2. Example: Infosys
Finacle, a product of the company is
recognized as the world's scalable open-
ended system based on providing core-
banking solutions.
In the year 2004, it crossed the billion-
revenue mark.
As on 31/03/2005, promoters held 21.76 %
shares of the company while institutional
investors held 47.62 %. Other investors and
the general public held 11.62% and 19.01 %
respectively.
Dr. Jitendra Mahakud 2
3. Financial Analysis as on March
31 2005
53.15% jumps in net profit
Operating income of the company
grew by 44.08%
Operating profit grew by 47.73%
Net profit margin was up by 182 basis
points to 27.25% from 25.43% for the
year under review.
Dr. Jitendra Mahakud 3
4. Infosys Vs. Index
Company & Index
7000 10000
9000
6000
8000
5000
Infosys Market Price
7000
Sensex Indices
6000
4000
5000
3000
4000
2000 3000
2000
1000
1000
0 0
1999-00 2000-01 2001-02 2002-03 2003-04
Sensex Infosys
Dr. Jitendra Mahakud 4
6. SWOT Analysis of Infosys
Strengths:
Good brand recall amongst decision-makers.
Strong technical expertise
Weaknesses:
Attrition amongst key professionals, especially on the
delivery side.
Inability to take on the Global Big Five in terms of scale.
Opportunities:
Growth in package implementation, consulting services and
availability of cash reserves to pursue acquisitions
Threats:
MNCs building offshore capabilities, anti-off shoring lobby in
Western markets
Dr. Jitendra Mahakud 6
7. WIPRO
Wipro is the largest company in India in
terms of market capitalization.
The company operates through five
principal business segments: Global IT
Services and Products, IT Enabled
Services, India and Asia-Pac IT Services
and Products, Consumer Care and
Lighting and Health Science.
Dr. Jitendra Mahakud 7
8. Financial Analysis as on March
31 2005
The net profit growth has increased
from 23.3% to 56.5%
The company gross profit margin is
24.9%
The company decided to lessen the
dividend this year which Rs. 29 per
share to Rs. 5 per share.
Dr. Jitendra Mahakud 8
9. One year Wipro’s comparative
graph with BSE
…………. – WIPRO ………....- BSE Sensex
Dr. Jitendra Mahakud 9
10. SWOT Analysis of Wipro
Strengths:
The company has brand recognition.
The company provides quality products.
The company has strong licensing networks.
The company has a strong economic base.
The company does an effective advertising campaigning.
The company is growing in international markets.
Weaknesses:
There is lack of backward and forward integration in the company.
The company’s revenues are highly dependent on its IT service sales.
The company is possibly slow in technology development.
The company has no clear future plan.
Opportunities:
IT boom back after the debacle of 9/11.
Offshore outsourcing is being increasingly accepted as a strategic imperative by more organizations
today
Threats:
There are new technologies available for small engines that the company cannot compete with.
There are new entrants into the market.
Dr. Jitendra Mahakud 10
11. Satyam
Satyam Computer Services Ltd (Satyam) is a leading
global consulting and IT services company
It has excellent domain competencies in verticals
such as Automotive, Banking & Financial Services,
Insurance & Healthcare, Manufacturing, and in
TIMES i.e. the Telecom, Infrastructure, Media,
Entertainment & Semiconductors sector.
As on 31/03/05 the Promoters, Institutional
Investors, General Public and Others held 15.67%,
66.96%, 4.47% and 12.90% of the share holding
pattern of the company respectively.
Dr. Jitendra Mahakud 11
12. Financial Analysis as on March
31 2005
There is 36.30% growth in sales.
There is a 28.38% growth in operating
profit
Gross profit increased by 25.52%
Net profit margin increased by 238
basis points from19.40 % to 21.78%
Dr. Jitendra Mahakud 12
13. Company and Index
Company & Index
7000 5000
4500
6000
4000
5000 3500
Satyam Market Price
3000
4000
Sexsex
2500
3000
2000
2000 1500
1000
1000
500
0 0
1999-00 2000-01 2001-02 2002-03 2003-04
Sensex Satyam
Dr. Jitendra Mahakud 13
15. SWOT Analysis of Satyam
Strengths:
They have the third largest market share in India.
Satyam has a strong financial position. Company revenues and earnings have been
rising steadily, a low tax rate
Weaknesses:
Satyam is smaller in size compared to its direct competitors. Infosys, Wipro, Tata,
CSC, are all multibillion.
The company’s revenues are highly dependent on its IT service sales
Opportunities:
Satyam has been selected by Check Free Investment Services (CIS), to become the
partner to CIS in the development of its next generation Check Free EPL(TM) platform.
Offshore outsourcing is being increasingly accepted as a strategic imperative by more
organizations today
Threats:
Lot of competition in this industry including pricing pressures and technological
development.
Changes in political, economic or other factors such as currency exchange rates,
inflation rates affect the worldwide business in each of the company’s Operations
Dr. Jitendra Mahakud 15
16. Current Ratio
Current Ratio
8
6 Satyam
Number
4 Infosys
2 Wipro
0
Mar Mar Mar Mar Mar Mar
2000 2001 2002 2003 2004 2005
Satyam 4.93 3.44 6.81 4.51 5.34 5.74
Infosys 4.18 2.9 3.09 3.16 2.03 3.2
Wipro 1.66 2.98 3.79 3.29 2.01 2.53
Year
Dr. Jitendra Mahakud 16
17. Net Profit Margin = Profit after Tax
---------------------
Net Sales
Net profit margin ratio
0.5
0
Mar Mar Mar Mar Mar Mar
Satyam 0.19 0.4 0.26 0.15 0.22 0.22
Infosys 0.33 0.33 0.31 0.26 0.26 0.28
Wipro 0.1 0.21 0.25 0.2 0.18 0.21
Year
Satyam Infosys Wipro
Dr. Jitendra Mahakud 17
18. Debt
Debt Equity Ratio = ----------------
Equity
1.00
0.80
Satyam
0.60
Infosys
0.40 Wipro
0.20
0.00
Mar Mar Mar Mar Mar Mar
Satyam 0.77 0.23 0.01 0.01 0.00 0.00
Infosys 0.00 0.00 0.00 0.00 0.00 0.00
Wipro 0.10 0.30 0.10 0.20 0.30 0.20
Dr. Jitendra Mahakud 18
19. Total Liabilities
Debt Ratio = ---------------------
Total Assets
Debt Ratio
0.6
Satyam
Number
0.4
Infosys
0.2 Wipro
0
Satyam 0.5 0.3 0.1 0.2 0.2 0.2
Infosys 0.2 0.2 0.2 0.2 0.4 0.2
Wipro 0.4 0.2 0.2 0.2 0.3 0.3
Year
Dr. Jitendra Mahakud 19
20. Return on Equity = Profit after
Tax / Book Value of Equity
Return on Equity
20
10
0
Mar Mar Mar Mar Mar Mar
Satyam 2.09 16.82 7.32 4.53 6.81 7.45
Infosys 2.33 2.99 2.57 2.22 2.55 9.8
Wipro 1.77 9.41 10.76 7.68 8.25 9.75
Year
Satyam Infosys Wipro
Dr. Jitendra Mahakud 20
21. EBIT
ROCE = -------------------------------------------
Total Assets – Current Liabilities
Return on Capital Employed
0.6
0.4 Satyam
Rs.
Infosys
0.2 Wipro
0
Satyam 0.28 0.57 0.27 0.19 0.27 0.29
Infosys 0.4 0.51 0.46 0.42 0.46 0.23
Wipro 0.38 0.39 0.38 0.28 0.3 0.36
Year
Dr. Jitendra Mahakud 21
22. EPS = Profit after Tax / No. of
Outstanding Shares
Earning Per Share
200.00
Rs./Share
100.00
0.00
Mar Mar Mar Mar Mar Mar
Satyam 23.11 17.29 14.29 9.77 17.57 23.50
Infosys 44.37 95.05 122.1 144.6 186.6 70.58
Wipro 43.22 23.38 27.54 25.85 28.93 46.82
Year
Dr. Jitendra Mahakud 22
25. Alpha Analysis: Alpha indicates the stock return when the market
return is zero. A positive alpha indicates that the stock is under
priced and negative alpha indicates that the stock is overpriced
based on assets pricing model.
Alpha (2004-5)
20.12%
25.00%
20.00%
9.84% 10.42%
15.00%
10.00%
5.00%
0.00%
SATYAM INFOSYS WIPRO
Dr. Jitendra Mahakud 25
26. Infosys technologies ltd.
Rs. Crore Actual Projected
Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
PAT 1904.38 2765.09 3789.38 5168.40 6999.16 9376.59
Appropriation of
profits
Dividends 356.56 723.92 992.08 1353.12 1832.42 2454.85
Retained earnings 1547.82 2041.17 2797.30 3815.28 5166.74 6921.74
No.of Shareholders 270570549 270570549 270570549 270570549 270570549 270570549
EPS 70.38 102.19 140.05 191.02 258.68 346.55
P/E 31.91 31.91 31.91 31.91 31.91 31.91
Market Price 2245.95 3261.04 4469.04 6095.40 8254.53 11058.38
Intrinsic Value = Market Price/ (1+ke)^n = (11058.38)/(1+.197)^5 = Rs 4500.08
From the above table, we can observe that projected market price of share after 5 years i.e. FY2010 is Rs 11060.68.
After discounting it to present value, by taking cost on equity (ke) as 19.7%, we get the intrinsic value of Rs 4500.08.
As it can be seen from the above table, the market price on March 2005 is comparatively less than the calculated intrinsic value.
Thus, it can be analyzed that the market price of the share is highly undervalued in comparison with its intrinsic value.
Dr. Jitendra Mahakud 26
27. Wipro technologies ltd.
Rs. Crore Actual Projected
Mar05 Mar06 Mar07 Mar08 Mar09 Mar10
PAT 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
1494.82 1779.14 2199.43 2719.05 3361.50 4155.86
Appropriation of profits
Dividends 401.12 363.37 449.21 555.34 686.55 848.79
Retained earnings 1093.70 1415.77 1750.22 2163.71 2674.95 3307.07
No.of Shareholders 703570522 703570522 703570522 703570522 703570522 703570522
EPS 21.25 25.29 31.26 38.65 47.78 59.07
P/E 29.73 29.73 29.73 29.73 29.73 29.73
Market Price 670.95 751.79 929.39 1148.96 1420.43 1756.09
Intrinsic Value = Market Price/ (1+ke)^n = (1756.09)/(1+.2928)^5 = Rs 486.29
From the above table, we can observe that projected market price of share after 5 years i.e. FY2010 is Rs 1756.09.
After discounting it to present value, by taking cost on equity (ke) as 29.28%, we get the intrinsic value of Rs 486.29.
From the above table, we can observe that market price of share on 31 st mach 2005 is 670.95 which is higher than its intrinsic value i.e. Rs 486.29.
Thus it can be analyzed that the market price of the share is very much overvalued in comparison with its intrinsic value.
This analysis proves that from the investor point of view, this share is looking weak for the near future.
Dr. Jitendra Mahakud 27
28. Satyam Computer Services Ltd.
Rs. Crore Actual Projected
Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010
12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
PAT 750.26 1190.08 1601.21 2147.28 2873.76 3842.15
Appropriation of profits
Dividends 180.49 214.75 288.94 387.47 518.57 693.31
Retained earnings 569.77 975.34 1312.27 1759.80 2355.20 3148.84
No.of Shareholders 319265291 319265291 319265291 319265291 319265291 319265291
EPS 23.50 37.28 50.15 67.26 90.01 120.34
P/E 17.38 17.38 17.38 17.38 17.38 17.38
Market Price 408.5 647.85 871.66 1168.92 1564.41 2091.57
Intrinsic Value = Market Price/ (1+ke)^n= (1756.09)/(1+.1965)^5 = Rs 852.92
From the above table, we can observe that projected market price of share after 5 years i.e. FY2010 is Rs 2091.57.
After discounting it to present value, by taking cost on equity (ke) as 16.7%, we get the intrinsic value of Rs 852.92.
As it can be seen from the above table, the market price on March 2005 is comparatively less than the calculated intrinsic value.
Thus it can be analyzed that the market price of the share is very much undervalued in comparison with its intrinsic value.
This analysis proves that from the investor point of view, this share is a good buy for the near future.
Dr. Jitendra Mahakud 28
