CMP 3562.00

Target Price 4000.00

ISIN: INE009A01021

JANUARY 10th

2014

INFOSYS LIMITED

CONSOLIDATED Result Update: Q3 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector IT

BSE Code 500209

Face Value 5.00

52wk. High / Low (Rs.) 3581.00/2190.00

Volume (2wk. Avg.) 59000

Market Cap (Rs. in mn.) 2037464.00

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

YEARS FY13A FY14E FY15E

Net Sales 403520.00 505445.20 596425.34

EBITDA 127880.00 147369.70 167094.55

Net Profit 94210.00 106920.48 120308.07

EPS 164.70 186.92 210.33

P/E 21.63 19.06 16.94

Shareholding Pattern (%)

1 Year Comparative Graph

INFOSYS LTD. S&P BSE SENSEX

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 24.96% to Rs. 130260.00 million.

Total Income has increased from Rs. 109270 million for the quarter ended December 31, 2012 to Rs. 137570 million for the quarter ended December 31, 2013.

During the quarter, 54 new clients were added by Infosys and its subsidiaries.

During the third quarter, Infosys applied for 22 unique patent applications in India and the U.S.

Infosys has been selected by FESCO to develop a Human Resources (HR) services platform, 'iSynergy'.

Infosys announced a major four-year strategic partnership with Netherlands’ COMMIT to help create healthier societies across the world.

Infosys BPO and Arrow Electronics Inc. announced an agreement to jointly market comprehensive services for information technology asset lifecycle management to their US clients.

Tetrad Investment Bank, Zimbabwe has chosen Infosys Finacle as their technology partner.

Infosys BPO announced the opening of a new delivery center in Eindhoven, the Netherlands.

Infosys Finacle™ sustained its business momentum in Q3 FY14 with eight new wins across India, Africa, USA, Europe, Middle East and South East Asia.

Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 13% 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. 3562.00 2037464.00 164.70 21.63 5.36 840.00

TCS Ltd. 2289.05 4475693.40 77.28 29.57 13.79 2200.00

HCL Technologies Ltd. 1308.00 914060.60 61.46 21.28 8.93 600.00

Wipro Ltd. 550.55 1357275.80 23.88 23.05 5.60 350.00

QUARTERLY HIGHLIGHTS (CONSOLIDATED)

Results Updates- Q3 FY14 (31st DECEMBER 2013)

MONTHS DEC-13 DEC-12 % Change

Net Sales 130260.00 104240.00 24.96%

PAT 28750.00 23690.00 21.36%

EPS 50.26 41.42 21.36%

EBITDA 39900.00 31800.00 25.47%

Infosys Ltd. achieved a turnover of Rs. 130260.00 million for the 3rd quarter of the current year 2013-14 as

against Rs. 104240.00 millions in the corresponding quarter of the previous year. The company has reported an

EBITDA of Rs. 39900.00 millions and a net profit of Rs. 28750.00 million against Rs. 23690.00 million reported

respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 50.26 for

the 3rd quarter as against an EPS of Rs. 41.42 in the corresponding quarter of the previous year.

Segment Revenue

Particulars (Value in Rs. Millions) Q3 FY14 Q3 FY13

Financial Services & Insurance (FSI) 43670.00 35110.00

Retail, Logistics, Consumer Product Group, Life Sciences &

Health Care Enterprises (RCL) 31990.00 25120.00

Energy, Utilities & Telecommunication Services (ECS) 24880.00 21360.00

Manufacturing enterprises (MFG) 29720.00 22650.00

Latest Updates

� Infosys has been selected by FESCO to develop a Human Resources (HR) services platform, 'iSynergy'. Users

of FESCO’s services can now access the company’s HR offerings through a single window on ‘iSynergy’, using

self-service options.

� The CEB TowerGroup Mobile Banking Solutions Technology Analysis report has recognized Infosys Finacle

as a ‘Best-in-Class’ provider.

� Infosys McCamish Systems LLC announced the release of a transformational customer service platform,

VPAS® Customer Service Work Desk (CSWD). VPAS®CSWD blends the flexibility and configurability of the

leading Business Process Management (BPM) software from Pegasystems, with the comprehensive VPAS®

Policy Administration System from Infosys McCamish to create a powerful and unique web-based customer

service platform to enhance operational excellence and customer experience.

� Infosys announced that its BPO building in Pune, has been awarded the Leadership in Energy and

Environmental Design (LEED) India ‘Platinum’ rating by the Indian Green Building Council.

� Infosys has been placed in the 'Winner's Circle' in the HfS Enterprise Analytics Services Blueprint 2013.

� The National Outsourcing Association (NOA) has presented Infosys and BT with the 2013 award for

excellence in telecommunication, utilities and hi-tech outsourcing.

� Infosys BPO has been positioned in the Leaders category in Everest Group’s Procurement Outsourcing (PO)

Service Provider Landscape with PEAK Matrix Assessment 2013 report.

� Infosys announced a major four-year strategic partnership with COMMIT, a public-private research

community in the Netherlands, to help create healthier societies across the world. Infosys will bring its

widely acknowledged technology leadership and financial investments to COMMIT’s Sensor-based

Engagement for Improved Health (SENSEI) project as part of a wider consortium of partners.

� Arrow Electronics Inc. and Infosys BPO announced an agreement to jointly market comprehensive services

for information technology asset lifecycle management to their US clients. Arrow and Infosys will provide

end-to-end IT asset management services, including procurement, deployment and configuration, support,

and decommissioning and disposition of assets.

� Infosys BPO announced the opening of a new delivery center in Eindhoven, the Netherlands. Infosys BPO will

leverage the new center to deliver critical business processes such as finance and accounting and other high

value services for its global clients, and provide end-to-end outsourcing services in Dutch, English, French

and German.

� Tetrad Investment Bank, Zimbabwe has chosen Infosys Finacle as their technology partner. Finacle will

power Tetrad Bank's Core Banking, Wealth Management, Customer Relationship Management (CRM), Online

banking, Mobile Banking and Alerts capabilities in its evolution from a merchant bank to a top-tier

commercial bank in the region.

� Infosys was positioned as a ‘Leader’ in Gartner’s Magic Quadrant for SAP Application Management Services,

Worldwide, 2013.

Graphical Representation

Revenue by Service Offering (Q3 FY14)

Revenue Mix

Geography Revenue Concentration (Q3 FY14)

Client Contribution to Revenue

Utilisation

Revenue by Industry (Q3 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 73 offices and 94 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 1,58,404 employees as on December 31, 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

� Engineering Services

� Engineering Segments

� BPO Services

Alliances

• Global Alliance Partners

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

technology and services. The company jointly deliver and market Infosys' solutions to clients across multiple

industries and geographies.

� Microsoft

� Oracle

� SAP

Alliance Partners

� CA Technologies

� Hewlett-Packard (HP)

� IBM

� Infor

� Informatica

� Salesforce.com

� Siemens

� TIBCO Software Inc.

� Autonomy Corporation

� Sterling Commerce

� Pegasystems

� Xerox

� OSIsoft

� NetApp Global System

� Hitachi Data Systems

(HDS)

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 its 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. The company is building momentum in the market with its Cloud and Big Data offerings.

This was validated by IDC’s recognition of Infosys as a Major Player in its IDC MarketScape for Cloud Professional

Services.

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

179 banks across 84 countries and serves 14 percent of the world’s banked population. Finacle 11E is designed

to simplify banking transformation with enterprise-class components. During the Q3 FY14, Finacle™ had 8 new

wins and 11 banks went live on the platform across India, Africa, Middle East and South East Asia.

FINANCIAL HIGHLIGHTS (CONSOLIDATED) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March31, 2012 -2015E

INFOSYS LIMITED FY12A FY13A FY14E FY15E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 2860.00 2860.00 2860.00 2860.00

Reserves and Surplus 310460.00 377080.00 484000.48 604308.56

a) Net worth 313320.00 379940.00 486860.48 607168.56

Non-Current Liabilities:

Deferred Tax Liabilities [Net] 0.00 560.00 784.00 980.00

Other Long Term Liabilities 1230.00 1820.00 3003.00 4054.05

b) Long term liabilities 1230.00 2380.00 3787.00 5034.05

Current Liabilities:

Trade Payables 230.00 1890.00 1227.52 1288.34

Other Current Liabilities 30590.00 39410.00 47292.00 54385.06

Short Term Provisions 38200.00 39690.00 40880.00 41902.00

c) Current Liabilities 69020.00 80990.00 89399.52 97575.40

Total (a+b+c) 383570.00 463310.00 580047.00 709778.00

ASSETS:

Non-Current Assets:

Tangible Assets 43750.00 48070.00 53837.42 59759.03

Intangible Assets 11800.00 23320.00 34513.60 46248.22

Capital work-in-progress 5900.00 11400.00 17214.00 23066.76

Deferred tax assets 2650.00 4690.00 6800.50 8976.66

Other non-current assets 150.00 310.00 480.50 643.87

Non Current Investments 40.00 3770.00 15268.50 31300.43

Long Term Loans and Advances 16670.00 18320.00 20225.28 22328.71

d) Non-Current Assets 19510.00 27090.00 148339.80 192323.68

Current Assets:

Current Investments 3680.00 17390.00 41736.00 70951.20

Trade Receivables 58820.00 70830.00 86840.30 105945.17

Cash and Bank Balances 205910.00 218320.00 244518.40 270222.96

Short Term Loans and Advances 34200.00 46890.00 58612.50 70335.00

e) Current Assets 302610.00 353430.00 431707.20 517454.33

Total (d+e) 383570.00 463310.00 580047.00 709778.00

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

Value(Rs. mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 337340.00 403520.00 505445.20 596425.34

Other Income 19040.00 23590.00 26952.00 29916.72

Total Income 356380.00 427110.00 532397.20 626342.06

Expenditure -239550.00 -299230.00 -385027.50 -459247.51

Operating Profit 116830.00 127880.00 147369.70 167094.55

Interest 0.00 0.00 0.00 0.00

Gross profit 116830.00 127880.00 147369.70 167094.55

Depreciation 0.00 0.00 0.00 0.00

Profit Before Tax 116830.00 127880.00 147369.70 167094.55

Tax -33670.00 -33670.00 -40449.22 -46786.47

Profit After Tax 83160.00 94210.00 106920.48 120308.07

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 106920.48 120308.07

Equity capital 2860.00 2860.00 2860.00 2860.00

Reserves & Surplus 310460.00 377080.00 484000.48 604308.56

Face value 5.00 5.00 5.00 5.00

EPS 145.38 164.70 186.92 210.33

Quarterly Profit & Loss Statement for the period of 30 JUNE, 2013 to 31 MARCH, 2014E

Value(Rs. mn) 30-June-13 30-Sep-13 31-Dec-13 31-March-14E

Description 3m 3m 3m 3m

Net Sales 112670.00 129650.00 130260.00 132865.20

Other income 5770.00 5100.00 7310.00 8772.00

Total Income 118440.00 134750.00 137570.00 141637.20

Expenditure -86030.00 -101280.00 -97670.00 -100047.50

Operating profit 32410.00 33470.00 39900.00 41589.70

Interest 0.00 0.00 0.00 0.00

Gross profit 32410.00 33470.00 39900.00 41589.70

Depreciation 0.00 0.00 0.00 0.00

Profit Before Tax 32410.00 33470.00 39900.00 41589.70

Tax -8670.00 -9400.00 -11150.00 -11229.22

Profit After Tax 23740.00 24070.00 28750.00 30360.48

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 23740.00 24070.00 28750.00 30360.48

Equity capital 2860.00 2860.00 2860.00 2860.00

Face value 5.00 5.00 5.00 5.00

EPS 41.50 42.08 50.26 53.08

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 145.38 164.70 186.92 210.33

EBITDA Margin (%) 34.63% 31.69% 29.16% 28.02%

PBT Margin (%) 34.63% 31.69% 29.16% 28.02%

PAT Margin (%) 24.65% 23.35% 21.15% 20.17%

P/E Ratio (x) 24.50 21.63 19.06 16.94

ROE (%) 26.54% 24.80% 21.96% 19.81%

ROCE (%) 37.29% 33.66% 30.27% 27.52%

EV/EBITDA (x) 17.44 15.93 13.83 12.19

Book Value (Rs.) 547.76 664.23 851.15 1061.48

P/BV 6.50 5.36 4.18 3.36

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.3562.00, the stock P/E ratio is at 19.06 x FY14E and 16.94 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.186.92 and

Rs.210.33 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 13% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 13.83 x for FY14E and 12.19 x for FY15E.

� Price to Book Value of the stock is expected to be at 4.18 x and 3.36 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs. 4000.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The Indian Information Technology (IT) and Information Technology enabled Services (ITeS) sectors go hand-in-

hand in every aspect. The industry has not only transformed India’s image on the global platform, but also fuelled

economic growth by energising higher education sector (especially in engineering and computer science). The

industry has employed almost 10 million Indians and hence, has contributed a lot to social transformation in the

country.

Furthermore, Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make

their business processes efficient and streamlined. Indian manufacturing sector has the highest IT spending

followed by automotive, chemicals and consumer products industries.

Indian organisations are turning to IT to help them grow business in the current economic environment. IT is

seen as a change enabler and a source of business value for organisations by 85 per cent of the respondents,

according to a study by VMware.

Market Size

India's IT-business process outsourcing (BPO) industry revenue is expected to cross US$ 225 billion mark by

2020, according to a Confederation of Indian Industry (CII) report, titled 'The SMAC Code-Embracing New

Technologies for Future Business'.

India is expected to become world's second-largest online community after China with 213 million internet users

by December 2013 and 243 million by June 2014, according to a report by Internet and Mobile Association of

India (IAMAI) and IMRB International.

Technology firms in India are expected to reap the benefits of Internet of Things (IoT) data, considered to be a

US$ 18 billion opportunity, to help clients improve productivity and asset utilisation as well as to enhance end-

customer experience, as per networking firm Cisco.

India’s total IT industry’s (including hardware) share in the global market stands at 7 per cent; in the IT segment

the share is 4 per cent while in the ITeS space the share is 2 per cent. 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.

Moreover, India plans to spend around US$ 3.9 billion on cloud services during 2013-2017, of which US$ 1.7

billion will be spent on software-as-a-service (SaaS), according the latest outlook of IT research and advisory

company, Gartner Inc.

The enterprise software market in India is expected to reach US$ 3.92 billion in 2013, registering a growth of

13.9 per cent over 2012 revenue of US$ 3.45 billion, according to Gartner.

Mumbai with 12 million internet users has emerged as the top most city in the country with highest penetration

of internet users, followed by Delhi (8.1 million) and Hyderabad (4.7 million), according to the data released by

Internet & Mobile Association of India (IAMAI).

Investments

Indian IT's core competencies and strengths have placed it on the international canvas, attracting investments

from major countries.

According to data released by the Department of Industrial Policy and Promotion (DIPP), the computer software

and hardware sector has attracted foreign direct investment (FDI) worth Rs 54,347.88 crore (US$ 8.77 billion)

between April 2000 and September 2013.

Some of the major investments in Indian IT and ITeS sector:

• Wipro plans to acquire US-based mortgage due diligence and risk management service provider Opus Capital

Markets Consultants (Opus CMC) for Rs 465 crore (US$ 75.07 million). Opus CMC provides comprehensive

risk management solutions to the mortgage industry in the US.

• Infosys has opened a new centre in Sydney, Australia. This is its fourth development centre in Australia and

has a capacity to seat 140 employees. Further, the company plans to hire 85 people in the region.

• Hitachi has acquired a foothold in India's payment space with the acquisition of Prizm Payment Services. The

firm has entered into share transfer agreements with Prizm shareholders, including Winvest Holdings

(India), Sequoia Capital and Axis Bank.

• Dell has opened its India design centre for its storage technologies and has realigned its domestic research

and development (R&D) unit. The facility will focus on developing software, integrating aspects involving

back-up of emails and related storage.

• Tata Consultancy Services (TCS) has launched a software development facility in Ahmedabad, Gujarat. The

facility will serve global customers across industry segments.

• Cognizant Technology Solutions has acquired ValueSource, a subsidiary of KBC Group, a Belgium-based

multi-channel bank insurance group.

• Schneider Electric has commissioned a services bureau in Bengaluru as a nerve centre and a support facility

for data centres in India and the Asia-Pacific region.

Government Initiatives

IT spending by the Government of India is projected to reach US$ 6.4 billion in 2013, a growth of 7 per cent year-

on-year, according to a report by Gartner.

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

• After a successful first-ever international delegation to Dubai, Gujarat-based small and medium enterprises

(SMEs) in the IT sector plan to send similar business delegations to European and South East Asian countries.

• The Government of Karnataka plans to announce a new information technology (IT) policy to boost

investments in state’s tier-II and tier-III cities. The policy would enable the sector to employ about two

million people in the state directly by 2020.

• The Government of India has fast tracked the process of setting up of centres of National Institute of

Electronics and Information Technology (NIELIT) in Northeast India.

• The Government of Brazil has liberalised the issue of short term work visas, a move which will make it easier

for Indian IT professionals to take up assignments in Brazil.

• India and Vietnam have signed two memorandums of understanding (MoU) for partnership in the field of

information, communications and technology (ICT).

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 software technology parks of India (STPI) and special economic zones (SEZs). Further,

the country is providing procedural ease and single window clearance for setting up facilities. The country’s cost

competitiveness in providing IT services, which is approximately 3-4 times cheaper than the US continues to be

its USP in the global sourcing market.

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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