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Ashish Chopra ([email protected]); +91 22 3982 5424
Siddharth Vora ([email protected]); +91 22 3982 5585
12 January 2015
Update | Sector: Technology
Tech Mahindra CMP: INR2,680 TP: INR3,100 (+16%) Buy
Acquires Sofgen holdings Limited (SOFGEN) Access to BFSI customer base key rationale; EPS-neutral
Acquires SOFGEN - Implementer of banking and wealth management software TECHM signed an agreement to acquire100% stake in Sofgen holdings Ltd, a niche consulting and services company specializing in Private Wealth, commercial and retail banking solutions. The consideration is USD30m, one-third of which is in the form of earn-outs to be paid after two years.
Acquisition adds ~USD45m to FY16 revenues, single digit margin Sofgen’s expected revenue this year is USD45m and has EBITDA margin in high single digits. The company has grown its top line in mid single digits in the past couple of years. Sofgen revenues comprise of Temenos implementations (60%), Avaloq implementations (30%) and a tax compliance reporting platform (10%). Majority of these implementations are in Middle East, Africa and Europe.
Rationale: Access to tier-I Banking and wealth management customers The key rationale of the acquisition lies in the customer access facilitated to TECHM. Sofgen’s services have been limited to platform migration and implementation of the solution at the customer site. The acquisition enhances TECHM’s capability to offer more end to end services in the BFSI vertical which encompasses both run-the-business and change the business propositions like Digital service transformations, IMS.
Our take: Long sought access to BFSI customers, but not yet in the US market While the acquisition has negligible impact on TECHM’s financials, its lends access to some large BFSI accounts, something that the company has been seeking for long. However, we see the transaction as only a small step towards the larger goal of scaling BFSI segment – given that it still does not open up the lucrative scale of US and large Europen banking clients for TECHM directly. It remains to be seen how much scale TECHM can derive from providing additional services to banking and wealth management customers in other regions.
Valuation and view The acquisition has 1% impact on top-line and negligible impact on TECHM’s earnings. We expect TECHM to grow its USD revenue at a CAGR of 20.7% over FY15-17 and EPS at a CAGR of 21.9% during this period. At 15.5x FY16E EPS, the stock is above its 5-year average, justifiably given the improvement in revenue growth and margins, following merger with Satyam and increasing irrelevance of BT. Our Target Price of INR3,100 discounts FY17E EPS by 15x, following expectation of sustained above-industry growth over the medium term. Maintain Buy.
BSE Sensex S&P CNX 27,458 8,285
Stock Info Bloomberg TECHM IN
Equity Shares (m) 240.0
52-Week Range (INR) 2,741/1,678
1, 6, 12 Rel. Per (%) 6/21/14
M.Cap. (INR b) 643.2
M.Cap. (USD b) 10.3
Financial Snapshot (INR b) Y/E Mar 2015E 2016E 2017E
Sales 229.0 293.4 338.2
EBITDA 44.3 57.2 65.2
Adj. PAT 30.3 38.3 45.0
Adj. EPS (INR) 137.0 172.9 203.4
EPS Gr. (%) 13.2 26.2 17.6
RoE (%) 28.6 28.4 26.9
RoCE (%) 29.8 31.8 30.3
Payout (%) 16.1 17.4 17.2
P/E (x) 19.6 15.5 13.2
EV/EBITDA (x) 12.4 9.4 7.8
Shareholding pattern (%)
As on Dec-14 Sep-14 Dec-13 Promoter 36.0 36.2 36.5
DII 10.6 10.8 15.1
FII 39.6 39.1 32.6 Others 13.7 14.0 15.8
FII Includes depository receipts
Stock Performance (1-year)
1,600
1,900
2,200
2,500
2,800
Jan-
14
Apr-
14
Jul-1
4
Oct
-14
Jan-
15
Tech MahindraSensex - Rebased
Investors are advised to refer through disclosures made at the end of the Research Report.
Tech Mahindra
12 January 2015 2
EVENT: Acquires Sofgen holdings Ltd to expand its Core Banking Expertise TECHM signed a definitive agreement to acquire100% stake in Sofgen holdings
Ltd, a niche consulting and services company specializing in Private Wealth, commercial and retail banking solutions
Financial closure is expected in 4QFY15 post the receipt of regulatory approvals. Sofgen will continue to operate as an independent entity after the acquisition CONSIDERATION: ~USD30m EV @ EV/EBITDA of 7x, 0.7x Sales TECHM will acquire 100% of Sofgen for a sub-USD30m total payout, 2/3rd of the
consideration will be paid upfront and 1/3rd is based on the earn outs over the next two years.
Earn outs will be computed on the base of revenue and EBITDA growth of the company.
Currently Sofgen is expected to do USD45m in revenues with high single digit EBITDA margins.
Sofgen has USD4-5m of debt on its balance sheet, included in the consideration. Rest of the consideration will go to the existing shareholders which is a mix of senior management and some private investors.
Given one-third of the consideration is in the form of earn-outs over next two years, Sofgen will continue to operate as an independent entity.
ABOUT SOFGEN: ~USD45m CY14E revenues, high single digit EBITDA margin The company has 450+ employees with 20+ Tier1 client relationships Sofgen revenues comprise of Temenos implementations (60%), Avaloq
implementations (30%) and a tax compliance reporting platform (10%). Temenos has been the largest selling core banking solution worldwide in the
retail and commercial banking space. Sofgen has been a Temenos partner for years.
Sofgen has the second largest pool of Avaloq consultants in the world, which is one of the leading wealth management platforms used by Tier-I wealth managers worldwide.
The tax compliance platform provided by Sofgen is used by a number of wealth managers in Europe to provide tax compliance reporting to individual account holders, primarily as a service which is a regulatory mandate in many parts of Europe.
Sofgen’s client base is spread across Europe, Asia and APAC; which includes number of leading commercial banks, wealth managers and global franchises.
Top 5 clients contribute 30% of revenues and Top 10 clients contribute 50% of revenues
Tech Mahindra
12 January 2015 3
Exhibit 1: Temenos implementation drives majority revenue for Sofgen
Source: Company, MOSL
RATIONALE: Customer access and address more areas of Sofgen customers’ spend The key rationale of the acquisition lies in the customer access facilitated to
TECHM. Sofgen’s services have been limited to platform migration and implementation of the solution at the customer site. The acquisition enhances TECHM’s capability to offer more end to end services in the BFSI vertical which encompasses both run-the-business and change the business propositions like Digital service transformations, IMS.
Sofgen has various IPs, tools and accelerators which will help improve TECHMs cycle time and reduce cost of implementations. Consultants (400+) of Sofgen come with a higher degree of core banking knowledge which TECHM will need time and experience to develop the capability organically.
TECHMs scale provides them to bid for larger deal sizes, and address 80-90% of acquired client relationships’ client spend, compared to ~10% addressable by Sofgen.
OUR TAKE: Long sought access to BFSI customers, but not yet in the US market While the acquisition has negligible impact on TECHM’s financials, its lends
access to some large BFSI accounts, something that the company has been seeking for long.
However, we see the transaction as only a small step towards the larger goal of scaling BFSI segment – given that it still does not open up the lucrative scale of US and large Europen banking clients for TECHM directly.
It remains to be seen how much scale can TECHM derive from providing additional services to banking and wealth management customers in other regions.
CHANGE IN ESTIMATES: Marginal EPS dilution in FY15, accretion in FY16 Our revenue estimate for FY16 is up by 1pp, but our earnings estimate is largely unchanged, factoring the financials of Sofgen and the consideration paid by TECHM. Factoring high single digit EBITDA margins at Sofgen, the impact on the merged entity is only 10bp.
Temenos impl., 60
Avaloq impl., 30
Tax compliance IP, 10
Revenue break-up (%)
Tech Mahindra
12 January 2015 4
Exhibit 2: Change in estimates Revised Earlier Change
FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
INR/USD 61.2 62.0 62.0 61.2 62.0 62.0 0.0% 0.0% 0.0% USD Revenue - m 3,743 4,733 5,454 3,743 4,686 5,426 0.0% 1.0% 0.5% USD rev Gr.(%) 20.8 26.5 15.2 20.8 25.2 15.8 0bp 125bp -56bp EBIDTA Margin (%) 19.4 19.5 19.3 19.5 19.6 19.5 -10bp -10bp -22bp EBIT Margin (%) 16.7 17.2 17.1 16.8 17.3 17.3 -10bp -11bp -25bp EPS - INR 137.0 172.9 203.4 137.0 172.6 203.3 0.0% 0.2% 0.0%
Source: Company, MOSL
Valuation and view: Expect continued growth leadership with stable margins Prospects of revenue growth at the top-end of the industry band remain
sanguine at TECHM due to multiple reasons: 1. Success in large deal wins is an encouraging indicator of TECHM’s
improving competitive prowess, even in the Enterprise segment. With three large deal wins in Manufacturing beginning to come through, prowess in Telecom will likely be compounded with Enterprise too, keeping growth outlook sanguine.
2. Also, its expertise in the Telecom vertical has thus far overshadowed the structural concerns in the client industry, as it continues to increase its share within its top accounts.
3. Network management services have potentially expanded the addressable market for TECHM, with directly addressable spend standing at ~USD40b. Additionally, opportunity going forward comes from increased adoption of offshore services by Continental Europe.
4. TECHM also has a sizeable scale in Engineering services, and the opportunity in the same can be leveraged, especially after the acquisition of Mahindra Engineering Services (MES)
While the integration of LCC to TECHM’s numbers will dent the margins in the near term (120bp impact on current base of 20%) along with wage hikes (150bp impact), we expect the company to operate its margins in a band of 19-21%, especially as the cost efficiencies at LCC help improve the margins from 8% currently to 12%. The acquisition of Sofgen is only a small step towards the company’s much coveted scale in BFSI, but access to tier-I accounts in emerging economies can help drive some scale.
While cash flows generation has been a potential concern, TECHM’s OCF/EBITDA should average ~55%, close to TCS’ 60%. Also, TECHM’s active inorganic foray has ensured relatively better capital allocation v/s peers, and its track record of successfully integrating companies keeps prospects of profitably scaling into the big league sanguine.
We expect TECHM to grow its USD revenue at a CAGR of 20.7% over FY15-17 and EPS at a CAGR of 21.9% during this period. At 15.5x FY16E EPS, the stock is above its 5-year average, justifiably given the improvement in revenue growth and margins, following merger with Satyam and increasing irrelevance of BT. Our Target Price of INR3,100 discounts FY17E EPS by 15x, following expectation of sustained above-industry growth over the medium term. Maintain Buy.
Please refer to our detailed report on acquisition of LCC
Tech Mahindra
12 January 2015 5
Exhibit 3: TECHM 1-year forward PE chart
Source: Company, MOSL
Exhibit 4: TECHM 1-year forward PB chart
Source: Company, MOSL
Exhibit 5: Comparative valuation Company Mkt cap Rating TP Upside EPS (INR) P/E (x) RoE (%) FY14-17E CAGR (%) (USD b)
(INR) (%) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E USD rev. EPS
TCS 78.7 Neutral 2750 9.5 110.8 129.9 151.3 22.7 19.3 16.6 35.8 34.4 32.8 15.6 15.7 Infosys 37.9 Buy 2500 20.6 108.7 120.1 137.9 19.1 17.3 15.0 26.2 24.8 24.6 10.4 14.0 Wipro 21.8 Neutral 625 12.9 34.5 39.3 44.6 16.0 14.1 12.4 23.1 22.6 21.9 10.6 12.1 HCL Tech 17.4 Buy 2000 29.4 105.5 114.3 127.8 14.7 13.5 12.1 32.7 29.4 26.6 13.4 12.3 TechM 10.0 Buy 3100 19.4 137.0 172.9 203.4 19.5 15.5 13.2 28.8 28.3 26.8 20.5 18.9 Cognizant 32.9 Not Rated
2.3 2.8 3.3 23.1 19.4 16.1 20.6 19.8 19.6 17.3 18.4
Tier-I Agg 198.9
19.2 16.5 14.2 27.9 26.6 25.4
Source: MOSL, Company
15.8
78.8
16.1 11.2
3.80
20
40
60
80
100
Aug
-06
Jun-
07
Apr
-08
Feb-
09
Dec
-09
Oct
-10
Aug
-11
Jun-
12
Apr
-13
Feb-
14
Dec
-14
PE (x) Peak(x) Avg(x)Median(x) Min(x)
3.9
17.6
4.3
3.01.20.0
5.0
10.0
15.0
20.0
Aug
-06
Jun-
07
Apr
-08
Feb-
09
Dec
-09
Oct
-10
Aug
-11
Jun-
12
Apr
-13
Feb-
14
Dec
-14
PB (x) Peak(x) Avg(x)Median(x) Min(x)
Tech Mahindra
12 January 2015 6
Story in charts
Exhibit 6: Telecom prowess reflected in vertical mix
Source: Company, MOSL
Exhibit 7: Scale and diversity lent by Satyam acquisition
Source: Company, MOSL
Exhibit 8: Active on the acquisition front – building scale and competencies
STANDALONE TECHM Time Valuation
(USD m) Revenue (USD m)
Employees
Mahindra Satyam Apr-09 1,133 481 (FY11) 48,000
Hutchison Global Services Sep-12 67 170 11,500
Comviva Sep-12 95 70 1,500
MAHINDRA SATYAM
Complex IT (Brazil) Feb-13 45 45 500
COMBINED ENTITY
Mahindra Engineering Services Nov-13 121 42 1,300
BASF Business Service Consult Feb-14 NA NA 60
Fix Stream Apr-14 10 NA NA
Lightbridge Communications Corp. Nov-14 240 430 5,700
Sofgen holdings Ltd Jan-15 ~30 45 450
Source: Company, MOSL
Exhibit 9: Strong execution reflected in much improved efficiency
Source: Company, MOSL
Exhibit 10: Incremental Deal TCV keep growth outlook sanguine
Source: Company, MOSL
Telecom, 52
Manufacturing, 18
Tech, Media, Ent,
8
BFSI, 10
Retail,Travel,
Logistics, 6 Others, 6
Vertical mix (%)
985 977 1063 1156 2633 3098 3743
5.4 (0.9) 8.9 8.8
127.7
17.7 20.8
FY09 FY10 FY11 FY12 FY13 FY14 FY15E
Revenue (USD m) YoY Growth (%)
24.5
20.4 16.7
21.4 22.2 19.4
FY10 FY11 FY12 FY13 FY14 FY15E
EBITDA margin (%)
190
500
220270 250 270
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15
Deal TCV (USD m)
Tech Mahindra
12 January 2015 7
Exhibit 11: Operating Metrics Operating Metrics 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15
Revenue by geography (%)
Americas 46 45 43 42 45 44 47 45 47 49
Europe 33 34 35 33 32 33 31 31 31 31
Rest of World 21 21 22 25 23 23 22 24 22 20
Vertical Split (%)
Telecom 44 45 46 48 48 47 47 49 50 52
Manufacturing 19 19 18 19 19 19 19 18 18.5 18
Tech | Media | Entertainment 13 13 12 12 12 12 11 11 9.5 8
BFSI 11 11 11 10 9 9 10 10 10 10
Retail | Transport | Logistics 6 7 7 6 6 7 7 6 6 6
Others 7 5 6 5 6 6 6 6 6 6
Onsite-offshore mix (%)
Onsite 47.6 48.2 48.3 48.4 51.0 51.0 52.0 53.0 54.0 55.0
Offshore 52.4 51.8 51.7 51.6 49.0 49.0 48.0 47.0 46.0 45.0
Client Metrics
No. of active clients 484 475 475 516 567 576 605 629 632 649
% of repeat business 96 95 92 94 97 95 92 88 99 97
No. of Million $ clients
USD1m+ 188 200 206 205 215 223 239 239 242 245
USD5m+ 73 74 77 70 74 77 75 75 80 86
USD10m+ 39 43 48 42 46 48 47 52 51 50
USD20m+ 21 21 22 24 25 26 25 27 29 30
USD50m+ 7 9 9 9 10 10 11 11 11 12
Client concentration (%)
Top client 17 15 14 13 12
Top 5 Clients 40 41 39 37 37 36 37 38 37 40
Top 6-10 10 10 11 13 12 12 12 13 13 11
Top 11-20 12 13 12 11 11 13 12 12 12 12
Headcount (end of period)
Software professionals 52,416 52,375 53,072 52,126 53,337 55,432 57,601 60,997 64,095 66,175
BPO 18,229 28,611 26,379 24,699 23,269 23,225 23,213 21,830 21,936 22,433
Sales and Support 5,647 5,920 6,195 6,284 6,457 6,577 6,585 6,614 6,698 6,701
Total 76,292 86,906 85,646 83,109 83,063 85,234 87,399 89,441 92,729 95,309
IT Attrition (LTM) (%) 17 16 16 16 14 14 15 15 16 18
IT Utilization (%) 75 74 76 77 76 75 75 74 72 73
IT Utilziation (excluding trainees) (%) 80 78 78 79 78 77 77 78 75 76
Receivable Days (DSO)-Including Unbilled 98 96 98 96 97 102 100 96 102 102
Borrowings (USD m) 164.4 201.7 199.2 213.6 125.7 53.5 55.3 60.6 14.3 10.2
Cash and Cash Equivalent (USD m) 572.7 628.1 676 673.9 615.4 522.7 559.7 600.6 609.7 556
Capital Expenditure (USD m) 18.8 16.2 15.5 41.9 41.2 23.8 21.2 44.6 43.6 38.5
Source: Company, MOSL
Tech Mahindra
12 January 2015 8
Exhibit 12: Operating Metrics
1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15
Rupee USD Rate
Period closing rate 55.61 52.86 55 54.29 59.39 62.61 61.81 59.92 60.18 61.5
Period average Rate 54.81 54.69 54.36 53.96 56.57 62.91 61.92 61.46 59.87 60.94
Proportion of Revenues From Currencies
USD 51 50 47 47 50 48 49 49 50 52
GBP 22 22 24 23 19 20 18 16 16 16
EURO 6 6 7 7 8 9 9 10 10 10
AUD 8 8 9 8 7 7 7 8 7 6
Others 13 14 14 14 15 17 17 17 17 16
Consolidated Hedge Position
GBP In Mn 285.7 278.4 276.6 262.8 267.9 244.2 211 170.5 144.3 123.3
Strike rate (INR) 84.12 86.25 88.04 89.89 91.58 92.4 94.2 95.3 97.1 99.9
USD In Mn 666.5 747.9 910.3 911 1081.6 899.3 771 783.9 1046.8 1224.2
Strike rate (INR) 53.02 54.39 55.64 56.93 58.22 58.9 59.5 60.6 61.6 63
Verticals (QoQ)
Telecom
7.1 7.1 8.0 3.7 2.5 4.4 8.7 5.8 9.4
Manufacturing
4.7 -0.8 9.2 3.7 4.7 4.4 -1.2 6.5 2.4
Tech | Media | Entertainment
4.7 -3.3 3.5 3.7 4.7 -4.3 4.3 -10.5 -11.4
BFSI
4.7 4.7 -6.0 -6.7 4.7 15.9 4.3 3.7 5.2
Retail | Transport | Logistics
22.2 4.7 -11.3 3.7 22.1 4.4 -10.6 3.7 5.2
Others
-25.2 25.7 -13.8 24.5 4.7 4.4 4.3 3.7 5.2
Total
4.7 4.7 3.5 3.7 4.7 4.4 4.3 3.7 5.2
Revenue by geography (QoQ)
Americas
2.4 0.1 1.0 11.1 2.4 11.5 -0.1 8.3 9.7
Europe
7.9 7.8 -2.5 0.6 8.0 -2.0 4.3 3.7 5.2
Rest of World
4.7 9.7 17.6 -4.6 4.7 -0.2 13.8 -5.0 -4.3
Total
4.7 4.7 3.5 3.7 4.7 4.4 4.3 3.7 5.2
Client concentration (QoQ)
Top 5
-7.6 -2.2 -3.9 -4.3 1.9 7.3 7.1 0.9 13.8
Top 6-10
7.3 -0.4 -1.9 3.7 4.7 4.4 13.0 3.7 -11.0
Top 11-20
4.7 15.2 22.3 -4.3 23.7 -3.7 4.3 3.7 5.2
Net additions
Software professionals
-41 697 -946 1,211 2,095 2,169 3,396 3,098 2,080
BPO
10,382 -2,232 -1,680 -1,430 -44 -12 -1,383 106 497
Sales and Support
273 275 89 173 120 8 29 84 3
Total
10,614 -1,260 -2,537 -46 2,171 2,165 2,042 3,288 2,580
Source: Company, MOSL
Tech Mahindra
12 January 2015 9
Financials and valuations Key Assumptions
Y/E March 2012 2013 2014 2015E 2016E 2017E INR/USD Rate 47.5 54.4 60.8 61.2 62.0 62.0 Revenues (USD m) 2,463 2,633 3,098 3,743 4,733 5,454 Total Headcount 74,116 83,109 89,441 108,032 124,648 143,155 Net Addition 8,993 6,332 18,591 16,616 18,507
Income Statement (INR Million) Y/E March 2012 2013 2014 2015E 2016E 2017E Sales 54,897 143,320 188,313 229,045 293,420 338,166
Change (%) 13.4 161.1 31.4 21.6 28.1 15.2 Total Expenses 45,703 112,689 146,477 184,715 236,221 272,983
EBITDA 9,194 30,631 41,836 44,330 57,199 65,183
% of Net Sales 16.7 21.4 22.2 19.4 19.5 19.3
Depreciation 1,614 3,896 5,221 5,999 6,874 7,378
Interest 1,413 922 673 221 403 276
Other Income 1,368 2,121 1,129 3,485 2,083 3,599
PBT 7,535 26,334 37,071 41,595 52,006 61,129
Tax 1,438 6,479 9,790 11,061 13,521 15,893
Rate (%) 19.1 24.6 26.4 26.6 26.0 26.0
PAT 6,097 19,855 27,281 30,534 38,484 45,235
Minority Interest & EO items 714 301 336 209 200 200
PAT before EO 10,918 19,554 26,945 30,325 38,284 45,035
Change (%) 24.2 79.1 37.8 12.5 26.2 17.6
Effect of restructuring fees -1,618 -1,340 -1,117 0 0 0
PAT after RF before EO 9,299 18,214 25,828 30,325 38,284 45,035
Change (%) 31.1 95.9 41.8 17.4 26.2 17.6
Extraordinary Items (EO) 679 0 3,342 0 0 0
PAT after EO 9,978 18,214 29,170 30,325 38,284 45,035
Balance Sheet (INR Million) Y/E March 2012 2013 2014 2015E 2016E 2017E Share Capital 1,275 2,316 2,335 2,781 2,781 2,781 Reserves 42,032 66,214 89,469 117,177 147,177 182,548 Net Worth 43,307 68,530 91,804 119,958 149,958 185,329 Minority Interest 0 1,349 1,453 1,546 1,546 1,546 Loans 11,266 14,702 8,420 9,511 9,296 8,771 Amount pending invest. 12,304 12,304 12,304 12,304 12,304 Capital Employed 54,573 96,885 113,981 143,319 173,104 207,950 Fixed Assets 6,868 22,318 28,606 41,039 45,095 47,717 Investments 35,876 12,429 12,194 12,194 12,194 12,194 Long term loans and adv 7,433 9,137 9,256 9,256 9,256 Deferred Tax Assets 998 3,477 3,830 4,042 4,042 4,042 Other non-current assets 219 157 115 115 115 Curr. Assets 20,437 89,634 105,472 118,693 147,341 185,599 Debtors 13,172 33,688 43,486 58,092 71,375 82,146 Cash & Bank Balance 2,418 34,629 33,202 22,266 35,360 60,313 Loans & Advances 4,845 12,925 14,544 17,030 17,030 17,030 Current Investments 1,745 2,525 6,731 6,731 6,731 Other Current Assets 2 6,647 11,715 14,574 16,845 19,379 Current Liab. & Prov 11,235 41,220 45,415 46,271 49,190 55,225 Net Current Assets 9,202 48,414 60,057 72,421 98,151 130,375 Application of Funds 54,573 96,885 113,981 143,319 173,104 207,950 E: MOSL Estimates
Tech Mahindra
12 January 2015 10
Financials and valuations Ratios Y/E March 2012 2013 2014 2015E 2016E 2017E Basic (INR) EPS 72.9 95.2 124.0 141.7 178.9 210.4 Diluted EPS 70.4 92.8 120.6 136.9 172.9 203.4 Cash EPS 82.6 110.7 145.0 164.0 203.9 236.7 Book Value 339.7 320.0 440.7 560.5 700.7 865.9 DPS 4.0 5.0 20.0 22.0 30.0 35.0 Payout % 5.7 5.9 16.6 16.1 17.4 17.2 Valuation (x) P/E 38.1 31.5 22.2 19.6 15.5 13.2 Cash P/E 32.4 24.2 18.5 16.3 13.1 11.3 EV/EBITDA 37.5 17.2 12.5 12.4 9.4 7.8 EV/Sales 6.3 3.7 2.8 2.4 1.8 1.5 Price/Book Value 7.9 8.1 6.1 4.8 3.8 3.1 Dividend Yield (%) 0.1 0.2 0.7 0.8 1.1 1.3 Profitability Ratios (%) RoE 26.0 32.6 36.4 28.6 28.4 26.9 RoCE 14.3 35.3 34.7 29.8 31.8 30.3 Turnover Ratios Debtors (Days) 85 60 75 81 81 83 Fixed Asset Turnover (x) 3.9 5.8 7.0 6.2 6.2 6.7 Leverage Ratio Debt/Equity Ratio(x) 0.3 0.2 0.1 0.1 0.1 0.0
Cash Flow Statement (INR Million) Y/E March 2012 2013 2014 2015E 2016E 2017E
CF from Operations 3,692 14,259 30,593 33,060 43,478 49,090
Change in Working Capital 7,778 -7,608 -12,302 -18,760 -12,635 -7,271
Net Operating CF 11,470 6,651 18,292 14,300 30,843 41,819
Net Purchase of FA -2,836 -3,099 -7,854 -21,829 -11,360 -11,050
Net Purchase of Invest. -6,796 -1,940 -5,103 3,485 2,083 3,599
Net Cash from Invest. -9,632 -5,039 -12,957 -18,344 -7,917 -6,401
Inc./(Dec) in Equity -528 1,032 19 446 0 0
Proceeds from LTB/STB -961 -7,036 -1,305 -1,264 -188 249
Dividend Payments -597 -750 -5,475 -6,075 -8,284 -9,664
Cash Flow from Fin. -2,086 -6,754 -6,762 -6,892 -8,472 -9,415
Net Cash Flow -248 32,211 -1,427 -10,937 14,454 26,003
Opening Cash Balance 2,666 2,418 34,629 33,202 22,265 36,719
Add: Net Cash -248 32,211 -1,427 -10,937 14,454 26,003
Closing Cash Balance 2,418 34,629 33,202 22,265 36,719 62,722
E: MOSL Estimates
Tech Mahindra
12 January 2015 11
N O T E S
Tech Mahindra
12 January 2015 12
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Disclosure of Interest Statement TECH MAHINDRA Analyst ownership of the stock No
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