Infosys

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Contents
1 2 3 4 5 6 7 8 Overview-Indian IT Industry Infosys-Introduction & Timeline H R-Employee Analysis Marketing Strategies & Models

Financials & Horizontal Comparison

Competitive Position & Environment Valuation-Quantitative & Brand Factors of Success
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Indian IT Industry

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Indian IT industry Overview

Indian economy impacted by recessionary trends, Slowdown in GDP growth to seven per cent, IT-BPO industry in India is become a growth engine for the economy, During the year, the sector maintained its double digit growth rate and was a net hirer, Growth has been fuelled by increasing diversification in the geographic base and industry verticals.

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Indian IT industry Overview

Direct employment is expected to reach nearly 2.23 million, Indirect job creation is estimated to touch 8 million, Software and services exports (including BPO) are expected to account for over 99 per cent of total exports, While the current mood is that of cautious optimism, the industry is expected to witness sustainable growth over a two-year horizon, going past its USD 60 billion export target in FY2011. LOGO

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Sources of revenues
Indian IT industry Revenue Break-up by sector
IT industry is largely dependent on Banking and financial industry. With the decline in these sectors, the revenue from these is expected to decline, hurting the bottomline of IT majors. This calls for exploring new verticals.

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Financial Attractiveness of Top 5 Global Services Locations on a scale of 4

India continues to the leader in terms of Financial Attractiveness

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Introduction
The idea was born on a January 1981 morning On July 2, 1981, Infosys Consultants Pvt. Ltd. The starting capital was $250 which was borrowed from Mrs. Murthy The 6 people who were with Murthy are: Nandan Nilekani N S Raghavan S Gopalakrishnan S D Shibulal K Dinesh Ashok Arora

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Milestone
1981 Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India, with an initial capital of US$ 250 Signs up its first client, Data Basics Corporation, in New York 1983 Relocates corporate headquarters to Bangalore 1987 Opens first international office in Boston, US 1993 Introduces Employee Stock Options (ESOP) program Acquires ISO 9001/TickIT certification 1995 Opens first European office in the UK and Global Development Centers at Toronto and Mangalore. Sets up e-Business practice 1996 The Infosys Foundation is established

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Milestone Contd.
1999 Infosys becomes the 21st company in the world to achieve a CMM Level 5 certification Infosys Business Consulting Services is launched 2000 Re-launches Banks 2000, the universal banking solution from Infosys, as Finacle 2002 Launches Progeon, offering business process outsourcing services 2005 Selected to the Global MAKE(Most Admired Knowledge Enterprises) Hall of Fame Records the largest international equity offering of US$ 1 billion from India 2009 Infosys selected as a member of The Global Dow Employee strength grows to over 100,000

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Vision & Mission

Vision To be a globally respected corporation that provides best-ofbreed business solutions, leveraging technology, delivered by best-inclass people."

Mission To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large."

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Services
Application Development and maintenance Corporate performance management Enterprise quality services Infrastructure services Packaged application services

Product engineering
Systems Integration LOGO

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Industry they are in

Aerospace & defense Automotive Banking Communication Consumer goods Manufacturing Energy Healthcare Hospitality Insurance Life Sciences Media & Entertainment Resources Retail Transportation Utilities

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Locations

Mangalore campus

Infosys, Pune campus

Mysore campus

Bangalore campus

Hyderabad campus

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Staff-Human Resources
Infosys is in knowledge-based industry, it focuses on the quality of the human resources At the entry level, it emphasizes on Selecting candidates who find the company's meritocratic culture satisfying, Superior academic records, Technical skills, and High level of learn ability. The company emphasizes on training and development of its employees on continuous basis LOGO

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Employee Analysis

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Human resource valuation of infosys

They used the lev & schwartz model to compute the value of HR The Lev & Schwortz Model lev and Schwartz (1971) proposed an economic valuation of employees based on the : Present value of future earnings Probability of employees death/separation/retirement This method helps in determining what an employees future contribution is worth today. According to this model the present value of future earning capacity of an employee, from the time of joining the organization till retirement was estimated.

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The human resource evaluation of infosys is based on the present value of future earnings of employees and on the following assumptions (a) Employee compensation includes all direct and indirect benefits earned both in India and overseas (b) The incremental earnings based on group / age have been considered (c) The future earnings have been discounted at the cost of capital of 11.21% (previous year 10.60%).
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To calculate the value of its human assets all the employees of Infosys were divided into five groups, based on their average age. Each group's average compensation was calculated. Infosys also calculated the compensation of each employee at retirement by using an average rate of increment. The increments were based on industry standards, and the employees performance and productivity. Finally the total compensation of each group was calculated.

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Employee Analysis
8,29,800 applications received Added 17,024 (net) in fiscal 2011 No. of employees increased from 375 in 1993 to 1,30,820 as of March 31, 2011 Total value of stocks issued to employees till now approximately `50,000 crore

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Business Model
Saas Learning Consulting Business Process management

2010

IT Outsourcing Systems Integration Independent Validation Services Infrastructure Management Product Life-Cycle management

2001

Technology Consulting Technology Enabled BPR Enterprise Solutions

1996

Application Development and Maintenance Software Re-engineering

1981

People | Organization | Infrastructure | Process | Quality Infosys Global Delivery Model

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Finacle-The Only Product

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Features of Finacle
Universal banking solution from Infosys Empowers banks to transform their business Architected out of years of experience with global banks and offers several powerful and differentiating features

One of the most comprehensive, flexible and scalable solutions in its class
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Advantages of Finacle
Business Agility (alertness) CRM and Alert Enabled Global Deployment Capability Multiple currency, time zones and languages Proven solution minimized risk 100% success Rapid, smooth successful deployments Integrated multi-channel framework Banks can offer their solutions through multiple channels High scalability Most Scalable solutions Allows banks to grow seamlessly LOGO

McKinseys 7 S Model
Leadership Style:

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Infosys believes that leadership is one of the most essential ingredients of organizational success which is provided by its Chairman, N R Narayan murthy. Leadership is based on high business vision and predominantly supportive styles. There is emphasis on developing leadership qualities among employees

Staff (Human Resources):

Since Infosys is in knowledge-based industry, it focuses on the quality of the human resources. Out of total personnel, about 90 per cent are engineers. The company emphasizes on training and development of its employees on continuous basis and spends about 2.65 per cent of its revenues on up gradation of employees skills, and around 50% as employee costs.

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McKinseys 7 S Model
Strategy:

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Increase business from existing and new clients Expand geographically Enhance solution set Pursue alliances and strategic acquisitions

Shared Values:
Customer Delight: A commitment to surpassing customer expectations.

Leadership by Example: To be an exemplar for the industry and teams. Integrity and Transparency: A commitment to be ethical, sincere and open in our dealings. Fairness: A commitment to be objective and transaction-oriented, thereby earning trust and respect. Pursuit of Excellence: A commitment to strive relentlessly, to constantly improve ourselves, our teams, our services and products so as to become the best.

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Organizational Structure: Free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. Creating the feeling of equality but also helps in developing project leaders. Skills: Infosys has made it mandatory for every employee auto clear a predefined certifications, domain as well as technical, in order to be eligible for appraisal. Internal initiatives like knowledge management, Infosys has been CMM-Level 5 certified for its process capabilities.

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SWOT Analysis
STRENGTHS
Leadership in sophisticated solutions that enable clients to optimize the efficiency of their business Proven Global delivery model Commitment to superior quality and process execution Strong Brand and Long-Standing Client Relationships Status as an employer of choice Ability to scale Innovation and leadership

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SWOT Analysis Contd.

WEAKNESS
Excessive dependence on US for revenues 67 % of revenues from USA Excessive dependence on BFSI sector for revenues 36 % of revenues from BFSI Weak player in domestic market. Only 1 % of revenues from India low as compared to peers Low R & D spending as compared to global IT companies only 1.3 % of total revenues Rising wage bill 42.9 % to 44.8 % of revenues Low expertise in high end services like Consultancy and KPO.

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SWOT Analysis Contd.

OPPORTUNITIES
Domestic market set to grow by 20%. Expanding into new geographies Europe, Middle East, etc Infosys is cash rich (Around US $ 1 Billion) - Acquiring companies to increase expertise in Consultancy, KPO and package implementation capabilities Opening offices and development centres in cost advantage countries such as those in Latin America and Eastern Europe.

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SWOT Analysis Contd.

THREATS
The economic environment, pricing pressure and rising wages in India and overseas Intense competition in the market for technology services could affect cost advantages. High dependency on a small number of clients, and the loss of any one of the major clients could significantly impact business. Failure to complete fixed-price, fixed-time frame contracts within budget and on time Currency fluctuations Termination of Client contracts can typically be terminated without cause and with little or no notice or penalty.

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BCG Matrix

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Shareholding pattern 2011

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Shareholding pattern 2011

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Revenue Break up by Services offered- 2011

Infosys must move up the value chain concentrate more in consulting, BPO and KPO business.

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Financial Performance-Yearly comparison

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Balance Sheet Analysis

Particulars Share Capital Reserves & Surplus Gross Block Investments in liquid MFs and certificates of deposit Net Current Assets Total assets Particulars Debt-equity ratio Debtors revenue (days) Current ratio Cash and equivalents/ Total assets (%) Cash and equivalents/ Total revenue (%) 2010-11 287 24,214 6,934 119 18,391 24,677 2010-11 61 5.22 61.94 60.21 2009-10 287 21,749 6,357 3,507 13,131 22,268 2009-10 56 4.46 66.48 70.03 2008-09 286 17,523 5,986 12,288 17,846 2008-09 61 4.72 57.65 50.78 2007-08 286 13,204 4,508 8,496 13,490 2007-08 72 3.28 57.00 49.14 2006-07 286 10,876 3,889 7,137 11,162 2006-07 64 4.91 50.26 42.66

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Strong & Liquid Balance Sheet

Highly Liquid(Cash & cash Equivalents stand at $3.7bn) Zero Debt High quality receivables(94.9% aging less than 60 days) ROCE of 38.5%, Roic of 64% for the quarter ended December 31, 2011 Dividends up to 30% of annual post-tax profits

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Superior Revenue Growth

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Financial Analysis
Total revenue-Approximately 97.7% were derived from oversees operation and 2.3% from domestic operations EPS increased by 11.8 percent during the year 2011, Rs.112.26 per share from Rs.100.37 per share in the previous year Net profit after tax increased by 12% to Rs.6443 crore (2011) from Rs.5755 crore in the previous year, NPAT Represents 25.4% and 27.2% of total revenue. Selling and marketing expenses of 4.8% of their total revenues compared to last years 4.6%

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Profitability Ratios
Particulars Export revenue/ Total revenue(%) Software dev expenses/ Total revenue (%) Gross Profit/ Total revenue (%) Selling and marketing expenses/ Total revenue (%) General and administration expenses/ Total revenue (%) Aggregate employee costs/ Total revenue (%) 2010-11 97.66 56.20 43.80 4.80 5.85 49.08 2009-10 98.73 54.68 45.32 4.61 5.90 48.96 2008-09 98.72 55.00 45.00 4.60 6.32 49.20 2007-08 98.60 56.72 43.28 4.67 6.90 49.89 2006-07 98.40 55.35 44.65 5.47 7.05 48.02

Operating profit (PBIDTA)/ Total revenue (%)

Operating profit after depreciation and interest/ Total revenue (%) Depreciation and amortization/Total revenue (%) Tax/ Total revenue (%) Profit after tax/ Total revenue (%)

33.15
30.23 2.92 9.37 25.38

34.82
31.00 3.82 8.12 27.22

34.08
30.66 3.42 4.42 28.72

31.72
28.23 3.49 4.03 28.57

32.13
28.56 3.57 2.68 28.77

ROCE (%)
Return on invested capital (%)

37.58
67.73

37.25
68.75

42.90
78.84

41.38
71.12

45.73
88.81

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Ratio Analysis

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Ratio Analysis Contd.

Ratio P/E Ratio PEG Ratio
40 30 20 10 0 2011 2010 2009 2008 2007

2011 28.87 2.44

2010 26.06 -20.68

2009 13.02 0.44

2008 18.4 1.2

2007 29.76 0.56

P/E Ratio PEG Ratio

-10
-20 -30

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Cash Flow Statement

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Receivables Marginally gone up

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IT industry

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Infosys- Competitive Situation & Positioning

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Competitive Environment
Tata Consultancy Services (TCS) Infosys Technologies Ltd Wipro Limited Hewlett-Packard India Pvt. Ltd IBM India Limited Satyam Computer Services Ltd. HCL Technologies Ltd. Intel Technology India Pvt. Ltd. CISCO Systems India Pvt. Ltd. Patni Computer Systems Ltd. Cognizant Technology Solutions India HCL Info-systems Ltd. Mahindra-British Telecom Redington (India) Limited i-Flex Solutions Ltd.

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Competition Analysis

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www.themegallery.com

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Market Share-2011
Indian IT industry Revenue Break-up by company

Indian IT market is dominated by a few large companies with presence of a number of small and medium companies

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IT Companies Comparison
Name Last Price Market Cap.
(Rs. cr.)

Sales Net Profit Total Assets Turnover 7,569.99 6,443.00 19,620.61 24,501.00

TCS Infosys

1,077.70 2,600.30

210,929.71 29,275.41 149,314.20 25,385.00

Wipro HCL Tech Oracle Financ

Mahindra Satyam

415.80 420.25 1,939.95

72.00

102,164.72 26,340.70 29,029.56 16,284.27

8,472.81

4,843.70 1,198.28 967.98

-127.60

26,065.00 6,889.31 5,150.34

3,423.10

6,794.48 2,360.51
4,776.10

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Company wise Comparison Balance Sheet

Infosys Mar '11 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities TCS Mar '11 Wipro Mar '11

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HCL Tech Jun '11

Oracle Finance Mar '11

287.00 287.00 0.00 0.00 24,214.00 0.00 24,501.00 0.00 0.00 0.00 24,501.00

295.72 195.72 0.00 100.00 19,283.77 0.00 19,579.49 35.87 5.25 41.12 19,620.61

490.80 490.80 0.70 0.00 20,829.40 0.00 21,320.90 0.00 4,744.10 4,744.10 26,065.00

137.74 137.74 1.00 0.00 5,720.41 0.00 5,859.15 1,029.87 0.29 1,030.16 6,889.31

41.95 41.95 0.08 0.00 5,108.31 0.00 5,150.34 0.00 0.00 0.00 5,150.34

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Company wise Comparison Cash Flow Statement

Wipro Mar '11 12 mths 5705.50 3710.50 -1474.00 -2732.60 -496.10 5699.40 5203.30 Infosys Mar '11 12 mths 8821.00 4270.00 3235.00 -3642.00 3868.00 11297.00 15165.00 TCS Mar '11 12 mths 8700.43 5741.28 -863.16 -4605.61 283.90 293.28 577.18

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Oracle Finance Mar '11 12 mths 1034.39 714.99 -1005.44 3.06 -287.39 395.14 107.75

HCL Tech Jun '11 12 mths 1289.88 1519.39 -535.03 -882.56 102.86 64.84 167.70

Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents Closing Cash & Cash Equivalents

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Brand Valuation Approach

Methodology followed for valuation of brand Infosys : Determine brand profits by eliminating the non-brand profits from the total profits Restate the historical profits at present-day values Provide for the remuneration of capital to be used for purposes other than promotion of the brand Adjust for taxes Determine the brand-strength or brand-earnings multiple.

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Brand Valuation

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Value-Added Statement

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EVA Analysis

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Value Of Firm Value of firm = FCFF/(1+WACC)^t Cost Of Capital = rf+(market rate-rf) =19.64% FCF = (Income+ depreciation- change in working capital- net book value) = 285.8

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Valuation-Power of Intangibles

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Valuation
The valuation of Infosys, the brand, has improved from Rs 14,153 crore in 2005 to Rs 36,907 crore in 2011. It was 23.2 per cent of the companys market capitalization five years ago, it stands at 24.6 per cent now

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Balance Score Card The Balanced Scorecard is a management system used to focus and prioritize management energy toward achieving both short and long term organizational goals

and with the ability to give early warning signals for midcourse correction
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BSC

Vision

CSF's
Strategic Goals Key Business Objectives
(Business Plans)

Finance
Balanced Business Scorecard (BBS)
Cust. Balanced Business Scorecard Process Learning

Key Business Processes

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Objectives

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Challenges Ahead
Economic uncertainty Regulatory changes Currency volatility Resource availability Ability to expand addressable market Wage inflation

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Factors of success
Delivering local business value
Customizing services and solutions to suit client needs Understanding client-specific needs and value proposition Aggressive marketing and branding strategy Coherent campaigns using multiple channels, including events, PR activities and direct marketing Creating positive perceptions with clients, industry associations, media and policy makers Range of investment in infrastructure, HR, technology and networking Increase in client penetration rate Helped in attracting best talent Business innovation in GDM coupled with technology and industry expertise in various fields Disruptive model has enabled Infosys to offer distinctly superior services Facilitated acquiring new clients

Building the brand

Coherent Market Strategy

Investing in Expertise

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