Quarterly Result Update

Infosys Ltd.
Concerns on volume growth and disappointing outlook for FY13
Outlook
Ironically, Infosys which traditionally has overshot its own guidance has now for the last three quarters been
struggling to meet its own forecast. With global budgetary allocations being cut and actual spending lagging
these reduced allocations we believe that the entire IT industry is going to be under pressure. Infosys
guidance on flat pricing and volume growth of 8-10% growth for FY13 was disappointing and we expect the
stock to underperform going forward.
Also the FSI space which constitutes ~35% of Infosys business has been impacted due to delays in decision
making and reduced IT spends due to more lenient regulation. Further, the macro economic situation in
Europe (~30% of revenues) is also expected to deteriorate and affect discretionary IT spending and remains
a high risk. With the decision to hike salaries being deferred we expect attrition levels to increase, in case
competition implements even moderate wage hikes. Margins (at 32.8% are down by 90 bps QoQ) could also
come under pressure in case intense competition leads to pricing pressures.
In the light of above mentioned facts we expect revenue and earnings to grow at a CAGR of 8.7% & 6.1% to
Rs 39680 crore and Rs 9362 crore by FY14. In our opinion there is a further downside risk of 7% (Target
price of Rs 2234 at 15x FY13 PE) over a period of 12 months. We recommend a SELL on the stock.

Key Takeaways
Citing the risks from slower growth in developed markets and challenging environment in Europe markets the
company has given lower than expected FY13 dollar revenue growth guidance of 8-10% (12-14% expected)
which translates into revenues of $ 7,553 mn-$7,692 mn. The company expects decline 50-100 bps in OPM
for FY13 Meanwhile, the company guided for flattish kind of revenue growth for Q1FY13.
Impacted by dip in volume growth (-1.5% QoQ), appreciation of rupee (-2.7% QoQ) and pricing declines
(1.1%) Infosys has posted a topline of Rs 8,852 crore for Q4FY12 (-4.8% QoQ) which was marginally ahead
of our expectations. Aided by currency appreciation and pricing gains, the company posted Revenues of
33,734 crore for FY12, a growth of 22.7% on YoY basis.

Recommendation (Rs)
CMP
Rating
Index Details
Sensex
Nifty
Industry

2,403
SELL

17,094
5,207
IT - Software

Scrip Details
Mkt Cap (Rs cr)
Eq Shares O/s (Cr)
AvgVol (Lakhs)

138,004
57.4
1.2
3305/21
69
2.2
5.0

52 Week H/L
Dividend Yield (%)
Face Value (Rs)

Latest shareholding pattern (%)

Promoters
16.0
Indian Institutions
16.6
FIIs
39.0
Public
28.4
Total
100.0
Stock performance (%)
1m
3m
Infosys Ltd.
-15.6
-7.1
Nifty
-4.1
7.0
BSE IT
-11.6
-1.4

th

6m
-10.8
2.6
-2.7

Friday, 13 April, 2012

.

Quarterly Result Update

Operating margins during the current quarter remained under pressure at 32.8% (-90 bps QoQ). This was
largely attributable to currency losses, pricing decline and lower utilisation rates. Considering the macro
environment the company has delayed wage hike decision to second half of FY13. Loss on operating front
was compensated by higher other income which grew by 47.5% on sequential quarter basis to Rs 662 crore
on account of higher interest income. As result of this Net Profit for the current quarter declined by 2.4% QoQ
to Rs 2,316 crore.
In terms of industrial segments the growth of BFSI segment (-4.6% QoQ) remained under pressure on
account of slow decision making and relaxation of banking regulatory norms especially in European
region.Driven by strong execution from Auto segment Manufacturing posted a QoQ growth of 2.2%.
Meanwhile Retail, Logistics, CPG & Life Sciences segments degrew by 2.9% on sequential quarter basis.
Energy & Utilities, Communications and Services also remained subdued with sequential degrowth of 0.3%.
With addition of 52 new clients, the number of active clients has reached 694 by end of Q3FY12. During the
current quarter company signed 5 large deals which also included 3 deals from North American geography.
Utilization rate excluding trainees stood at 67.2%, a decline 220bps on sequential quarter basis. Hiring at
gross level for FY12 stood at 45,605, which was aggressive as compared against guidance of 45,000.
Attrition rate also improved by 70 bps on sequential quarter basis to 14.7%which is encouraging sign for the
company.

th

Friday, 13 Apr, 2012

Quarterly Result Update

Description
Net Sales
Other operational Income
Total Oper. Income(TOI)
Raw Materials Cons.% to TOI
Stock adj. (-)Inc / (+)Dec% to TOI
Net Raw Mat adj. for stock
% to TOI
Other expenses
% to TOI
Contribution Net_Sales
Personnel
% to TOI
Total expenditure
Operating Profit
% to TOI
Non-Operating Income
Interest
Exceptional Items
Gross Profit
Depreciation
PBT before Extra-ord
% to TOI
Extraordinary Items
PBT
Tax Rate
Prov. for Tax
% to TOI
Profit after Tax
% to TOI
Minority Interest
PAT (adj. For MI)
Face Value
Equity Share capital
EPS (Rs.)
CEPS (Rs.)

Q4FY12
8852.0
0.0
8852.0
412.0
4.7
0.0
0.0
412.0
4.7
1006.0
11.4
7434.0
4787.0
54.1
6205.0
2647.0
29.9
652.0
0.0
0.0
3299.0
0.0
3299.0
37.3
0.0
3299.0
29.8
983.0
11.1
2316.0
26.2
2316.0
5.0
286.0
40.5
40.5

Q4FY11
7250.0
0.0
7250.0
282.0
3.9
0.0
0.0
282.0
3.9
914.0
12.6
6054.0
3952.0
54.5
5148.0
2102.0
29.0
415.0
0.0
0.0
2517.0
0.0
2517.0
34.7
0.0
2517.0
27.8
699.0
9.6
1818.0
25.1
1818.0
5.0
286.0
31.8
31.8

% Chg.
22.1
0.0
22.1
46.1
0.0
46.1
10.1
22.8
21.1
20.5
25.9
57.1
0.0
0.0
31.1
0.0
31.1
0.0
31.1
7.3
40.6
27.4
27.4
27.4
27.4

Q4FY12
8852.0
0.0
8852.0
412.0
4.7
0.0
0.0
412.0
4.7
1006.0
11.4
7434.0
4787.0
54.1
6205.0
2647.0
29.9
652.0
0.0
0.0
3299.0
0.0
3299.0
37.3
0.0
3299.0
29.8
983.0
11.1
2316.0
26.2
2316.0
5.0
286.0
40.5
40.5

Q3FY12
9298.0
0.0
9298.0
448.0
4.8
0.0
0.0
448.0
4.8
1111.0
12.0
7719.0
4840.0
52.1
6399.0
2899.0
31.2
442.0
0.0
20.0
3321.0
0.0
3321.0
35.7
0.0
3321.0
28.6
949.0
10.2
2372.0
25.5
2372.0
5.0
286.0
41.5
41.5

% Chg.
-4.8
0.0
-4.8
-8.0
0.0
-8.0
-9.5
-3.7
-1.1
-3.0
-8.7
47.5
0.0
-100.0
-0.7
0.0
-0.7
0.0
-0.7
4.3
3.6
-2.4
-2.4
-2.4
-2.4

FY201203 FY201103
33734.0
27501.0
0.0
0.0
33734.0
27501.0
1468.0
1060.0
4.4
3.9
0.0
0.0
0.0
0.0
1468.0
1060.0
4.4
3.9
4147.0
3483.0
12.5
12.7
28066.0
22938.0
18340.0
14856.0
54.4
54.0
23955.0
19399.0
9779.0
8102.0
28.8
29.4
1957.0
1231.0
0.0
0.0
53.0
20.0
11683.0
9313.0
0.0
0.0
11683.0
9313.0
34.6
33.9
0.0
0.0
11683.0
9313.0
28.8
26.7
3367.0
2490.0
10.0
9.1
8316.0
6823.0
24.7
24.8
8316.0
6823.0
5.0
5.0
286.0
286.0
145.4
119.3
145.4
119.3

% Chg.
22.7
0.0
22.7
38.5
0.0
38.5
19.1
22.4
23.5
23.5
20.7
59.0
0.0
165.0
25.5
0.0
25.5
0.0
25.5
7.8
35.2
21.9
21.9
21.9
21.9

th

Friday, 13 Apr, 2012

Quarterly Result Update

Financials and Projections
Y/E March, Fig in Rs. Cr
FY 2011 FY 2012e FY 2013e FY 2014e
Profit & Loss Statement
Net Sales
27501
33734
37161
39860
% Chg.
22.7
10.2
7.3
Total Expenditure
18545
23008
25722
27456
% Chg.
24.1
11.8
6.7
EBDITA
8956
10726
11440
12404
EBDITA Margin %
33
32
31
31
Other Income
1211
1904
1848
2286
PBDIT
10167
12630
13288
14690
Depreciation
854
947
1130
1315
Interest
0
0
0
0
Exceptional items
0
0
0
0
PBT
9313
11683
12158
13374
Tax Provisions
2490
3367
3647
4012
Reported PAT
6823
8316
8511
9362
PAT Margin (%)
24.8
24.7
22.9
23.5
Software Dev Cost (%)
54.8
55.9
56.2
54.9
Sales & Mark Exp/ Sales (%)
5.5
5.2
5.5
6.0
Gen Admin Exp / Sales (%)
7.2
7.1
7.5
8.0
Tax Rate (%)
26.7
28.8
30.0
30.0

Y/E March, Fig in Rs. Cr

FY 2011 FY 2012e FY 2013e FY 2014e
Per Share Data (Rs)
EPS
119
146
149
164
Cash EPS
134.4
162.1
168.7
186.9
DPS
60
47
30
30
Book Value
477.9
585.6
699.6
828.4
Capital, Liquidity, Returns Ratio
Debt / Equity (x)
0.0
0.0
0.0
0.0
Current Ratio (x)
6.5
6.3
7.2
8.2
ROE (%)
25.0
24.9
21.3
19.8
ROCE (%)
36.8
37.6
33.1
31.0
Dividend Yield (%)
2.5
2.0
1.2
1.2
Valuation Ratio (x)
P/E
20.1
16.5
16.1
14.7
P/BV
5.0
4.1
3.4
2.9
EV/Sales
4.2
3.5
3.1
2.9
EV/EBIDTA
13.0
10.9
10.2
9.4
Efficiency Ratio (x)
Debtors (days)
77.2
77.2
77.8
75.6
Other Current Assets (days)
12.9
11.2
11.2
11.2
Creditors (days)
14.0
11.1
13.0
12.7

Balance Sheet
Share Capital
Reserves & Surplus
Minority Interest
Total Loans
Others
Total Liabilities
Goodwill & Intangibles
Gross Block
Less: Acc. Depreciation
Net Block
Capital Work in Progress
Net Current Assets
Deferred Tax Assets
Misc Expenses
Total Assets

Cash Flow statement

Profit After Tax
Depreciation
Working Capital Changes
Others
Operating Cash Flow
Capital Expenditure
Change in Investment
Cash Flow from Investing
Proceeds from equity issue
Inc/ Dec in Debt
Dividend and DDT
Cash Flow from Financing
Net Change in Cash
Opening Cash Balance
Closing Cash Balance

286
27017
0
0
319
27622
873
7573
3254
4319
525
20048
1371
486
27622

286
33175
0
0
121
33582
974
8730
4209
4521
1080
25480
1353
174
33582

286
39685
0
0
121
40093
961
10330
5326
5004
1696
30904
1354
174
40093

286
47048
0
0
121
47455
948
11930
6629
5301
2496
37181
1355
174
47455

6823
854
-1360
-500
5817
-1248
3579
2331
72
0
-3665
-3593
4555
12111
16666

8316
947
-1274
1044
9033
-1524
-222
-1746
168
0
-3014
-2846
4442
16666
21107

8511
1130
246
0
9886
-2201
361
-1840
0
0
-2000
-2000
6046
20591
26637

9362
1315
-378
0
10300
-2401
0
-2401
0
0
-2000
-2000
5898
26638
32537

th

Friday, 13 Apr, 2012

Quarterly Result Update

P/E Bands

P/B Bands

EV/EBITDA Bands

7000

8000

350000

6000

7000

300000

5000

6000

250000

5000

4000

200000

4000

3000

150000

3000

2000

2000

100000

1000

1000

50000

CMP

Mar-04

Mar-06

Mar-08

Mar-10

Mar-12

16X

21X

26X

31X

36X

0
Mar-02
CMP

NIFTY Comparison
105.0
100.0
95.0
90.0
85.0
80.0
75.0
70.0
65.0
60.0
Apr-11

Jun-11 Aug-11

Oct-11

Dec-11

Mar-04

Mar-06

5X

6.5X

Mar-08

Mar-10

Mar-12

9.5X

11X

8X

0
Mar-02

Mar-04

Mar-06

EV

12X

15X

Sectoral Index Comparison

Feb-12

105.0
100.0
95.0
90.0
85.0
80.0
75.0
70.0
65.0
60.0
Apr-11

NIFTY

Mar-10

Mar-12

21X

24X

18X

30

Jun-11 Aug-11 Oct-11

Dec-11

Feb-12

HCL TECH

25
20

INFOSYS

BSEIT

INFOSYS

TCS

15
WIPRO

10
5
0
0

INFOSYS

Mar-08

Rating Charts

EXPECTED 2YR EPS CAGR%

0
Mar-02

RATING SCORE

th

Friday, 13 Apr, 2012

Quarterly Result Update

RONW Vs P/E

Volumes Growth (%)

7.0%

34%

40.0

6.0%

33%

35.0

5.0%

5.0

10.0

15.0

20.0

25.0

30.0

-2.0%

P/E

Q4 FY12

0.0

Q3 FY12

-1.0%

0.0

Q2 FY12

26%
Q1 FY12

5.0

27%

0.0%

Q4 FY11

Geometric

Q1 FY11

10.0

28%

1.0%
Q4 FY12

Patni

29%

2.0%

Q3 FY12

Wipro

Oracle

30%

3.0%

Q2 FY12

15.0

Mindtree

31%

4.0%

Q1 FY12

NIIT Tech

20.0

HCL Tech

Infosys

Q4 FY11

25.0

Tech Mah.

Q3 FY11

Mphasis

32%

Q2 FY11

30.0

Q1 FY11

45.0

ROE

35%

Q3 FY11

TCS

Operating Margin (%)

8.0%

Q2 FY11

50.0

Geographical Segmentation of Revenues

Revenue by Geographical Segment

Mar 31, 2012

%

Quarter ended
Dec 31, 2011 Mar 31, 2011
%
%

12 Months
Mar 31, 2012 Mar 31, 2011
%
%

North America

62.4

63.7

63.7

63.9

65.3

Europe

23.1

22.6

22.1

21.9

21.5

2.1

2.7

2.2

2.2

Rest of the World

12.5

11.6

11.5

12

11

Total

100

100

100

100

100

India

th

Friday, 13 Apr, 2012

Quarterly Result Update

Revenue Break up by Industry Verticals
Revenue by Industry

Quarter ended
Mar 31, 2012 Dec 31, 2011 Mar 31, 2011
%
%
%

12 Months
Mar 31, 2012 Mar 31, 2011
%
%

Insurance, banking & financial

Services

34.3

35.3

35.7

35.1

35.9

Banking & financial services

27.4

27.9

28.5

27.9

27.8

Insurance

6.9

7.4

7.2

7.2

8.1

Manufacturing

21.3

20.4

20.4

20.5

19.6

Retail & Life Sciences

22.9

23.1

21.4

23

20.5

Retail & CPG

15.8

15.2

14.5

15.7

14.2

Transport & Logistics

1.6

2.1

1.8

1.9

Life Sciences

3.9

4.1

3.7

3.9

3.4

Healthcare

1.6

1.8

1.1

1.6

Energy & Utilities Communication

Services

21.5

21.2

22.5

21.4

24

Energy & Utilities

6.1

5.8

5.9

6.1

Telecom

10.1

9.8

11.9

10.2

12.9

Others

5.3

5.4

4.8

5.3

Total

100

100

100

100

100

th

Friday, 13 Apr, 2012

Quarterly Result Update

Break up of Onsite & Offsite Revenues and Utilization levels
Quarter ended
12 Months
Effort and Utilization
Mar 31, 2012
Dec 31, 2011
Mar 31, 2011
Mar 31, 2012
Mar 31, 2011
%
%
%
%
%
Effort
Onsite
Offshore
Revenue
Onsite
Offshore
Utilization
Including trainees

Excluding trainees

24.6
75.4

24.8
75.2

24.6
75.4

25.0
75.0

24.2
75.8

49.6
50.4

49.5
50.5

49.3
50.7

49.9
50.1

49.2
50.8

67.2

69.9

68.4

69.2

72

73

77.4

75.2

75.6

78.9

Break up of revenues by Service Verticals

Revenue by Service offering
Services
Business IT Services
Application Development
Application Maintenance
Infrastructure Management Service
Testing Services
Business Process Management Service
Product Engineering Services
Others
Consulting & System Integration
Products, Platforms and Solutions
Products
BPM Platform
Others
Total

Mar 31, 2012

%

Quarter ended
Dec 31, 2011
%

Mar 31, 2011

%

62.7
16.9
20.9
6.2
7.8
3.4
4.8
2.7
31.1
6.2
4.4
1.4
0.4
100

63.6
17.1
21.8
6.1
7.9
3.6
4.4
2.7
30.6
5.9
4.8
0.8
0.3
100

61.8
16.1
22
6.1
7.3
2.4
4.9
3
31.7
6.5
5.4
0.7
0.4
100

12 Months
Mar31, 2011
Mar31, 2012
%
%
63
16.8
21.6
6.0
7.9
3.4
4.6
2.7
31.2
5.8
4.6
0.9
0.3
100

62.8
16
22.9
6.3
7.5
2.4
4.9
2.8
31.2
6
4.9
0.7
0.4
100

th

Friday, 13 Apr, 2012

Quarterly Result Update

Ventura Securities Limited

Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai 400079
This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no
responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their
articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or
in part without written permission is prohibited. This report is for private circulation.

th

Friday, 13 Apr, 2012