Economic Analysis

The Indian IT sector is one of the ongoing shining sectors of the Indian economy showcase with rapid
development and promise. According to a report by NASSCOM called “Perspective 2020: Transform India”
the exports element of the Indian Industry is anticipated to reach US$ 175 billion in revenue by 2020. India is
considered as the home town to a huge number of potential IT professionals who could congregate the
demands and global industry expectations with their eminent skill and expertise. IT sector in India is high
cost efficient in terms of skilled professionals as in comparison with the developed countries. This is also the
reason for increase in IT services like knowledge process outsourcing and business process outsourcing have
extended in the job market of Indian economy. The average purchasing powers of the individual consumers
have increased. With this aggregate demand and aggregate supply has increased which resulted improvement
in gross domestic production of goods and services in the India. Therefore, IT sector plays a very important
role in Indian Economy as whole. This paper attempt to study the fundamental analysis on selected five IT
companies listed in NSE with respect to Hedge Equities Ltd

YEAR 2011- 2012- 2013- 2014- 2015- Compound Annual

2012 2013 2014 2015 2016 growth
rate (CAGR)%
GDP (%) 6.2 5.6 6.6 7.2 7.6 4.16
Inflation Rate (%) 9 9.13 5.86 6.32 2.23 -24.3
IIP 65.12 27.87 10.25 14.50 14 -26.46
Balance of payment -2.4 0.9 -0.6 -0.4 0.1 -152.9
Fiscal Deficit (%) 4.9 4.5 4.1 3.9 3.5 -6.50
Current account deficit (%) 4 4.9 1.6 1.2 0.1 -52.18
Unemployment rate (%) 5.2 4.9 4.9 5 4.8 -1.58

Economic growth can be determined using the GDP of the country. GDP is showing an upwards
trend for the past four years as it increases year after year. As the inflation rate falls down the
purchasing
 INDUSTRY ANALYSIS

In Industry analysis, Information technology industry is studied in terms of its problems and prospects.
India is considered as world’s leading sourcing destination for the information technology industry, as
ion figures it comes to just about 67 percent of the US $ 124-130 billion market. The IT industry has
shaped momentous command in education sector, in particular for engineering and computer sciences.

COMPANY ANALYSIS

In company analysis the financial performance of the selected companies is analyzed in order to
analyze the profitability of the firm. An investor should be aware of the financial performance of the
company to know the risk and return associated with particular share. For the purpose of analysis various
ratios such as EPS, Book Value, P/E ratio, return on equity and Dividend payout ratio are used.

 EARNINGS PER SHARE

Earnings per share is computed by dividing profit after interest and preference dividend by number of equity
shareholders. EPS indicates the earning capacity of the company.

YEAR MINDTREE
2011-2012 54
2012-2013 81.66
2013-2014 108.2
2014-2015 63.84
2015-2016 36.05
CAGR -7.76

Mindtree is having negative CAGR. Positive CAGR reveals increase of EPS over years and Negative
CAGR reveals decrease in EPS over years.

 PRICE TO EARNINGS RATIO

The P/E Ratio is a measure of the price paid for share relative to income or profit earned by the firm per
share. A higher P/E ratio means that investors are paying more for unit of income.

YEAR MINDTREE
2011-2012 4.51
2012-2013 5.58
2013-2014 6.09
2014-2015 10.22
2015-2016 18.09
CAGR 32.02
 Table shows a positive CAGR Mindtree

RETURN ON EQUITY

Return on equity is a measure of profitability of company that reveals how profit is generated by the
company with the money shareholders have invested. It is computed by dividing profit after tax with net
worth.

YEAR MINDTREE
2011-2012 25.37
2012-2013 29.97
2013-2014 30.66
2014-2015 29.38
2015-2016 27.44
CAGR 1.58

Table shows that Return on equity of Mindtree is moving in positive trend.

 DIVIDEND PAYOUT RATIO

The DPR measures what a company’s pay out to investors in the form of dividends. It can be calculated by
dividing the annual dividends per share by the Earnings per share. It can be computed by DPS divided by EPS.

YEAR MINDTREE
2011-2012 7.4
2012-2013 14.66
2013-2014 23.07
2014-2015 26.65
2015-2016 29.12
CAGR 31.5

Table shows dividend payout ratio for last five years, Mindtree is providing shareholders with high dividend.

 BOOK VALUE

This ratio indicates the share of equity shareholders after the company has paid all its liabilities, creditors,
debenture holders and preference shareholders.
YEAR MINDTREE
2011-2012 236.44
2012-2013 316.55
2013-2014 393.5
2014-2015 240.24
2015-2016 144
CAGR -9.44

Mindtree is showing negative CAGR

VALUATION OF SHARE

RATIOS MINDTREE
Average DPR 0.335

(ΣDPS / No. of Years)

Average Retention Ratio 0.665

(1- DPR)
Average ROE 0.285

(ROE/ No. of years)

Growth in Equity 0.189

(Avg. Retention Ratio *Avg. ROE)

Normalized Average P/E ratio 8.89

(Σ P/E ratio/ No. of years)

Projected EPS 42.89

(Current EPS * (1 + Growth in

equity)
Intrinsic Value 381.29

(Projected EPS * Normalized Avg.

Ratio)
Market Value (as on 28-Apr-2017) 485.95