about infosys analysis

1. INFOSYS
Presented To:-
Prof.Praneeta Deshmukh
Presented By:-
Deep Kumar

2. Infosys Profile
Founded on 2nd July 1981 with a capital of Rs.10,000
went Public in 1993.
1st Indian Company to be listed on Nasdaq on 11th March 1999.
Global footprint : Over 50 offices and development centers
Employees: 1,73,000(As on 31st oct 2014).
Certified at SEI- CMM Level 5.
Major Clients: British Telecom, Bank Of America, Citigroup,
Wall mart

3. INDUSTRY ANALYSIS

4. Macro Economic Indicator:-
 GDP-annual rate of 5.63% 3rd quarter of
2014
 Inflation rate:-last reported 6.3 % in sep-
2014
 Interest Rate:-reverse repo reported @5.5 %.
 Trade deficit 20210.90 Millions in oct-2014
 Tax rate India 30% ,less than Spain , France
etc
 Saving rate -35.7%

5. Political PEST AnalysEisconomic • Political stability
• Government owned companies
and PSUs have decided to give
more IT projects to Indian IT
companies.
• Terrorist attack or war.
• Global IT spending
(demand)
• Domestic IT Spending
(Demand)
• Currency Fluctuation
• Real Estate Prices
Social Technological
• Language spoken: English
• Education: A number of
technical institutes and
universities over the
country offer IT education.
• Working age population
• Telephony
• Internet Backbone
• New IT Technologies like
SOA, Web 2.0, High-definition
content, grid
computing, etc

6. Porter’s Five Forces Model
 Threat of Substitutes: Medium
1. Other offshore locations such as Eastern Europe, the
Philippines and China
2. Price
 Bargaining power of supplier: High to Low
1. Due to slowdown, the job-cuts, the layoffs and bleak IT
outlook.
2. No longer Demand and supply of IT professionals
3. Vast talent pool – fresher's and experienced.

7. Porter’s Five Forces Model
Barriers to Entry : Low
1. Low capital requirements.
2.Large value chain, space for small enterprises.
Bargaining Power of Customers: Very High
1. Large number of IT companies
2. Huge decline in IT expenditure
Rivalry Among Firms: High
1.'low-cost, little-differentiation' positioning.
2.Strong competitors – few number of large
companies.

8. SWOT Analysis
STRENGTHS WEAKNESSES
• Trusted Brand & Client
Relations
• Proven GDM
• Wide spectrum of
Services
• Leadership &
Management
• Quality Standards
• Dependence on BFSI
Segment for revenues
• Dependence on North
America for revenues
• Weak Player in domestic
Mkt
• Rising Operating
Expenditure
• Low R & D focus

9. SWOT Analysis
OPPORTUNITIES
• Untapped Domestic
Market
• New Geographies
• Acquisitions
• High End Consulting
THREATS
• Intense Competition
• High dependency on small
no. of clients
• Currency Fluctuations

10. COMPANY ANALYSIS

11. Infosys Ratio:-
YEAR RATIO March 12 March 13 March 14
Liquidity Ratio:-
Current Ratio 4.91 4.75 3.70
Quick Ratio 4.88 4.69 3.65
Leverage Ratio:-
Return on Total Assets 518.21 627.95 736.64
Profitability Ratio:-
Gross profit Ratio 28.23 30.66 31.04
Net profit Ratio 27.37 27.52 26.31
Financial Ratio:-
Fixed Asset To. Ratio 1.15 1.12 1.13
Debtors To. Ratio 6.50 6.25 6.74
DPS Ratio 35.86 26.45 31.49
Reported EPS
147.50 158.75 178.40

12. Analysis:-
Liquidity Ratio:-Use of liquidity ratio is good but comparison of previous year
the ratio is decreased.
Leverage/ Gearing Ratio:-The company is debt free and maintains sufficient cash to meet
its strategic objectives. In the year 2014, Internal Cash flows have
more than adequately covered working capital requirements ,
Capital expenditure , investment in subsidiaries and dividend payments.
Profitability Ratio:- Net profit ratio is decreased in comparison of previous year
but company doing aggressive selling and its not affect to much in company..
Financial Ratio:- Efficiency of Assets utilisation has Increased. All debtors are considered
good and realizable. The ratio has increased largely due to the increase
in the sales.
 Dividend per share ratio & EPS is excellent in the comparison of previous year of the company.

13. Recommendation
 Intrinsic value =EPS*(P/E Ratio)
 EPS=178.40
 P/E Ratio=18.40
 Intrinsic value=3282.56
 Market Value=4295.75
-Market Value>Intrinsic value
Sell shares of infosys

14. DFO

16. Strategies : Long Call
 For aggressive investors who are very bullish about the prospects for a stock /
index, buying calls can be an excellent way to capture the upside potential with
limited downside risk.
 When to Use:
Investor is very bullish on the stock / index.
 Risk:
Limited to the Premium.
(Maximum loss if market expires at or below the option strike price).
 Reward: Unlimited
 Breakeven: Strike Price + Premium

17. LONG CALL
 Mr. Amar is bullish on Infosys on 29th Nov, when the market
price at 4356.53. He buys a call option with a strike price of Rs.
4400 at a premium of Rs. 36.35, expiring on 30th Dec. If the
Market price goes above 4436.35, Mr. Amar will make a net
profit (after deducting the premium) on exercising the option.
In case the market price stays at or falls bellow 4400, he can
forego the option (it will expire worthless) with a maximum
loss of the premium.

18. Analysis
 This strategy limit the downside risk to the extent of premium
paid by Mr. Amar (Rs. 36.35)
 But the potential return is unlimited in case of rise in Market
Price.
 A long call option is the simplest way to benefit if you believe
that the market will make an upward move and the most
common choice among first time investors in option.
 As the stock price rises the long call moves into profit more and
more quickly.

19. Strategies: Long Call
The Payoff
Schedule
On expiry Infosys
Close at
Net Payoff from call
Option (Rs.)
4100 -36.65
4200 -36.65
4300 -36.65
4400 -36.65
4436.65 0
4500 63.35
4600 163.35