CareFirst to consolidate IT support services currently managed by multiple vendors.

Infosys announced a partnership with IPsoft to offer autonomics-based managed IT service to clients. IPsoft

and Infosys will set up an Autonomics Center of Excellence and an Autonomics Lab at the Infosys Global

Education Center in Mysore.

The Cloud and Big Data business has executed over 100 engagements. Over the last quarter, Infosys won over

15 engagements across Cloud services and Big Data. Infosys was also invited to join the global Open Data

Center Alliance (ODCA) as a contributing member to help define and strengthen worldwide industry

standards to support enterprise cloud and big data requirements.

The US District of Columbia awarded Infosys Public Services, a one-year contract valued at $49.5 million to

develop its new health benefit exchange, a crucial component of the Affordable Care Act.

Infosys won the IBM Smarter Commerce Business Partner of the Year Award for Australia and New Zealand.

British Telecom’s Seamless Desktop program powered by the Infosys AssistEdge was awarded the

prestigious Global Telecoms Business Innovation Award for 2013 in the Consumer Service Innovation

category.

Infosys has been recognized as a winner in the 2013 Simulating Reality contest, organized by MSC Software.

Union National Bank (UNB), Abu Dhabi has implemented Infosys Finacle to power its Treasury and Capital

Markets business. Finacle Treasury will help integrate the bank’s trading, risk management and back office

operations.

Infosys announced that Robinsons Bank, a commercial bank in the Philippines, has selected Infosys Finacle as

its transformation partner to support its branch network expansion and business growth. With the new

technology transformation program, Robinsons Bank will consolidate and connect the multiple existing

systems in use at the bank, and aim to reduce cost of operations across all its branches. Robinsons Bank plans

to expand its network to over 100 branches in three years and integrate recent acquisitions. This requires its

technology infrastructure to scale efficiently and cost effectively.

Infosys has been named a ‘2013 Environmental Tracking (ET) Carbon Ranking Leader’ for its greenhouse gas

emissions and disclosure practices.

Finacle™ sustained its business momentum in the last quarter with 15 new wins and 14 banks going live on

Finacle™ across the Middle East, Africa, Asia and Central America. This includes the first Finacle™ customer in

Mongolia and the first successful core banking implementation in recent times in Turkey.

During the first quarter, Infosys applied for 18 unique patent applications in India and the U.S. With this, it

has 528 patent applications undergoing various stages in the patent approval process in India, the U.S. and

other jurisdictions, has been granted 106 patents by the United States Patent and Trademark Office and three

patents by the Luxembourg patent office.

Infosys is collaborating with SAP on development of mobile applications for the retail industry. These efforts

are focused on giving consumer packaged goods (CPG) companies anytime, anywhere access to sales

representatives and merchandisers, enabling them to capture information from the field to make them more

competitive and agile.

Golomt Bank, Mongolia’s largest private banking and financial services provider, has selected Infosys Finacle

to power its technology transformation. The bank is looking to adapt to a rapidly changing business

environment in Central Asia and manage their expanding customer base.

The Metro Atlanta Chamber presented the 2013 Global Impact Award to Infosys BPO in the Foreign Direct

Investment category for its plans to invest in education and training.

Graphical Representation

Revenue by Service Offering (Q1 FY14)

Revenue Mix (Q1 FY14)

Geography Revenue Concentration (Q1 FY14)

Client Contribution to Revenue (Q1 FY14)

Utilization (Q1 FY14)

Revenue by Industry (Q1 FY14)

Company Profile

Infosys Limited, formerly known as Infosys Technologies Limited is a global technology Services Company

headquartered in Bangalore, India. It is the second largest IT exporter in India.

Today, Infosys is a global leader in the "next generation" of IT and consulting with revenues of US$ 7.4 billion.

Infosys takes pride in building strategic long-term client relationships. 98% of revenues come from existing

customers (FY13). Infosys defines designs and delivers technology-enabled business solutions for Global 2000

companies. Infosys provides a complete range of services by leveraging its domain and business expertise

and strategic alliances with leading technology providers.

Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading

to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the

best talent is available, where it makes the best economic sense, with the least amount of acceptable risk.

Global presence

Infosys has a global footprint with 67 offices and 69 development centers in US, India, China, Australia, Japan,

Middle East, UK, Germany, France, Switzerland, Poland, Netherlands, Canada and many other countries. Infosys

and its subsidiaries have 1,57,263 employees as on June 30, 2013.

Products and Services offered by the company:

The Company’s offerings span business & technology consulting, services, systems, product engineering, custom

software development, maintenance, re-engineering, independent testing & validation services, IT infrastructure

services & BPO.

IT Services

� Application Services

� Architecture Services

� Enterprise Quality Services

� Independent Validation Services

� Information Mgt. Services

� Infrastructure Services

� Packaged Application Services

� SOA Services

� Systems Integration Services

Engineering Services

� Mechanical Product Development

� Electronics/ Hardware Development

� Software Product Development

� Embedded Systems

� Value Analysis/ Engineering & Benchmarking

� Manufacturing Engineering & Digital Manufacturing

� Industrial Automation & Controls

� Tooling & Commodity Management

� Professional Services

� Product Ownership & End of Life

� Product Lifecycle Management (PLM)

� Knowledge-based Engineering

� Manufacturing Execution Systems

� Contact Center & Unified Communications

� Engineering Consulting

Engineering Segments

� Aerospace

� Automotive

� Industrial Manufacturing

� High-Tech

� Software

� Energy

� Utilities

� Communication Services

� Retail

� Consumer Packaged Goods

� Life Sciences

� Financial Services

BPO Services

� Business Platforms

� Customer Service Outsourcing

� Finance and Accounting

� Human Resource Outsourcing

� Knowledge Services

� Legal Services

� Order Management

� Sourcing and Procurement Outsourcing

Product and Platforms

� Finacle

� Flypp

� Infosys Edge

• Infosys CommerceEdge

• Infosys SocialEdge

• Infosys TalentEdge

� Infosys HIMI

� Infosys iProwe

� Infosys MaskIT

� Infosys mConnect

� Infosys Research on Demand

� iTransform

� Supply Chain Visibility

� Infosys Unified Communications and Collaboration (UC)

Subsidiaries of the company:

� Infosys BPO Limited

� Infosys Technologies (Australia) Pty Limited

� Infosys Consulting Inc.

� Infosys Technologies (China) Company Limited

� Infosys Technologies S. De R.L. De C V., Mexico

� Infosys Technologies (Sweden)

� Infosys Tecnologia Do Brazil

� Infosys Public Services Inc.

� Infosys Technologies (Shanghai) Co Ltd

Alliances

• Global Alliance Partners

The partnership focuses on developing solutions that incorporate Infosys IP and the alliance partners'

technology and services. We jointly deliver and market Infosys' solutions to clients across multiple industries

and geographies.

� Microsoft

� Oracle

� SAP

Alliance Partners

� CA Technologies

� Hewlett-Packard (HP)

� IBM

� Informatica

� Salesforce.com

� Schlumberger

� Siemens

� TIBCO Software Inc.

� Autonomy Corporation

� Sterling Commerce

� Pegasystems

� Xerox

� OSIsoft

Cloud

Cloud adoption is a complex process and the multiplicity of available options has led to confusion over how to

embark on a viable Cloud Journey. IT and business teams follow different approaches to Cloud adoption. It

continues to strengthen Cloud ecosystem, with over 30 partners delivering a trusted system for our clients. A

large hi-tech client has selected Infosys to develop a Cloud-based monitoring solution, using technologies such as

Hadoop and Exadata, to manage and meter its enterprise infrastructure. The company is working with a large

railroad client in North America on its strategy to move mainframe-based legacy applications to the Cloud. A

leading healthcare provider has selected Infosys as a partner to migrate its existing workload to Microsoft Office

365 as its primary messaging and collaboration platform. This provides the client productivity improvement and

high asset optimization.

Finacle™

Finacle from Infosys partners with banks to power-up their innovation agenda, enabling them to differentiate

their products & service, enhance customer experience and achieve greater operational efficiency. Finacle

solutions address the core banking, wealth management, CRM, Islamic banking & treasury requirements of retail,

corporate and universal banks worldwide. Finacle solutions also empower banks with multiple sales, service &

marketing channels including e-banking, mobile banking and call centers. Finacle is the chosen solution in over

154 banks across 75 countries. Other offerings in the Finacle™ universal banking solution include:

• Finacle™ Core banking solution for regional rural banks.

• Finacle™ Alerts solution, which enables banks to alert end-users on events recorded by diverse business

systems.

• Finacle™ WatchWiz, a comprehensive new-generation monitoring solution that allows banks to monitor

diagnose and resolve issues.

• Finacle™ Advizor, which combines the convenience of human intervention with banking self-service channels

through the interplay of video, audio & data communication.

Financial Highlight CONSOLIDATED

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value(Rs.in.mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 337340.00 403520.00 464048.00 515093.28

Other Income 19040.00 23590.00 26892.60 29850.79

Total Income 356380.00 427110.00 490940.60 544944.07

Expenditure -239550.00 -299230.00 -352676.48 -394561.45

Operating Profit 116830.00 127880.00 138264.12 150382.61

Interest 0.00 0.00 0.00 0.00

Gross profit 116830.00 127880.00 138264.12 150382.61

Depreciation 0.00 0.00 0.00 0.00

Profit Before Tax 116830.00 127880.00 138264.12 150382.61

Tax -33670.00 -33670.00 -35948.67 -40302.54

Profit After Tax 83160.00 94210.00 102315.45 110080.07

Minority Interest 0.00 0.00 0.00 0.00

Share of Profit & Loss of Asso 0.00 0.00 0.00 0.00

Net Profit 83160.00 94210.00 102315.45 110080.07

Equity capital 2860.00 2860.00 2860.00 2860.00

Reserves 310460.00 395110.00 497425.45 607505.52

Face value 5.00 5.00 5.00 5.00

EPS 145.38 164.70 178.87 192.45

Quarterly Profit & Loss Statement for the period of 31st Dec, 2012 to 30th Sep, 2013E

Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13E

Description 3m 3m 3m 3m

Net sales 104240.00 104540.00 112670.00 117176.80

Other income 5030.00 6740.00 5770.00 6231.60

Total Income 109270.00 111280.00 118440.00 123408.40

Expenditure -77470.00 -79920.00 -86030.00 -89054.37

Operating profit 31800.00 31360.00 32410.00 34354.03

Interest 0.00 0.00 0.00 0.00

Gross profit 31800.00 31360.00 32410.00 34354.03

Depreciation 0.00 0.00 0.00 0.00

Profit Before Tax 31800.00 31360.00 32410.00 34354.03

Tax -8110.00 -7420.00 -8670.00 -9413.00

Profit After Tax 23690.00 23940.00 23740.00 24941.03

Minority Interest 0.00 0.00 0.00 0.00

Share of Profit & Loss of Asso 0.00 0.00 0.00 0.00

Net Profit 23690.00 23940.00 23740.00 24941.03

Equity capital 2860.00 2860.00 2860.00 2860.00

Face value 5.00 5.00 5.00 5.00

EPS 41.42 41.85 41.50 43.60

Ratio Analysis

Particulars FY12A FY13A FY14E FY15E

No. of Shares (in mn) 572.00 572.00 572.00 572.00

EBITDA Margin (%) 34.63% 31.69% 29.80% 29.20%

PBT Margin (%) 34.63% 31.69% 29.80% 29.20%

PAT Margin (%) 24.65% 23.35% 22.05% 21.37%

P/E Ratio (x) 18.35 16.20 14.92 13.86

ROE (%) 26.54% 23.67% 20.45% 18.04%

ROCE (%) 37.29% 32.13% 27.64% 24.64%

EV/EBITDA (x) 13.06 11.93 11.04 10.15

Book Value (Rs.) 547.76 695.75 874.62 1067.07

P/BV 4.87 3.83 3.05 2.50

Charts

Outlook and Conclusion

� At the current market price of Rs.2808.00, the stock P/E ratio is at 14.92 x FY14E and 13.86 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.178.87 and

Rs.192.45 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 10% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 11.04 x for FY14E and 10.15 x for FY15E.

� Price to Book Value of the stock is expected to be at 3.05 x and 2.50 x respectively for FY14E and FY15E.

� We expect that the company surplus scenario is likely to continue for the next three years, will keep its

growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.3145.00 for Medium to Long term investment.

Industry Overview

The information technology (IT) and information technology enabled services (ITeS) industry has been one of

the key driving forces fuelling India’s economic growth.

India is one of the fastest-growing IT services markets in the world, with three-quarters of large Indian

enterprises planning to increase IT spending in 2013, with an average IT budget of US$ 12.2 million, according to

a survey by Gartner.

The Indian IT-business process outsourcing (BPO) sector including the domestic and exports segments continue

to grow from strength to strength, witnessing high levels of activity both onshore as well as offshore. The

companies continue to move up the value-chain to offer higher end research and analytics services to their

clients. India's leadership position in the global IT and BPO industries are based primarily on the following

advantages.

Market Size

The Indian IT and ITES industry has continued to perform its role as the most consistent growth driver for the

economy. Service, software exports and BPO remain the mainstay of the sector. Over the last five years, the IT

and ITES industry has grown at a remarkable pace. A majority of the Fortune 500 and Global 2000 corporations

are sourcing IT and ITES from India and it is the premier destination for the global sourcing of IT and ITES

accounting for 55 per cent of the global market in offshore IT services and garnering 35 per cent of the ITES/BPO

market.

India's IT and BPO sector exports are expected to grow by 12-14 per cent in FY14 to touch US$ 84 billion - US$ 87

billion, according to Nasscom.

The Indian IT infrastructure market is projected to grow by 9.7 per cent y-o-y to reach US$ 2.1 billion in 2013.

Nasscom has created a separate unit to drive its newfound enthusiasm for software products, and has set a target

of US$ 10 billion in revenues from software products by 2020.

Investments

EMC Corporation's investment in India is expected to reach US$ 1.5 billion by 2014. The company started its

journey in India with a modest investment of US$ 100 million in 2005.

Some of the major investments in the sector are as follows:

• D-Link plans to set up a testing lab in India in the second half of this year to ensure better localisation,

said Mr A P Chen, Chairman, D-Link

• Hexaware Technologies has set up an onshore delivery centre in Texas, US. The centre is its third onshore

delivery centre in the US

• NIIT Technologies has won a multi-year contract from the Airports Authority of India (AAI) worth Rs 344

crore (US$ 61.84 million) for the implementation of Airport Operations Control Centres (AOCC)

• The Software Technology Parks of India (STPI) plans to set up a data centre in Hyderabad. The centre will

address the storage and cloud needs of small and medium enterprises (SME)

• Wipro has signed an agreement to acquire a minority stake in Opera Solutions, a global big data and

analytics company, for about US$ 30 million

Government Initiatives

FDI up to 100 per cent under the automatic route is allowed in Data processing, software development and

computer consultancy services; Software supply services; Business and management consultancy services,

Market Research Services, Technical testing & Analysis services.

The Government of India's move to do away with the mandatory requirement of 10 hectares of minimum land

area for setting up an IT and ITeS special economic zones (SEZ) is expected to provide a major boost to the real

estate and IT sector.

Some of the major initiatives taken by the Government to promote IT and ITeS sector in India are:

• The Government of West Bengal plans to spend Rs 41 crore (US$ 7.37 million) to roll out citizen-centric

services electronically across 19 districts including Kolkata

• Kerala has set an ambitious target of becoming a cent per cent digital state in governance, said Mr P K

Kunhalikutty, Minister for Industries and Information Technology, Government of Kerala. The State has

around 600 small, medium and large IT firms employing over 80,000 professionals directly and nearly

three times the number indirectly

• The Cabinet has recently approved the National Policy on Information Technology 2012. The policy aims

to increase revenues of IT and ITES industry from US$ 100 billion to US$ 300 billion by 2020 and expand

exports from US$ 69 billion to US$ 200 billion by 2020

• The Government of India plans to set up 15 new laboratories for testing hardware and software products

under public-private partnership (PPP) model

• The Ministry of Finance has issued a circular to chairmen of public sector banks and regional rural banks,

that all payments to customers, staff, vendors and suppliers as well as disbursement of loans and

payments towards investments should be made only through the electronic mode

Road Ahead

Globalisation has a profound impact in shaping the Indian IT industry over the years with India capturing a

sizeable chunk of the global market for technology sourcing and business services. Over the years the growth

drivers for this sector have been the verticals of manufacturing, telecommunication, insurance, banking, finance

and of late the fledgling retail revolution. As the new scenario unfolds it is getting clear that the future growth of

IT and ITeS will be fuelled by the verticals of climate change, mobile applications, healthcare, energy efficiency

and sustainable energy. Traditional business strongholds would make way for new geographies, there would be

new customers and more and more of SMEs will go for IT application and services.

Demand from emerging countries is expected to show strong growth going forward. Tax holidays are also

extended to IT sector for STPI and SEZs. Further, the country is providing procedural ease and single window

clearance for setting up facilities.

Growth in offshoring is expected to outclass the growth in overall IT spend across the various verticals.

Offshoring as a per cent of total spend is also expected to rise across the various verticals. India has the

opportunity to tap the growing offshoring market with its cost advantage, expertise and huge talent pool.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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