BFM GRP Assignment New

Banking and Financial Management Group Assignment
On
INFOSYS
SUBMITTED TO : Dr Vedashree Mali

DATED : 30th November , 2023
Group Members:
Anirban Dey-1062220023
Tanya Kumari- 1062220046
Siddharth Meshram-1062220062
Siddharth Parashar-1062220063
Abhishek Gokhale-1062220144
Sameer Lagoo-1062220293
1
Introduction of IT sector.
The Information Technology (IT) industry is a dynamic and rapidly evolving sector that plays
a pivotal role in shaping the modern world. This expansive field encompasses a broad
spectrum of technologies, services, and activities aimed at managing and utilizing
information efficiently. From the development of cutting-edge software applications to the
maintenance of complex computer networks, the IT industry is integral to the functioning of
businesses, governments, and individuals on a global scale.
History of the IT industry In India.

The committee focused on the advancement of the IT industry in India, famously known as
the "Bhabha Committee" or the Electronics Committee. This committee, through its 10-year
plan spanning from 1966 to 1975, played a pivotal role in laying the groundwork for India's
IT service sector. The inception of the industry can be traced back to 1967 in Mumbai with
the establishment of Tata Consultancy Services (TCS). Notably, in 1977, TCS entered into a
partnership with Burroughs, marking the commencement of India's export of IT services.
The first software export zone, SEEPZ, came into existence in Mumbai in 1973, serving as a
precursor to the contemporary IT parks. During the 1980s, over 80 percent of the country's
software exports originated from SEEPZ, illustrating its significance in the industry's early
development.
Within a short span of 90 days from its formation, the Task Force, an outcome of the
committee's initiatives, produced an exhaustive report on India's technological landscape.
This led to the formulation of an IT Action Plan comprising 108 recommendations. The Task
Force's rapid response was possible due to its reliance on the collective experiences and
challenges faced by state governments, central agencies, universities, and the software
industry. Importantly, its proposals aligned The committee focused on the advancement of
the IT industry in India, famously known as the "Bhabha Committee" or the Electronics
Committee. This committee, through its 10-year plan spanning from 1966 to 1975, played a
pivotal role in laying the groundwork for India's IT service sector. The inception of the
industry can be traced back to 1967 in Mumbai with the establishment of Tata Consultancy
Services (TCS). Notably, in 1977, TCS entered into a partnership with Burroughs, marking
the commencement of India's export of IT services.
development.
industry. Importantly, its proposals aligned with international recommendations from bodies
2
like the World Trade Organization (WTO), International Telecommunication Union (ITU),
and World Bank. The Task Force also drew from the experiences of nations like Singapore
that had implemented similar programs, emphasizing collaboration and consensus-building.
TIDEL Park in Chennai, inaugurated in 1999, stood as the largest IT park in Asia,
symbolizing the industry's growth. Notably, regulated VSAT links became visible in 1994.
Desai (2006) details the regulatory adjustments made in 1991 to facilitate linking, involving
the creation of the Software Technology Parks of India (STPI) by the Department of
Electronics. STPI, being government-owned, provided VSAT communications without
breaching the existing monopoly. The initiative established software technology parks across
different cities, each offering satellite links for firms, initially through wireless radio links. By
1993, individual companies were permitted to have dedicated links, facilitating the direct
transmission of work from India to international destinations. This marked a significant leap
in the global recognition of India's capabilities, convincing American clients of the reliability
of satellite links for collaborative work.
In a move towards international collaboration, a joint EU-India group of scholars was formed
in 2001 to foster research and development. The year 2002 saw India and the European
Union agreeing to bilateral cooperation in science and technology. India's status as an
Associate Member State at CERN from 2017 further underscored its commitment to global
collaboration. Additionally, plans for a joint India-EU Software Education and Development
Center in Bangalore demonstrated the expanding partnerships in the IT sector.
In recent years, India has witnessed a surge in startups across various industries, with the
Information Technology sector experiencing notable growth. This boom can be attributed, in
part, to startup-friendly initiatives such as the Start Up India Scheme and T-Hub. These
schemes aim to provide resources and support to foster the creation of new startups,
stimulating economic growth and positioning India as a The committee focused on the
advancement of the IT industry in India, famously known as the "Bhabha Committee" or the
Electronics Committee. This committee, through its 10-year plan spanning from 1966 to
1975, played a pivotal role in laying the groundwork for India's IT service sector. The
inception of the industry can be traced back to 1967 in Mumbai with the establishment of
Tata Consultancy Services (TCS). Notably, in 1977, TCS entered into a partnership with
Burroughs, marking the commencement of India's export of IT services.
development.
industry. Importantly, its proposals aligned with international recommendations from bodies
3
like the World Trade Organization (WTO), International Telecommunication Union (ITU),
and World Bank. The Task Force also drew from the experiences of nations like Singapore
that had implemented similar programs, emphasizing collaboration and consensus-building.
Centre in Bangalore demonstrated the expanding partnerships in the IT sector.
stimulating economic growth and positioning India as a hub for innovation. Despite the
success of these initiatives, there has been a notable absence of active support for Scheduled
Tribes (ST) and Scheduled Castes (SCs) in the action plans, reflecting a broader trend of
marginalized communities facing challenges in breaking into the flourishing IT industry. Hub
for innovation. Despite the success of these initiatives, there has been a notable absence of
active support for Scheduled Tribes (ST) and Scheduled Castes (SCs) in the action plans,
reflecting a broader trend of marginalized communities facing challenges in breaking into the
flourishing IT industry.
with international recommendations from bodies like the World Trade Organization (WTO),
International Telecommunication Union (ITU), and World Bank. The Task Force also drew
from the experiences of nations like Singapore that had implemented similar programs,
emphasizing collaboration and consensus-building.
4
Centre in Bangalore demonstrated the expanding partnerships in the IT sector.
stimulating economic growth and positioning India as a hub for innovation. Despite the
success of these initiatives, there has been a notable absence of active support for Scheduled
Tribes (ST) and Scheduled Castes (SCs) in the action plans, reflecting a broader trend of
marginalized communities facing challenges in breaking into the flourishing IT industry.
Current Economic Scenario

In the contemporary global economic landscape, India stands as the leading exporter of
Information Technology (IT). The IT sector's contribution to India's Gross Domestic Product
(GDP) has witnessed a substantial increase, climbing from 1.2% in 1998 to a significant 10%
in 2019. Exports play a dominant role in India's IT industry, constituting approximately 79%
of the total revenue generated by the sector. Nevertheless, the domestic market also holds
significance, experiencing robust growth in revenue.
The industry's share of India's total exports, encompassing both merchandise and services,
has seen a remarkable rise from less than 4% in the fiscal year 1998 to around 25% in the
fiscal year 2012. As of 2006, the technologically inclined services sector in India contributes
to 40% of the country's GDP and 30% of its export earnings, all while employing only 25%
of the nation's workforce, according to Sharma (2006). According to Gartner, the "Top Five
Indian IT Services Providers" are Tata Consultancy Services, Infosys, Wipro, Tech
Mahindra, and HCL Technologies.
The estimated revenue of the IT and Business Process Management (BPM) industry stands at
US$194 billion in the fiscal year 2021, reflecting a year-on-year increase of 2.3%. This
revenue is further broken down into an estimated US$45 billion from domestic sources and
US$150 billion from exports in the same fiscal year. The IT industry employed nearly 2.8
million individuals in the fiscal year 2021, contributing significantly to employment
generation. As of March 2023, the overall IT–BPM sector employs a substantial workforce of
5.4 million people.
5
However, the year 2022 posed challenges for companies within the sector, marked by notable
employee attrition and intense competition in hiring processes. Despite these challenges,
Indian IT revenues demonstrated remarkable growth, reaching $227 billion in the fiscal year
2022, a period impacted by the COVID-19 pandemic. NASSCOM's Strategic Review
provides an optimistic outlook, predicting that the IT industry can achieve the ambitious
target of reaching US$350 billion by the fiscal year 2026, growing at a rate of 11-14%. This
projection underscores the resilience and potential for continued expansion within the Indian
IT sector.
State wise revenue in IT exports
The most significant Indian IT firms in terms of market capitalization.
The leading IT service providers in India in 2022 ranked by market capitalization. In

September 2021, TCS achieved a market capitalization milestone of US$200 billion, marking
the first instance of an Indian IT technology company reaching this valuation. Additionally,
on August 24, 2021, Infosys joined the ranks as the fourth Indian company to attain a market
capitalization of $100 billion.
The most substantial IT firms in India ranked by their revenue.
6
7
About Infosys
Infosys Limited is an Indian multinational information technology company that
provides business consulting, information technology and outsourcing services. The company
was founded in Pune and is headquartered in Bangalore. Infosys is the second-largest
Indian IT company, after Tata Consultancy Services, by 2020 revenue figures.
On 24 August 2021, Infosys became the fourth Indian company to reach US$100 billion
in market capitalization. It is one of the top Big Tech (India) companies.
History of Infosys
In Pune, Maharashtra, India, seven engineers created Infosys. The original investment was
$250. On July 2, 1981, it was registered under the name Infosys Consultants Private Limited.
It moved to Bangalore, Karnataka, in 1983. When the business became a public limited
company in June 1992, it changed its name to Infosys Technologies Limited from Infosys
Technologies Private Limited in April of that same year. In June 2011, it was rebranded as
Infosys Limited.
In February 1993, an IPO was announced, with a share price of ₹95 (that is, ₹690 or US$8.60
in 2023) and a book value of ₹20 (that is, ₹150 or US$1.80 in 2023) for each share. Despite
being undersubscribed, US investment bank Morgan Stanley "bailed out" the IPO, which
picked up a 13% equity stake at the offer price. Its shares were listed in June 1993 with
trading opening at ₹145 (equivalent to ₹1,100 or US$13 in 2023) per share.
In 1999, Infosys shares were listed as American depositary receipts (ADRs) on the Nasdaq
stock exchange. It was the first Indian business to list on the Nasdaq stock exchange.
[Reference required] By 1999, the share price had skyrocketed to ₹8,100 (about ₹35,000 or
US$440 in 2023), making it the priciest share available. Infosys was one of the top 20 largest
firms on the Nasdaq at the time based on market value. To improve access to the company's
shares for European investors, the ADR listing was moved from Nasdaq to NYSE Euronext.
Then-prime minister of Britain, David Cameron, spoke to Infosys staff members during a
July 2010 visit to the Bangalore headquarters.
A new office for Infosys servicing Harley-Davidson was announced in Milwaukee,

Wisconsin in 2012. In 2011, Infosys hired 1,200 workers in the United States, and in 2012,
the company added 2,000 more workers. Infosys announced plans to expand in Indianapolis,
Indiana, in April 2018.
Infosys launched EdgeVerve Systems, a product subsidiary, in July 2014 with an emphasis
on enterprise software products for the disciplines of business operations, customer support,
procurement, and commerce networks. Assets from Finacle Global Banking Solutions were
transferred from Infosys in August 2015, and as a result, they were included to EdgeVerve
Systems' product line.
8
Product & Services Offered by Infosys
We improve upon the way businesses operate. utilizing best-of-breed digital platforms to
empower our clients to drive game-changing efficiency and innovate on business models.
Our digital platforms assist customers in leveraging the power that comes with being a
connected business. We achieve this through utilizing value networks, connecting customer
journeys, and maximizing human potential.
Our digital platforms, which are fundamentally based on security and scalability and driven
by native AI and automation capabilities, assist businesses in finding and automating
processes, digitizing and organizing unstructured data, and harnessing the power of the
network through enterprise integration. By providing actionable intelligence and realizing our
clients' goal of creating a connected business, we propel digital transformation.
A leading
provider of digital banking systems is Finacle. To promote better banking, we collaborate

with both nascent and well-established financial institutions. Our SaaS services and array of
cloud-native solutions enable banks to operate, innovate, engage, and change more
effectively. We are a division of EdgeVerve Systems, a fully owned product subsidiary of
Infosys, a pioneer in global technology with yearly sales over USD 15 billion.
Our solution suite's comprehensive functionality, modular architecture, start-up culture, and
entrepreneurial attitude set us apart. We are renowned for having an unblemished history of
assisting financial institutions of all kinds in accelerating the digital transformation process.
Finacle is now used by financial institutions in over 100 countries to support millions of
enterprises and over a billion consumers to save, pay, borrow, and invest better.
9
With its Enterprise Agile Delivery Platform, Panaya helps businesses to constantly deliver
innovation while accelerating application evolution. Panaya offers testing solutions and
cloud-based application delivery to guarantee business and IT cooperation. With end-to-end
application lifecycle visibility and quicker release velocity, Panaya facilitates enterprise
agility while maintaining unwavering quality and optimizing user experience. Since 2008,
Panaya has been used by 2,000 businesses across 62 countries—including a third of the
Fortune 500—to update corporate apps quickly and efficiently with high quality.
Assisting top businesses worldwide to succeed in the realm of digital commerce and to give
their clients experiences that are focused on people. Infosys Equinox offers a comprehensive
ecosystem that addresses every part of your e-commerce demands thanks to our future-ready
MACH-X architecture. Our primary digital commerce and marketing platform, Infosys
Equinox, is a collection of fundamental microservices that cover every possible situation in
digital commerce. Because of this, businesses can quickly develop and implement features
across all channels and touchpoints without encountering the difficulties and friction that
come with using outdated platforms. We are aware that company executives require more
than just the best e-commerce platform available. For this reason, Infosys Equinox provides
end-to-end capabilities, including integrations and the core platform, for the whole lifecycle
10
of commerce. It permits you to take your e-commerce from concept to turnkey in a matter of
weeks.
Make the most of Infosys Meridian, the company's live enterprise workplace platform, to
plan virtual events, meetups, and webinars with a high user engagement experience quotient.
Provide intuitive and engaging experiences to interact with stakeholders, consumers, and
staff. We can assist you with simulating live experiences that your clients and staff can easily
access from remote places, whether it's a town hall with employees, the annual general
meeting, a virtual event for clients, or a demonstration of products and services.
11
Capital Structure of Infosys
2. To analyse the financial performance of Infosys by using Different ratios.
One of the sectors in India that is expanding the fastest is information technology (IT). The
Indian IT sector has established a strong reputation for itself in international markets. The
mainframe maker Burroughs requested its India sales agency, Tata Consultancy Services
(TCS), to export programmers to install system software for a U.S. client in 1974, which is
when the IT industry in India got its start. Negative circumstances led to the formation of the
IT sector. "Infosys is a global leader in next-generation digital services and consulting."
Following their resignation from Patni Computer Systems, Narayan Murthy, Nandan
Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh, and Ashok Arora co-
founded Infosys in 1981. In April, the business rebranded as Infosys Technologies Private
Limited 1992 and to Infosys Technologies Limited when it became a public. limited company
in June 1992. It was renamed Infosys Limited in June 2011.
limited company in June 1992. It was renamed Infosys Limited in June 2011.
Infosys became the fourth Indian business to reach the $100 billion market value threshold on
August 24, 2021.
The precise proportion of debt and equity used to fund a business's assets and activities is
referred to as its capital structure. From a business standpoint, equity is a more costly, long-
term source of funding with more flexibility in terms of finances.
The amount of money, or capital, that supports, finances, and operates a business is known as
its capital structure. Additionally, it can display capital expenditures and business acquisitions
that may have an impact on the company's profitability.
1. To examine Infosys' current capital structure.

The whole capital structure of Infosys is made up of equity. The business is debt-free. It is
exempt from paying fixed interest since it is debt-free. Infosys's capital structure is
conservative. Because leverage is not a part of the capital structure, there is little financial
risk. Infosys is only profitable when it comes to equity; it is unable to benefit from tax
shielding and leverage.
Ratio of T-1 Capital Structure
Since its founding, Infosys has largely relied on internal funding and equity issues, and this
practise has continued to this day. The company's equity foundation has been reinforced. Low
debt suggested a chance to raise the percentage of permanent capital in the capital structure
financially consisting long term debt.
12
Year 2018 2019 2020 2021 2022
Current Ratio 3.5 2.9 2.6 2.5 2
Basic EPS 71.28 33.75 35.68 43.36 50.48
Net Profit
margin 0.2608 20% 19.66% 21% 20%
Dividend P/O 46.42 63.7 49% 64% 61%
Return on
Asset 20.22 17.34 17% 17% 18%
P/E Ratio 15.4 21.2 15.5 31.6 36.2
Return on
Equity 24.89 22.64 24% 23% 28%

A current ratio greater than one indicates a healthy business's finances. Since Infosys' ratio is
2, it can easily pay off loans and accounts payable twice for every dollar. It provides guidance
to analysts and investors on how a business might optimise its current assets on the balance
sheet in order to pay down its current debt and other payables.
A greater EPS indicates that a business is lucrative enough to distribute more profits to its
owners; as earnings grow over time, a business may decide to raise its dividend. And from
2019 to 2022, Infosys' EPS increased in this instance.
It is lower than in 2018, which is bad for the business. It shows that the company's share price
is higher than its earnings.
Industry-specific net profit margins range from 20% to 5%, with the Corporate Finance
Institute classifying 20% as good, 10% as typical or normal, and 5% as low or poor. The net
profit margin experiences an increase between 2020 and 2022. However, it is declining in
comparison to 2018, which is bad news for the business.
A reasonable dividend payout ratio is between thirty and fifty percent; anything higher than
that might not be able to be sustained. For the past three years, Infosys' DPR has been above
60%. It indicates they think the company is paying out comparatively more of its earnings as
dividends while reinvesting less money back into the company. This is known as a high
dividend payout ratio.
2017–2018 saw the highest return on assets, while 2020–2021 saw the lowest.The return on
assets is trending in different directions. It was generating the highest return on assets in FY
2017–2018. To 16.65% in FY 2020–2021, it fell.
Following then, it rose to 18.01%. The pattern indicates that the business is unable to
profitably recoup its investments. However, ROA above 5% is typically seen as good, and
above 20% as exceptional. 2. To analyse the financial performance of Infosys by using
Different ratios.
13
Since Infosys's ROA is consistently above 5% and close to 20%, it is regarded as being
favourable for both financial position and investment purposes.
In 2018 (15.4x, -9.1%) and 2020 (15.5x, -26.9%), Infosys's P/E ratio dropped; but, in 2019
(21.2x, +38.0%), 2021 (31.6x, +103.8%), and 2022 (36.2x, +14.4%), it grew. In March 2022,
Infosys's P/E ratio reached its highest point during the previous five years, at 36.2x.
In general, a company is regarded as a solid investment if its return on equity (ROE) exceeds
20%. With Infosys's current return on equity (ROE) of 28.18%, investors are advised to
consider investing in the company. Over 20% ROE for Infosys from 2018 to 2022 is a
positive indicator for the company's financial position and investments.
5. To research how capital structure affects profitability.
Capital structure decisions impact firm value and profitability by increasing value through the
present value of tax savings from debt utilisation. This may seem to suggest that companies
should use all of their debt to increase their worth. Infosys is performing well just on equity;
it is unable to benefit from tax shelters and leverage.
A company's profitability and the efficiency with which it makes profits are measured by its
return on equity (ROE). An organisation is more successful at turning equity capital into
profits if its ROE is higher. With a return on equity (ROE) of 28.18%, Infosys makes Rs. 28
for every Rs. 100 in stock it owns. That suggests that Infosys is in a strong financial position.
In contrast to 2018, Infosys's ROE decreased in 2019, but it increased to 28.18% after that.
14
Evaluation of Dividend Policy of Infosys
Shareholder Value: Companies use dividends to distribute their profits among

shareholders. A transparent dividend policy is essential for drawing and keeping
investors who depend on a consistent income flow from their investments.
Market Perception: The market's view of a company is positively affected by a

dividend policy that is both steady and transparent. It signifies the company's
financial stability, confidence in future earnings, and a dedication to providing
value back to its shareholders.
Attraction for Investors: A clearly outlined dividend policy can enhance a

company's appeal to potential investors. Many investors, particularly those in
search of regular income, seek out companies with a track record of dependable
and increasing dividends.
Financial Discipline: The establishment of a dividend policy involves a

meticulous evaluation of the company's financial well-being. This process
promotes financial discipline, assisting the company in striking a balance between
rewarding shareholders and retaining earnings for future growth and investment
opportunities.
• Dividend Coverage Ratio: This is like checking if the money the company makes
is enough to cover the ice cream it's giving away. A high ratio means the company
is in good shape and can keep sharing those sweet dividends.
• Retention Ratio: Ever see a kid save some of their allowance instead of spending
it all? Well, companies do something similar with profits. The retention ratio is like
how much of their earnings they save for later, using it to make the business even
better.
• Dividend Pay-out Ratio: Imagine you have a pile of candy, and you decide to
share a part of it with your friends. The dividend pay-out ratio is like figuring out
what percentage of your candy stash you're willing to share. Companies want to
find a good balance between giving enough to keep friends happy (shareholders)
and saving some for themselves to buy new and exciting candies (investments in
the business).
15
Equity Share Net Income Dividend
Year Dividend (CR.) Payout Ratio
2023 13,675.00 21,104.20 64.80
2022 12,700.00 19,836.20 61.00
2021 9,158.00 15,407.90 64.00
2020 9,553.00 20,229.80 47.22
2019 13,768.00 19,754.20 69.70
2018 5,623.00 13,246.20 42.45
Dividend Payout Ratio = (Dividends Paid / Net Income) x 100
INFOSYS
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
1900 1900 1900 1900 1900 1900
Equity Share Dividend Net Income (CR.)
Analysis:
The dividend payout ratio has been increasing steadily since 2018, reaching 64.80% in 2023.
This is a positive sign, as it indicates that the company is generating more cash than it needs
to reinvest in its business. As a result, it is able to return more of its profits to shareholders in
the form of dividends.
The dividend payout ratio is also higher than the industry average of 50%. This suggests that
the company is committed to rewarding its shareholders with a generous dividend yield.
16
However, it is important to note that a high dividend payout ratio can also be a sign of
financial stress. If a company is paying out too much of its earnings in dividends, it may not
have enough money to reinvest in its business and grow. This could eventually lead to a
decline in profitability and dividends.
Overall, the increasing dividend payout ratio is a positive sign for investors. However, it is
important to monitor the company's financial health to ensure that it is able to sustain its
dividend payments in the long term.
Additional analysis:
The dividend payout ratio was highest in 2019, at 69.70%. This was likely due to a
combination of factors, including strong earnings growth and a desire to return more cash to
shareholders. However, the payout ratio declined in 2020 and 2021, as the company retained
more earnings to weather the COVID-19 pandemic.
The payout ratio has since rebounded in 2022 and 2023, as the company's earnings have
recovered. However, the payout ratio is still below its pre-pandemic level. This suggests that
the company is taking a more cautious approach to dividend payments, in order to preserve
its financial flexibility.
Overall, the dividend payout ratio is a useful metric for investors to track. It can provide
insights into the company's financial strength, its commitment to returning cash to
shareholders, and its potential for future dividend growth.
Retention Ratio = (1 - Dividend Payout Ratio)

This ratio shows the proportion of net income that a company retains for reinvestment in the business
rather than distributing it as dividends.
Equity
Share Dividend
Year Dividend Net Income (CR.) Payout Ratio Retention Ratio
2023 13,675.00 21,104.20 64.80 63.80
2022 12,700.00 19,836.20 64.02 63.02
2021 9,158.00 15,407.90 59.44 58.44
2020 9,553.00 20,229.80 47.22 46.22
2019 13,768.00 19,754.20 69.70 68.70
2018 5,623.00 13,246.20 42.45 41.45
17
RETENTION RATIO
80.00
70.00
60.00
50.00
40.00
68.70
30.00 63.80 63.02 58.44
46.22 41.45
20.00
10.00
0.00
1 2 3 4 5 6
As you can see, the retention ratio has increased from 41.45% in 2018 to 63.80% in 2023.
This is a significant increase, and it is a sign that Infosys Ltd is committed to reinvesting in
its business for future growth.
There are a few possible reasons for the increase in Infosys Ltd's retention ratio. One
possibility is that the company is investing in new growth opportunities. For example, the
company is expanding its presence in new markets and is developing new products and
services. Another possibility is that the company is investing in its existing business to
improve its efficiency and profitability. For example, the company is investing in new
technologies and is automating its operations.
Analysis of Retention Ratio for Each Year
2018
The retention ratio in 2018 was 41.45%. This was a relatively low retention ratio, which
suggests that the company was prioritizing returning cash to shareholders over reinvesting in
the business.
2019
The retention ratio in 2019 increased significantly to 68.70%. This increase can be attributed
to a few factors, including a slowdown in revenue growth, increased investment in new
technologies and capabilities, and a desire to build a stronger financial position.
2020
The retention ratio in 2020 decreased to 46.70%. This decrease can be attributed to the
COVID-19 pandemic, which had a negative impact on the company's business. The company
needed to pay out more dividends to shareholders to support their finances during this
difficult time.
18
2021
The retention ratio in 2021 increased to 58.44%. This increase can be attributed to the
company's improving financial performance and its continued investment in new growth
opportunities.
2022
The retention ratio in 2022 increased further to 63.02%. This increase can be attributed to the
company's continued investment in new growth opportunities and its efforts to improve its
efficiency and profitability.
2023
The retention ratio in 2023 is 63.80%. This is in line with the company's long-term strategy of
investing in new growth opportunities and improving its efficiency and profitability.
Overall Analysis
The increase in Infosys Ltd's retention ratio is a positive sign for the company's future
growth. It indicates that the company is committed to reinvesting in its business to maintain
its competitive advantage and grow its market share.
Dividend Coverage Ratio = (Earnings per Share / Dividends per Share)
This ratio assesses the company's ability to cover its dividend payments with earnings. A ratio
less than 1 may indicate potential issues with dividend sustainability.
Dividend
Year EPS DPS Coverage Ratio
2023 55.48 16.5 3.4
2022 50.27 31 1.6
2021 42.37 27 1.6
2020 36.34 17.5 2.1
2019 33.66 21.5 1.6
2018 71.28 25 2.9
19
INFOSYS
80
60
40
20 DPS
EPS
0
1 2 3 4 5 6
EPS DPS
As you can see, Infosys Ltd's dividend coverage ratio has fluctuated over the past five years,
but it has generally been declining. This is because the company's DPS has been increasing
faster than its EPS.
There are a few possible reasons for the decline in Infosys Ltd's dividend coverage ratio. One
possibility is that the company is returning more cash to shareholders in the form of
dividends. Another possibility is that the company is investing more in its business, which is
reducing its EPS.
Analysis of Dividend Coverage Ratio for Each Year
2018
The dividend coverage ratio in 2018 was 2.85. This was a relatively healthy dividend
coverage ratio, which suggests that the company was generating more EPS than it was paying
out in DPS.
2019
The dividend coverage ratio in 2019 decreased to 1.57. This decrease was due to a
combination of factors, including a slowdown in revenue growth and an increase in DPS.
2020
The dividend coverage ratio in 2020 increased to 2.10. This increase was due to a decrease in
DPS, as the company needed to retain more of its earnings to support its business during the
COVID-19 pandemic.
2021
The dividend coverage ratio in 2021 decreased to 1.60. This decrease was due to an increase
in DPS.
2022
20
The dividend coverage ratio in 2022 further decreased to 1.62. This decrease was due to a
further increase in DPS.
2023
The dividend coverage ratio in 2023 is 3.40. This is a significant decrease from previous
years.
Overall Analysis
The decline in Infosys Ltd's dividend coverage ratio is a cause for concern. It suggests that
the company is returning more cash to shareholders in the form of dividends than it is
generating in EPS. This is not sustainable in the long term.
The company's management needs to address the decline in its dividend coverage ratio. It can
do this by either reducing DPS, increasing EPS, or a combination of both.
Recommendations
Based on the data that we get regarding Infosys following recommendations would be given:
Reduce DPS: The company should reduce its DPS to a level that is more sustainable. This
will increase its dividend coverage ratio and improve its financial health.
Increase EPS: The company should focus on increasing its EPS. This can be done by growing
its revenue, improving its profitability, and reducing its costs.
By taking these steps, Infosys Ltd can improve its dividend coverage ratio and ensure that it
is able to sustain its dividend payments in the long term.
Conclusion
The business is operating profitably and keeps a healthy cash balance. Because it has no debt,
it carries less financial risk and draws in more investors because of its high dividend payout.
With a healthy cash reserve, Infosys may grow its company by investing more in the IT
industry. Since its founding, Infosys has largely relied on internal funding and equity issues,
and this practise has continued to this day. The company's equity foundation has been
reinforced. Low debt suggested that there was a chance to raise the percentage of long-term
debt in permanent capital structure.
Capital structure decisions impact firm value and profitability by increasing value through the
present value of tax savings from debt utilisation. This may seem to suggest that companies
should use all of their debt to increase their worth. It would be beneficial, in my opinion, if
the company reorganised its capital structure and used debt as a tax shelter. Industry-specific
net profit margins range from 5% to 20%, with the Corporate Finance Institute classifying
20% as good, 10% as typical or normal, and 5% as low or poor. Between 2020 and 2022,
there is a rise in the net profit margin. However, it is declining in comparison to 2018, which
is bad news for the business. The financial health of the company may suffer as a result.
21

BFM GRP Assignment New

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

BFM GRP Assignment New

Uploaded by

Copyright:

Available Formats

Banking and Financial Management Group Assignment

SUBMITTED TO : Dr Vedashree Mali

History of the IT industry In India.

Current Economic Scenario

State wise revenue in IT exports

The most significant Indian IT firms in terms of market capitalization.

The leading IT service providers in India in 2022 ranked by market capitalization. In

The most substantial IT firms in India ranked by their revenue.

A new office for Infosys servicing Harley-Davidson was announced in Milwaukee,

provider of digital banking systems is Finacle. To promote better banking, we collaborate

1. To examine Infosys' current capital structure.

1. To analyse the financial performance of Infosys by using Different ratios.

Shareholder Value: Companies use dividends to distribute their profits among

Market Perception: The market's view of a company is positively affected by a

Attraction for Investors: A clearly outlined dividend policy can enhance a

Financial Discipline: The establishment of a dividend policy involves a

Dividend Payout Ratio = (Dividends Paid / Net Income) x 100

Equity Share Dividend Net Income (CR.)

Retention Ratio = (1 - Dividend Payout Ratio)

You might also like