March 21, 2013 Infotech Enterprises (INFENT - ICICI...

March 21, 2013

Initiating Coverage

ICICI Securities Ltd | Retail Equity Research

En’ER(&D)’gised but are growth risks priced? Infotech Enterprises (IEL) is a midsized differentiated engineering services play in the Indian IT services space. Proven track record, sticky client relationships and quality management could help Infotech achieve sustainable multi-year earnings growth given engineering services could be a $42-billion opportunity by 2020. Client mining, which improved post sales force reorganisation, could evolve further, as IEL improves its value proposition, and help sustain revenue growth momentum. That said, though long term growth potential is in place, near term challenges could exert pressure on revenue growth and operating margins. We are initiating coverage with a HOLD rating and a target price of | 180. Engineering vertical growth represents attractive market opportunity Engineering R&D (ER&D) exports could be a ~$42-billion opportunity in 2020 vs. $11.2 billion in 2013, representing a CAGR of 20.8% vs. 13.6% CAGR during 2007-13. ER&D exports contribution could rise to >20% in 2020 vs. 14.8% in FY13E led by higher growth relative to IT exports. Note, higher growth rates could continue given lower levels of offshoring penetration (~3-5%) vs. ~10% for traditional IT services and rising adoption of offshore engineering services in aerospace, hi-tech, auto and telecom verticals. This bodes well for IEL as its engineering vertical – which primarily focuses on design and engineering services across mechanical, electrical and electronic aspect of the product – has grown faster than company average (31% vs. 28%) during FY05-12 period. Revenue growth could be driven by sticky client relationship IEL’s long standing relationships with a majority of its top clients –including Tom Tom (19 years), Airtel (14), Pratt & Whitney (12), Bombardier (9), Boeing (8), Philips (7) and Invensys (6) – generally help improve revenue visibility as product development programmes for engineering customers are usually long-term in nature and sticky relationships lead to annuity revenues. Near term challenges dictate HOLD Though Infotech’s PE (7.9x FY14E) is inexpensive relative to peers, growth risks persist led by weakness in European business and client ramp downs in the hi-tech and telecom business while appreciating rupee headwinds could offset incremental gains from operational efficiencies. We are modelling revenue, PAT growth of 14%, 18% CAGR, respectively, during FY12-15E (slower than 29%, 29% during FY05-12) coupled with flat EBITDA margins (18.6%) in FY14E. We have valued the stock at | 180, i.e. at 8.4x FY14E EPS estimate of | 21.4. Exhibit 1: Key financials

FY11 FY12 FY13E FY14E FY15E

Net Sales (| crore) 1188 1553 1878 2040 2304

EBITDA (| crore) 180 269 349 380 429

Net profit (| crore) 140 161 225 237 265

EPS (|) - diluted 12.5 14.5 20.3 21.4 24.0

PE (x) 13.6 11.7 8.4 7.9 7.1

EV to EBITDA(x) 7.6 5.1 3.9 3.6 3.2

Price to book (x) 18.4 16.4 14.1 12.2 10.7

RoNW (%) 13.6 14.8 18.0 16.4 16.2

ROCE(%) 16.7 23.5 26.8 25.5 25.3[

Source: Company, ICICIdirect.com Research

Infotech Enterprises (INFENT)| 170

Rating matrix

Rating : Hold

Target : | 180

Target Period : 12 months

Potential Upside : 6%

YoY Growth (%)

FY12 FY13E FY14E FY15E

Net Sales 30.7 20.9 8.6 12.9

EBITDA 49.8 29.9 8.9 12.9

Net Profit 15.5 39.3 5.3 12.2 [

Current & target multiple

FY12 FY13E FY14E FY15E

PE (x) 11.7 8.4 7.9 7.1

EV to EBITDA(x) 5.1 3.9 3.6 3.2

Price to book (x) 16.4 14.1 12.2 10.7

Target PE 12.4 8.9 8.4 7.5

Target EV/EBITDA 5.5 4.2 3.9 3.4

Target P/BV 17.3 14.9 12.9 11.4 [

Stock Data

Bloomberg/Reuters Code INFTC in Equity/INFE.NS

Sensex 19293

Average Volumes (yearly) 55095

Market cap (| crore) | 1877 crore

Debt (Dec-12) | 0 crore

Cash (Dec-12) | 1369 crore

52 week H/L (|) 211/143

Equity capital | 55 crore

Face value 5

FII Holding (%) 29.7

DII Holding (%) 6.3

Comparative return matrix (%)

Returns (%) 1M 3M 6M 12M

Infotech Enterprises 1.3 (6.5) (13.4) 12.1

KPIT Cummins (6.0) (0.9) (19.5) 24.2

NIIT Tech 4.7 11.7 (6.8) 10.0

Mindtree 3.8 23.7 28.2 84.3

[

Price movement

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Nifty Infotech

Analyst’s name Abhishek Shindadkar [email protected] Aishwariya KPL [email protected]


Company background Infotech Enterprises, founded in 1991 (IPO in 1997), provides engineering solutions, including product development and life-cycle support, process, network and content engineering services to global organisations. Infotech helps companies innovate products faster, optimise R&D costs, enhance operational efficiencies and maximise the return on investment in their networks. With 10,134 associates spread across 35 global locations, Infotech serves clients in the aerospace, consumer, energy, medical, oil & gas, mining, heavy equipment, hi-tech, transportation, telecom and utilities industries from its delivery centres in North America, Europe, Middle East and Asia Pacific.

Business description Infotech primarily focuses on two business segments viz. utilities telecom and content engineering [UT&C, earlier called network & content engineering (N&CE)] and engineering services. In FY12, the company realigned its businesses into four business units (BU): aerospace (Aero) – providing product engineering solutions to aerospace customers, heavy equipment, transportation & hi-tech (HTH) – providing product and process engineering solutions to non-aerospace customers in manufacturing, high technology and process engineering industries, utilities telecom (UT) – providing network engineering and related solutions to telecom and utility customers and content engineering (CE) – providing spatial solutions to a range of industries including mining, oil & gas and content publishing.

Exhibit 2: Revenues grew at 29% CAGR during FY03-12

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Exhibit 3: …while it operated at average 18.9% EBITDA margin 35

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EBITDA % margins


Engineering services The engineering services unit accounted for 65% of Q3FY13 revenues and primarily caters to the aerospace (~56% of engineering), heavy equipment, transportation and hi-tech (~44%) segments. The company helps clients to reduce time-to-market, thus ensuring cost effective development through stringent processes and proven life-cycle management models. Further, it offers process engineering solutions such as FEED, field instrumentation, modular engineering, project expedition, vendor selection & management to help companies operating across the energy sector (power plants to oil & gas companies) to improve their plant efficiencies with optimised production processes. Engineering services grew at 21.6% CAGR during FY08-12 with EBITDA margins of 18.8% (FY12), higher than company average.

Shareholding pattern (Q3FY13)

Shareholder Holding (%)

Promoters 22.4

FII 29.7

DII 6.3

Others 41.7

FII & DII holding trend (%)

22.9

22.8

22.4

22.4

22.4

32.3

32.5

32.5

33.8

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Q4FY

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Q1FY

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Q3FY

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%

Promoters FII & DII


Aerospace business unit Contributing 56.3% of engineering services and 36.6% of Infotech revenues (Q3FY13), aero BU revenues are the highest. With 2600+ engineers and 21+ million hours of experience, Infotech provides design, analytics, engineering and aftermarket services. Aero SBU dollar revenues grew at 17.2% CAGR during FY09-12 vs. company average of 18.7% and contributed ~$96 million in 9MFY13. Though revenue growth was modestly below company average, we believe EBITDA margins are higher than company average at ~22%.

Exhibit 4: Aerospace SBU service portfolio

Avionics Systems Strucutures Interiors Engines462 230 464 126 1238

935 Design844 Analysis372 Manfacturing Engg.369 After market services

Employees

Concept/Preliminary/Detailed : Software/Hardware Engg. : Value Engg. : Reverse Engg.Structural Analysis : Impact Analysis : Finite Element Analysis : Verification & ValidationPrototyping : Tool Engg. : Flight Trial Support : Process Planning & Review Logistics Support : Technical Publication : Post Product Engg. : Obsolescence Mgmt.

Service lines/Sub verticals


Exhibit 5: Aero SBU revenue distribution across geographies

APAC1%Europe

14%

North America85%

Source: As of FY12, Company, ICICIdirect.com Research

Exhibit 6: Aero SBU revenue distribution across service lines

Interiors5%

Aero Systems11%

Avionics14%

Aero Structures20%

Aero Engines50%

Source: As of FY12, Company, ICICIdirect.com Research

HTH Business Unit HTH contributes 43.7% of engineering services and 28.4% (Q3FY13) of Infotech revenues. Primarily it has three practices; HOME – heavy engineering, oil & gas and mining & energy; Transportation (rail) and HCM – Hi-tech, consumer and medical. Geographically, the SBU earned 52% (48% in FY12) of its revenues from North America, 35% (47%) from Europe and 13% (5%) from APAC. We estimate the SBU operates at 16-18% EBITDA margins with majority of sub-segments operating at SBU average margins dragged by transportation that could be lower (~15%). Utilities telecom and content engineering (UT&C) The UT&C SBU accounted for 34% of Q3FY13 revenues and primarily provides geo-spatial and IT services to utilities and telecom customers. Within the SBU, utilities accounted for 26% of FY12 revenues while telecom and content contributed 42% and 32%, respectively. The SBU grew at 11.7% CAGR during FY08-12 and had EBITDA margins of 15% (FY12). Discussions suggest the content business has one of the highest margins at ~28%, utilities could be the lowest (11-13%) led by high onsite content while telecom could be lower than company average. Utilities & telecom BU (UT) UT BU employs ~2300 associates, has ~80 active customers and contributes 69.9% of UT&C SBU and 23.7% of Infotech revenues (Q3FY13). BU revenues grew at 20.5% CAGR during FY09-12, faster than company average and UTC SBU (13.7%) predominantly led by the utilities


business. Geographically, North America contributed 52% (9MFY13) of BU revenues, EMEA (17%), APAC (28%) and India (3%). Content Business unit As of Q3FY13, the content business contributed 30% of UT&C BU; 10.2% of Infotech revenues and had 45+ active customers with 95% repeat business. Though the BU had one of the highest margins (~27%) it dragged the company average growth as it grew a modest 5.3% CAGR during FY09-12. Exhibit 7: FY12 content business revenue classification

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ogy

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Softw

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Revenue by Geography Revenue by Industry Revenue by Service

%

FY12


Exhibit 8: Revenue growth across major business segments

63.7

67.4

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FY08 FY09 FY10 FY11 FY12

$ m

illio

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%

UTC Engg. YoY, % YoY, %


From a geographic perspective, US contributed 60.7% of Q3FY13 revenues and grew at 24.9% CAGR in FY08-12. Europe contribution has steadily declined to 25.3% in Q3 vs. 44.5% in Q3FY10 and grew at 8.4% CAGR in FY08-12. Australasia contribution has risen steadily and is now at 14% vs. 3.6% in Q1FY05 and grew at 25.2% CAGR during FY08-12.

UTC, engineering grew at 11.7% and 21.6% CAGR,

respectively, during FY08-12


Exhibit 9: Revenue contribution across geographies % Q1FY11 Q2FY11 Q3FY11 Q4FY11 FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13

North America 52.2 55.0 55.8 57.7 55.2 58.0 56.7 54.8 59.7 57.3 62.5 61.1 60.7Europe 38.4 37.5 36.0 33.9 36.4 33.7 33.6 34.8 28.5 32.7 25.7 26.4 25.3Asia + Australia 9.4 7.4 8.2 8.5 8.4 8.3 9.7 10.4 11.8 10.1 11.8 12.5 14.0


Exhibit 10: APAC continues to drive revenue growth $ million Q1FY11 Q2FY11 Q3FY11 Q4FY11 FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13North America 28.9 34.9 39.0 41.5 144.3 45.0 46.2 44.8 49.6 185.4 52.6 53.3 53.2

QoQ growth 20.8 11.7 6.3 8.4 2.7 -3.0 10.7 6.2 1.2 -0.2YoY growth 51.5 28.5

Europe 21.3 23.8 25.2 24.3 94.6 26.1 27.4 28.4 23.7 105.6 21.6 23.0 22.2QoQ growth 11.9 5.7 -3.3 7.3 4.7 4.0 -16.8 -8.5 6.4 -3.7YoY growth 7.7 11.6

Asia + Australia 5.2 4.7 5.7 6.1 21.7 6.4 7.9 8.5 9.8 32.6 9.9 10.9 12.3QoQ growth -9.8 22.0 6.4 5.5 22.7 7.6 15.3 1.4 9.7 12.5YoY growth 19.7 50.1

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Exhibit 11: Service offerings – an overview

Offerings Sub-Offerings Verticals Notable long client relationships

Performance analysis Aerospace Pratt & Whitney (12 yrs)

Repair design Automotive/heavy electronic Bombardier (9 yrs)

Embedded & application software development Hitech Boeing (8 yrs)

Lightning systems Consumer & medical Philips ( 7 yrs)

Telematics Transportation Invensys ( 6 yrs)

Braking system

HVACDesign for testability

PCB fabrication, assembly

Prototype and pilot build

Regulatory compliance

Product recall support

Technical publication

Model signalling design and testing

Consultation & technical documentation

Concept design Fossil power plants

Construction support Nuclear power plants

Pipeline mapping Mineral processing plants

Pipeline management Oil & gas

Fabrication support

FEED, commissioning

Smart Grid Utilities & telecom Airtel (14 yrs)

GIS BT (9 yrs)

OMS

Mobile

FAT & SAT

Data modeling

OSS deployment and synchronisation

RF benchmarking

Testing Oil & gas Tom Tom (19 yrs)

Data accumulation Mining & exploration

Content aggregation Government

Geospatial data services

Enterprise content management

Product engineering services

Process engineering services

Network engineering services

Content engineering services



Management Profile BVR Mohan Reddy, Chairman & Managing Director: Mr Reddy, founder Infotech Enterprises, holds a graduate degree in Mechanical Engineering from College of Engineering, Kakinada (1971) and postgraduate degrees from IIT, Kanpur, India and University of Michigan, Ann Arbor, US. He has been a member of the Nasscom Executive Council since 2003 and has also served as the Chairman of Confederation of Indian Industry (CII) Southern Region (2008-09). He has been conferred several awards including the “Distinguished Alumnus Award” by IIT, Kanpur and the prestigious American Society of Mechanical Engineers (ASME) leadership award for outstanding leadership in advancing the use of computers in information engineering. Krishna Bodanapu, President & Chief Operating Officer: Mr Bodanapu manages all business operations including delivery, sales, marketing, strategy and organisational excellence. Since joining Infotech in 2001, he has held various positions including sales manager (engineering services Europe) and marketing manager (aerospace vertical). Prior to joining Infotech, he was with Altera Corporation, a leading semiconductor manufacturing company, in San Jose, California. Mr Bodanapu holds a Bachelor's degree in Electrical Engineering from Purdue University and a Master's degree in Business Administration from Kellogg School of Management at Northwestern University. Ajay Aggarwal – Chief Financial Officer: Mr Aggarwal has extensive experience in financial and commercial management in large organisations. He is well versed in setting up start-ups with expertise in funding, banking and strategic planning, as well as capital budgeting, corporate finance, M&A and restructuring. Before joining Infotech, he was with Tata Chemicals as Chief Corporate Controller. Prior to that, he was associated with reputed organisations such as Kirby Building Systems, Reliance Industries, PT Polysindo and JK Synthetics. Mr Aggarwal holds an FCS, FICWA, and an engineering degree from BITS, Pilani. B Ashok Reddy – President, Global Human Resources and Corporate Affairs: Mr Reddy leads the HRD function and holds a postgraduate degree in Industrial Relations & Personnel Management and also a Bachelor‘s degree in Law. His diversified experience includes personnel, human resource development (HRD), legal, factory administration, and government liaison positions. He joined as a management trainee in one of the Infotech subsidiaries and rose to Chief Manager - HR in Infotech’s home appliances business division, which employs more than 3,000 employees. Prior to joining Infotech, he was with Voltas Ltd. John Renard – President, UT&C: Mr Renard, President UT&C, has over 10 years of commercial and management experience in the GIS space. He studied management at Cambridge, UK, and undertook two year vocational management training with Tiphook Plc. Prior to Infotech; he ran his own consulting practice, working with companies such as Andersen Consulting and Total. Rajendra Velagapudi - Senior VP & Head of Aero BU: Mr Velagapudi is responsible for leveraging client relationships and positioning Infotech among the best global end-to-end solutions providers for the global aerospace and defence industries. He played a key role in building a world-class engineering solutions team at Infotech and nurturing partnerships with customers. He was a champion in leading quality initiatives at Infotech, such as ISO 9000, AS9100 and Achieving Competitive Excellence (ACE) – a United Technologies Corporation (UTC)


quality operating system. Prior to joining Infotech in 1999, he worked in the field of mechanical design and analysis of power train systems for commercial and off-highway equipments. He started his career in 1987 at the Ford Truck Division and later worked with Bajaj Tempo and Bharat Earth Movers before moving to Infotech. He holds a degree in mechanical engineering from Siddhartha Engineering College, Vijayawada and two Masters degrees – specialising in Automobile Engineering from Madras Institute of Technology, Chennai and specialising in Design from the Cranfield University, UK. Anand Parameswaran – Senior VP & Head of HTH BU: Mr Parameswaran is responsible for all aspects of customer satisfaction, associate engagement, profitability and revenue growth of the HTH BU. He is also responsible for the Peoria and San Jose delivery centres in the US. Prior to joining Infotech, he worked in various leadership roles across North America, Europe and Asia in the IT industry for Wipro and Cognizant and is a graduate of BITS, Pilani.


Investment Rationale InfoTech’s established track record, new deal wins, sticky client relationships and quality management coupled with estimated engineering services opportunity worth $42 billion could help achieve sustainable earnings growth. EBITDA margin headwinds seem to have receded led by employee pyramid rationalisation, G&A optimisation and higher utilisation rates. However, FY14E margin could be flat YoY as growth is tapering and rupee appreciation, if any, could offset incremental margin tailwinds from operational efficiencies. From a Mcap/sales and EV/EBITDA metric, IEL is trading at 0.9x and 3.6x on FY14E; 0.8x and 3.2x on FY15E basis, respectively. We are modelling revenue, PAT growth of 14%, 18% CAGR, respectively, in FY12-15E coupled with stable average EBITDA margins (18.6%). Though valuations at 7.9x FY14E are compelling growth risks persists, led by weakness in European business and client ramp downs in the hi-tech and telecom business, resulting in higher than peer-group-average PE/G of 1.4x vs. 0.6x for peers. We value IEL at | 180, i.e. at 8.4x FY14E EPS estimate.

Engineering services represent attractive market opportunity Engineering R&D (ER&D) exports could be a ~$42 billion opportunity in 2020 vs. $11.2 billion in 2013, representing a CAGR of 20.8% vs. 13.6% CAGR during 2007-13. ER&D exports contribution could rise to >20% in 2020 vs. 14.8% in FY13E led by higher growth relative to IT exports. Note, higher growth rates could continue given lower levels of offshoring penetration (~3-5%) vs. ~10% for traditional IT services and rising adoption of offshore engineering services in aerospace, hi-tech, auto and telecom verticals. This bodes well for IEL as its engineering vertical – which primarily focuses on design and engineering services across mechanical, electrical and electronic aspect of the product – has grown faster than company average (31% vs. 28%) during FY05-12.

Exhibit 12: Global ER&D spend expected to reach ~$1.6trillion

1.1 1.3 1.60

0.5

1

1.5

2

2009 2011 2020E

$ tri

llion

Global ER&D spend

Source: Nasscom estimates, ICICIdirect.com Research

Exhibit 13: Indian exports could reach $42 billion in 2020

7.9 9 10.2 11.2 42.075.20

10

20

30

40

50

2007 2008 2010 2011 2012 2013F 2020E

$ bi

llion

ER&D exports

Source: Nasscom estimates, ICICIdirect.com Research

Aerospace services worth $4 billion may be procured from India in 2020 Currently, ~25% or $0.85 billion (2011) worth of aerospace services were procured from India. The aerospace industry was among the initial ER&D offshorers to India and IEL managed to capture a sizeable market and mind share with its value proposition and being early adopters of this trend. Over time rising demand for services related to narrow and efficient aircraft, digitisation and advanced avionics could increase India’s contribution to $4 billion or 60% of the global offshoring in 2020. Though these services could typically be volume driven, commoditised in nature vs. design related high value business, the company is strengthening capabilities around the next wave of offshoreable services.


Exhibit 14: Aerospace services worth $4 billion may be procured from India in 2020

Source: Company Presentation (Booz Report) , ICICIdirect.com Research

Industry SWOT: Aero, utilities attractive in near term; rail over longer term Analysing IEL’s value proposition and market opportunity across verticals suggests that good spending is happening in aerospace, utilities and rail. Aero could be attractive in the near term given current service offerings but longer-term spending could shift to commoditised businesses (manufacturing engineering, aftermarket commercial, and MRO engineering services) where core competencies are being strengthened. Telecom, off-highway continues to be a large market but is competitive and challenged. Hi-tech could be nearing its cyclical trough while recovery could be driven by embedded systems vs. basic design earlier. Further, utilities spending that led recent growth could continue. Finally, though rail growth moderated led by IEL’s inability to replenish UK Olympic related spending surge, industry attractiveness could rise over time. Exhibit 15: Industry outlook across verticals

Source: Company Presentation, ICICIdirect.com Research

Global Spend

0.9

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3.0

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2011 2020

$ bi

llion

India ROW

Global CAGR :8.4%

India CAGR :18.8%

Global Spend


Revenue growth may be driven by sticky client relationship IEL’s long standing relationships with a majority of its top clients – including Tom Tom (19 years), Airtel (14), Pratt & Whitney (12), Bombardier (9), Boeing (8), Philips (7), and Invensys (6) – generally helps improve revenue visibility as product development programmes for engineering customers are usually long-term in nature and sticky relationships lead to annuity revenues. For instance, a large European conglomerate – with interest in power generation and transportation – a customer of IEL since 2005 could expand its current 65 FTE relationship by almost 3.5x over the next three years.

Exhibit 16: Top clients have been with IEL for an average 8.5 years

12

98

76

14

9

19

0

5

10

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Prat

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hitn

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Bom

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Philip

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nsys

Airt

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BT

Tom

Tom

Year

s

Years of relationship


Exhibit 17: Select clientele across verticals

Aerospace & defence Telecom Transportation Heavy Equipment Content Utilities Hi-tech, Consumer & Medical Energy, Oil &gasPratt & Whitney Airtel Bombardier Terex TomTom Sempra Energy IBM SiemensHamilton Sundstrand Verizon Invensys Caterpillar I H S Edison Broadcom MitsubishiBoeing BT Alstom John Deere Rural Payment Agency SP AusNet Maxim WestinghouseTextron At&t Thales Joy Global Inc. Riotinto Ausgrid Qualcomm TransoceanDIEHL Telstra GE tranportation Atlas Capco Defence Estates TNB Malaysia Texas instruments FabricommAirbus Swisscom United Group Komatsu SKM Duke Energy ThermoFisher MHIHoneywell Ansaldo STS Volvo Platts Tata power Philips ClipperVought Hyundai Rotem Stolle BSH GE EnergyGKN Heil LSI Hyundai Heavy Inds.Liebherr FincanterriLuftansa Technik ArcherIHI Aerospace SchlumbergerElbit Systems Rio TintoSR technics

Volker Wessles Puget Sound

Energy


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Client mining may improve as services portfolio across value chain improves Currently, IEL provides a variety of discrete manufacturing services – design, cost optimisation – during initial engagements with customers. However, that could change as it seeks to move up the value chain by providing 1) Solutions – e.g. joint go-to-partner for design and manufacturing, and 2) Systems – e.g. establish frugal engineering solutions. Though this necessitates building core competencies around such services, potential rise in their contribution could improve the

Over time, engineering customers, Pratt & Whitney,

Bombardier and Boeing could have cumulatively

contributed in excess of ~$500 million, $120 million and

$100 million, respectively


revenue/client and revenue/employee metric (Exhibit 16), which at current level is half that of peers such as KPIT and MindTree.

Exhibit 18: IEL revenue/client half that of KPIT, MindTree $ ('000) FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13Revenue/EmployeePersistent 27.0 8.0 7.7 7.9 7.4 26.8 7.6 7.5 7.7 8.2 31.3 8.4 9.4 9.0Infotech Enterprises 27.9 7.7 8.5 9.0 8.9 32.3 9.4 9.5 9.6 9.5 37.2 9.2 9.3 9.3KPIT Cummins* 34.3 9.2 9.3 10.5 11.3 37.4 11.6 11.7 11.9 13.5 43.7 13.6 13.9 13.6Mindtree 35.6 9.2 9.3 9.5 9.7 37.3 10.4 10.2 10.1 10.2 39.0 10.4 10.5 10.7Revenue/ClientPersistent 645.5 201.5 201.5 208.7 205.3 743.4 209.2 203.7 189.2 188.2 720.1 188.5 204.9 196.6Infotech Enterprises 813.4 NA NA NA NA 789.0 NA NA NA NA 951.5 NA NA NAKPIT Cummins* 1090.5 312.8 345.2 397.2 438.2 1445.6 440.8 431.8 445.0 564.4 1830.1 570.1 587.7 581.2Mindtree 1031.2 295.0 315.7 316.9 311.4 1172.3 327.0 375.3 401.9 443.2 1698.8 430.6 434.4 448.6


EBITDA margins seem to have stabilised The EBITDA margin declined substantially to 12.5% in Q1FY12 vs. 21.6% in Q4FY10 primarily due to higher wage inflation and promotions to contain attrition as well as acquisitions. As a reminder, the company’s Daxcon & Wellsco acquisitions in Q4FY10 and Q2FY11, respectively, could also have impacted margins given the onsite nature of these projects. As of Q3FY13, Infotech had an EBITDA margin of 18.5% led by margin tailwinds from employee pyramid rationalisation, SG&A efficiencies and higher utilisation rates. This suggests EBITDA margin headwinds have receded. Finally, FY14E margins levers could be 1) offshoring shift in UT BU, 2) utilisation and 3) rationalisation of software expense. IEL is working with several initiatives including – staggered payments, limiting active users at any given point – to reduce software licence costs. Exhibit 19: Margins improve with employee pyramid rationalisation & SG&A efficiencies

12.5

15.7

20.6 19.818.7 18.7 18.5

10

15

20

25

Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

%

EBITDA margins (%)


Infotech spends generously on software costing in excess of

$10,000 per annum per user for certain verticals. Recurring

capex is higher as annual maintenance costs are generally

20-25% of the license costs. The company capitalises the

license costs but expenses the maintenance costs


Exhibit 20: Software expenditure continues to be rationalised

61.7

45.3

30.3

32.2

16.2

12.5

35.0

176.

5

196.

6

208.

9

251.

8

136.

7

0

100

200

300

FY07 FY08 FY09 FY10 FY11 FY12

| cr

ore

Expensed Capitalized


Offshoring shift, utilisation may aid FY14E margins; rupee remains wildcard In Q3FY13, Infotech reported EBITDA margins of 18.5% vs. 12.5% in Q1FY12, an improvement of ~600 bps led by rupee tailwinds, employee pyramid rationalisation, SG&A efficiencies and higher utilisation. Note, despite substantial improvement in margins, 0-3 year experience employees comprise 36% of the workforce lower than average ~45-55% for Tier-I IT companies and could act as margin lever. Further, utilisation, at 83% (UTC) and 71% (engineering), is still below its TTM average of 85% and 72%, respectively. Finally, offshoring driven margin improvement in utilities business could be a positive surprise. Exhibit 21: Employee pyramid skewed towards laterals

Source: Company, ICICIdirect.com Research,

15+ years – 6%

7 - 15 years – 21%

3 – 7 years – 37%

0 - 3 years – 36%


Exhibit 22: Utilisation is below historical levels and has scope for improvement

90 88

82 84 85 83

73 72 73 71 73 71

50

60

70

80

90

100

Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

%UTC ENGG


Cash could be lower going into FY14E as IEL scouts for acquisition targets With over | 500 crore in cash, IEL continues to aggressively pursue acquisition targets in the US and Europe. Historically, the company has successfully expanded its service offering reach through multiple acquisitions. Finally, scale benefits become essential for accepting larger projects and could lead to IEL targeting large acquisitions in the $10-20 million range. Exhibit 23: Cash may be lower going into FY14E as IEL scouts for acquisition

439 286 407 508

22.918.1

27.1

32.7

100

200

300

400

500

600

Mindtree NIIT Tech KPIT Cummins Infotech Enterprises

| cr

ore

0

10

20

30

40

%

Q3FY13 % of FY12 revenue


SEZ shift to cushion net margins Rising tax rates (~35% in FY12 vs. ~24% in FY10) and EBITDA margin headwinds augmented earnings impact, which declined at 7% CAGR during FY10-12. That said, IEL is consciously moving new businesses to SEZ facilities, which has reduced the effective tax rates from 35% in Q3FY12 to 31.6% in Q3FY13. As of Q3FY13, IEL has ~1300 employees in SEZ facilities, which could rise to 1,500 by FY13E end. Further, IEL plans to accommodate 3,000 employees in SEZs over the next two years, which could lower tax rates by ~2% each in FY14E and FY15E.

Exhibit 24: Movement of employees to SEZ could lower tax rates going into FY14E

FY12 Q1FY13 Q2FY13 Q3FY13No. of employees in SEZ 327 645 844 1289Effective tax rate 35.3% 32.6% 32.3% 31.6%


As of Q3FY13, IEL has ~1300 employees in SEZ. It could

end FY13E with 1500 and is targeting 3000 employees in

the next two years, which could lower tax rates by 2%

each in FY14E and FY15E


Successful at evolving business mix over time Over time, Infotech, which started as a CAD/CAM provider digitising 3D models, transformed to an engineering design provider focused on the mechanical aspect for industries such as aero, which today is among the largest offshore engineering services division. Within the engineering business also, the company has been successful in increasing the contribution from emerging industries like automotive, consumer electronics and heavy engineering while the contribution of aerospace (in engineering vertical) has reduced from ~80% in FY09 to ~56% now. Infotech also managed to expand the services footprint of its utilities, telecom and government (UTG) vertical to include telecom engineering, network management, operation support systems and smart grid vs. geographical information service (GIS) earlier. Noticeably, the company did leverage GIS experience from its first customer (Tom Tom with whom Infotech has mapped 65% of the world) to offer content engineering services to telecom, utilities, oil and gas and mining industries. We believe Infotech has been successful at evolving its business mix over time and could help expand its addressable market.

JV with Hindustan Aeronautics may create incremental opportunities The Indian offset policy mandates that foreign suppliers have to source services worth 30% of the contract value domestically. The ratio rises to 50% for purchases over $70 million. Though a majority of these would go towards component manufacturers, 20% of offset value could go towards sourcing IT engineering solutions. Infotech could be a key beneficiary of this incremental demand given its engineering services domain expertise and its association with Boeing, Airbus, and Eurocopter. Further, the company’s 50:50 JV with HAL, which maintains aircraft for defence services, could help capture a larger pie of this incremental demand.

Cash flow and FCF generation concerns but are being addressed Analysing data since FY08 suggests IES converted an average 60% of its EBITDA to cash flow from operations vs. 81.5% for MindTree, 54.2% for KPIT and 62.9% for NIIT Tech. Further, despite one of the weakest FCFF conversion, due to higher capex, IEL is aggressively rationalising capital expenditure. For instance, during 9MFY13, IEL spent | 50.5 crore or 3.6% of revenues on capex vs. average 4.7% of revenue during FY10-12.

Exhibit 26: FCFF/EBITDA ratio weak relative to peers FCFF/EBITDA (%) FY08 FY09 FY10 FY11 FY12 AverageInfotech Enterprises -65.5 33.7 43.8 20.7 46.5 15.8NIIT Tech 14.0 19.8 52.9 2.5 26.9 23.2KPIT Cummins 9.3 40.2 52.0 14.7 18.4 26.9Mindtree -140.6 117.1 73.3 -22.7 54.0 16.2

Source: Company, ICICIdirect.com Research, **No adjustment is made for acquisition

Exhibit 25: Though a notch better, CFO/EBITDA ratio still not peer group leading CFO/EBITDA (%) FY08 FY09 FY10 FY11 FY12 AverageInfotech Enterprises 48.2 86.2 60.5 56.7 46.1 59.5NIIT Tech 66.6 85.2 78.1 23.0 61.7 62.9KPIT Cummins 47.8 68.4 66.6 42.3 46.1 54.2Mindtree 72.9 147.3 92.5 24.4 70.6 81.5



Exhibit 27: Capex continues to be rationalised

| crore FY10 FY11 FY12 9MFY13 AverageCapex 34.7 64.7 79.0 50.5

As % of sales 3.6 5.4 5.1 3.6 4.7


Better placed on Mcap/sales and EV/EBITDA metric but PE/G expensive On the Mcap/sales metric, the stock is trading at 0.9x and 0.8x its FY14E and FY15E sales vs. peer group average of 1.4x and 1.2x, respectively. Further, on the EV/EBITDA metric, the stock is trading at 3.6x and 3.2x its FY14E and FY15E EBITDA vs. peer group average of 5.2x and 4.6x, respectively. Finally, on Mcap/operating cash flow basis, IEL is trading at par with 15.1x multiple vs. peer group average of 15.2x. That said, PE/G, at 1.4x FY14E estimates, is expensive relative to peer group average of 0.6x as growth is moderating.

Exhibit 28: Peer valuation

Name Price (|)FY14E FY15E FY13E FY14E FY15E FY13E FY14E FY15E FY14E FY15E FY13E FY14E FY15E

Mindtree Ltd 914 86.6 94.7 11.8 10.6 9.6 7.0 6.3 5.7 0.9 1.0 1.6 1.4 1.3Hexaware Technologies Ltd* 91 9.1 10.8 10.0 8.4 7.6 8.7 5.5 4.9 0.5 0.6 1.9 1.3 1.1KPIT Cummins Infosystems Ltd 104 12.0 13.9 9.6 8.7 7.5 5.0 4.4 3.9 0.8 0.5 0.8 0.7 0.6Eclerx Services Ltd 645 72.2 82.1 11.1 8.9 7.9 6.7 6.0 5.2 0.4 0.6 2.9 2.6 2.3NIIT Tech Ltd 282 41.0 46.0 7.7 6.8 6.1 4.3 3.8 3.3 0.6 0.5 0.8 0.7 0.7Persistent Systems Ltd* 560 35.4 46.5 15.8 12.0 10.5 8.2 5.8 5.3 0.4 0.7 2.2 1.7 1.5Average 11.0 9.3 8.2 6.6 5.3 4.7 0.6 0.6 1.7 1.4 1.2

Infotech Enterprises Ltd 170 21.4 24.0 8.4 7.9 7.1 3.9 3.6 3.2 1.4 0.6 1.0 0.9 0.8

Mcap/Rev (x)Dil. EPS (|) P/E (x) EV/EBIDTA (x) PEG (x)

Source: Company, ICICIdirect.com Research,*consensus estimates

Exhibit 29: Trading at 1.4x PEG based on FY14E estimate; above peer group of 0.6x

0.9

0.5

0.8

0.40.6

0.4

1.4

0.0

1.0

2.0

Mindtree Ltd HexawareTechnologies

Ltd

Kpit CumminsInfosystems

Ltd

EclerxServices Ltd

Niit Tech Ltd PersistentSystems Ltd

InfotechEnterprises

Ltd



Key Financials

Modelling FY14E, FY15E | revenues to grow 9%, 13%, respectively We expect FY14E and FY15E rupee revenues to grow 9% and 13% YoY to | 2040.4 crore and | 2303.5 crore, assuming average |/$ rate of | 52.4 and | 52, respectively. The growth could be driven primarily by new deal wins and mining of existing customers in the aero and UT&C businesses. From a quarterly perspective, we expect Q4FY13E revenues to grow 1.1% QoQ while EBITDA margins could be flat at 18.5%. Exhibit 30: Revenues to grow at 14% CAGR during FY12-15E

161.

3

187.

5

257.

1

362.

5

542.

5

674.

1

889.

8

953.

1

1188

.0

1553

.0

1878

.2

2040

.4

2303

.6

16.2

37.241.0

49.7

24.2

32.0

7.1

24.630.7

20.9

12.9

8.6

0

500

1000

1500

2000

2500

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

E

FY14

E

FY15

E

| cr

ore

0

20

40

60

%

Revenues % growth[


Modelling EBITDA margins to remain flat in FY14E, FY15E For FY14E and FY15E, we expect average margins to remain flat relative to FY13E (18.6%) as growth is tapering and rupee appreciation, if any, could offset incremental margin tailwinds from operational efficiencies. As a rule of thumb, every 100 bps depreciation in the rupee impacts margins by 30-35 bps. A significant appreciation or depreciation of the rupee could lead to estimate revisions.

Exhibit 31: EBITDA margins may remain flat in FY14E-FY15E

35.8

29.9

47.2

68.1

114.

9

122.

3

179.

6

208.

3

179.

6

268.

9

349.

3

380.

3

429.

4

22.2

15.918.3 18.8

21.218.1

20.221.9

15.117.3 18.6

18.6 18.6

050

100150200250300350400450500

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

E

FY14

E

FY15

E

| cr

ore

0

10

20

30%

EBITDA % margins[


Modelling FY14E and FY15E dollar revenue growth of 12%

and 16% YoY to $ 389.7 million and $ 451.7 million,

respectively


Modelling PAT growth of 5.3% and 12.2% in FY14E and FY15E, respectively We are modelling PAT margins of 11.6% and 11.5%, respectively, in FY14E and FY15E, which translates to YoY growth of 5.2% and 12.2%, respectively. PAT growth would be led by revenue growth and other income benefit with flat margins. We expect RoCE and RoE to decline 132 bps and 154 bps in FY14E to 25.5% and 16.4%, respectively, vs. 26.8% and 18%, respectively in FY13E. Exhibit 32: Modelling PAT margins of 11.6% and 11.5%, respectively, in FY14E and FY15E

14.9

9.0

27.4

50.3

83.7

85.5

92.5

170.

9

139.

7

161.

4

226.

6

236.

7

265.

4

9.2

4.8

10.6

13.915.4

12.710.4

17.9

11.810.4

12.1

11.511.6

0

50

100

150

200

250

300

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

E

FY14

E

FY15

E

| cr

ore

0

5

10

15

20

%

PAT % margins


Exhibit 33: RoCE and RoE may decline 132 bps and 154 bps in FY14E, respectively

16.7

23.5

26.825.5 25.3

13.6 14.8

18.016.4 16.2

0

10

20

30


%

ROCE ROE



Valuations At current levels, IEL is trading at 7.9x and 7.1x our FY14E and FY15E diluted EPS estimate of | 21.4 and | 24, respectively. On the Mcap/sales metric, the stock is trading at 0.9x and 0.8x its FY14E and FY15E sales vs. peer group average of 1.3x and 1.2x, respectively. Further, on EV/EBITDA metric, the stock is trading at 3.6x and 3.2x its FY14E and FY15E vs. peer group average of 5.2x and 4.6x, respectively. Though Infotech’s PE (7.9x FY14E) is inexpensive relative to peers, growth risk persists led by weakness in European business and client ramp downs in the hi-tech and telecom business while appreciating rupee headwinds could offset incremental gains from operational efficiencies. We have valued IEL at | 180, i.e. at 8.4x FY14E EPS estimate and initiate coverage with a HOLD rating. Exhibit 34: One year forward PE(x) chart

0

100

200

300

400

Apr

-02

Apr

-03

Apr

-04

Apr

-05

Apr

-06

Apr

-07

Apr

-08

Apr

-09

Apr

-10

Apr

-11

Apr

-12

|

Price 15 12 9 5 2


Exhibit 35: Trading at 11.7x TTM EPS and below historical average of 13.8x

0

10

20

30

40

Jun-

06

Nov

-06

Apr-0

7

Sep-

07

Feb-

08

Jul-0

8

Dec-

08

May

-09

Oct-0

9

Mar

-10

Aug-

10

Jan-

11

Jun-

11

Nov

-11

Apr-1

2

Sep-

12

Feb-

13

x

P/E average max min


At current levels, IEL is trading at 7.9x and 7.1x our FY14E

and FY15E diluted EPS estimate of | 21.4 and | 24,

respectively

IEL is trading at 11.7x trailing twelve month (TTM) EPS,

below its historical average of 13.8x


Risk & concerns Competition from China R&D outsourcing, testing and product development has been a success for Chinese outsourcing vendors and they continue to offer comparable services at relatively cheaper prices. Majority of companies (both from the US, Europe and Japan) outsource these services to China. R&D outsourcing is generally discretionary in nature and, hence, is late cyclical and typically lag IT services in recovery. Within RDS, product engineering services recover slower than software product engineering. Exhibit 36: Global corporate ER&D spend

1626

23

3429

37 32

30

30

60

90

120

2011 2020

%

China Europe US Other


Though receivables, unbilled grow slower than revenue, DSO still a concern Though accounts receivables, unbilled grew (27.6%, 16.1% CAGR) slower than revenue (29.3% CAGR) during FY05-12, DSO remains a concern. Noticeably, receivables less than six months grew 42% YoY (faster than revenue growth) to ~| 358 crore in FY12 while those exceeding six months grew 84% YoY to | 19 crore. Also, provisions increased 47% YoY to | 9 crore in FY12. Exhibit 37: DSO higher than industry average

92

104

99 99101

98

86889092949698

100102104106

Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13

Days

DSO


Growth in ER&D spends from Corporate China could be the

largest in 2020


Exhibit 38: Unbilled revenue grew at 16.1% CAGR during FY05-12

48

3832 34

59

0

20

40

60

80

FY08 FY09 FY10 FY11 FY12

| cr

ore

0

2

4

6

8

%

Unbilled revenue % of sales


Exhibit 39: Receivables less than six months grew 42% YoY (faster than revenue growth) to ~| 358 crore in FY12 while those exceeding six months grew 84% YoY to | 19 crore s

10.4

252.5

6.219.2

357.5

9.20

100

200

300

400

More than 6 months Less than 6 months provision for doubtful debts

| cr

ores

FY2011 FY2012


Pays dividend consistently but yields modest; cash generation may improve Though IEL has consistently paid dividends since FY98, which have grown at a CAGR of 27.5% (FY03-12), yields have been generally low. Noticeably, though revenue, EBITDA and EPS grew at 28.6%, 25.1% and 30.3% CAGR, respectively, during FY03-12, operating cash flow (CFO) and free cash flow (FCF) grew slower at 20.4% and 17.8%, respectively. The drag could primarily be led by EBITDA margin headwinds, acquisitions and higher capex spending.

Payouts are being benchmarked with peers and potential

increase – from current ~17% – is being discussed at

board


Exhibit 40: Dividend yields have been modest and could improve

0.3 0.3 0.3

2.5

1.3

1.00.80.60.4 0.6

1.4

1.1

0.50.4

0.30.4

1.8

0.6

0.8

1.7

0

1

1

2

2

3

3

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

|

0.0

0.5

1.0

1.5

2.0

%

DPS Yield


Significant currency volatility may impact operating margins The average rupee depreciated ~13.5% in FY13YTD vs. FY12 and could have created margin tailwinds of ~400 bps assuming 30 bps relief for every 100 bps change in rupee. That said, similar tailwinds may not be available, going forward, while significant currency volatility from current levels could have a material impact on operating margins.

Rise in attrition may lead to higher-than-industry-average wage inflation At 15.5%, IEL’s attrition is better than MindTree and KPIT but is higher than NIIT Tech, which has the lowest among peers. A significant rise in attrition could necessitate higher than industry average wage inflation to retain aero domain experts. Exhibit 41: Attrition better than peers but not best

19.0

18.1

17.5

14.3

15.2

22.5

20.0

17.2

17.2

17.1

20.5

25.6

21.7

19.4

18.2

17.0

16.3

15.8

13.4

12.5

12.1

12.4

12.7

19.0

15.5

17.2

16.3 12

.5

10

15

20

25

30

Q1FY

12

Q2FY

12

Q3FY

12

Q4FY

12

Q1FY

13

Q2FY

13

Q3FY

13

%

Infotech Enterprises KPIT Mindtree NIIT Tech



Tables and ratios Exhibit 42: Profit & loss account

(|crore) FY11 FY12 FY13E FY14E FY15E

Total Revenues 1,188 1,553 1,878 2,040 2,304

Growth (%) 24.6 30.7 20.9 8.6 12.9

Total Operating Expenditure 1,008 1,284 1,529 1,660 1,874

EBITDA 180 269 349 380 429

Growth (%) (13.8) 49.8 29.9 8.9 12.9

Depreciation 48 34 61 71 78

Other Income 27 18 28 24 24

Interest 1 1 1 2 2

PBT before Exceptional Items 157 236 315 331 373

Growth (%) (24.3) 50.2 33.3 5.1 12.7

Tax 26 14 101 101 114

PAT before Exceptional Items 135 150 211 231 259

Exeptional items 2 (2) (2) - -

PAT before MI 133 151 212 231 259

Minority Int & Pft. from associates 7 10 12 6 6

PAT 140 161 225 237 265

Growth (%) (18.3) 15.5 39.3 5.3 12.2

EPS 12.5 14.5 20.3 21.4 24.0

EPS (Growth %) (18.4) 15.5 40.0 5.7 12.2

Source: Company, ICICIdirect.com Research,

Exhibit 43: Balance sheet


Equity 56 56 56 56 56

Reserves & Surplus 974 1,102 1,289 1,480 1,694

Networth 1,029 1,157 1,345 1,536 1,749

Minority Interest - - - - -

Long term Liabilties & provisions 45 53 53 53 53

Source of funds 1,074 1,210 1,397 1,589 1,802

Net fixed assets 265 290 301 309 318

Net intangible assets 27 35 43 51 60

Goodwill 47 21 21 21 21

Other non current assets 69 80 80 80 80

Investments 58 24 37 43 49

Debtors 257 367 415 458 515

Cash & Cash equivalents 351 456 568 703 851

Other current assets 112 129 140 149 172

Current liabilities 84 125 160 146 199

Provisions 27 69 47 79 64

Application of funds 1,074 1,210 1,397 1,589 1,802



Exhibit 44: Cash flow statement


PAT 140 161 225 237 265

Depreciation 49 49 61 71 78

WC changes (69) (73) (44) (34) (43)

Other non cash adju. 24 55 63 73 86

Income taxes pd. (41) (69) (101) (101) (114)

CF from operations 102 124 204 246 273

Other Investments 129 37 28 24 24

Acq. Of business (42) (2) - - -

(Purchase)/Sale of Fixed Assets (65) (79) (80) (87) (95)

CF from investing Activities 23 (5) (52) (64) (72)

Inc / (Dec) in Equity Capital 2 2 - - -

Change in debt funds (3) 2 - - -

Dividend & DDT (13) (32) (39) (45) (52)

CF from Financial Activities (15) (29) (41) (47) (53)

Exchange rate differences 5 14 - - -

Opening cash balance 234 349 456 568 703

Cash as margins/associates 20 32

Cash c/f to balance sheet 351 456 568 703 851


Exhibit 45: Key Ratios FY11 FY12 FY13E FY14E FY15E

Per Share Data (|)

EPS-diluted 12.5 14.5 20.3 21.4 24.0

Cash per share 3.2 4.1 5.1 6.4 7.7

BV 9.3 10.4 12.0 13.9 15.8

Operating Ratios (%)

EBITDA/Total Revenues 15.1 17.3 18.6 18.6 18.6

PBT/Total Revenues 13.3 15.2 16.8 16.2 16.2

PAT/ Total Revenues 11.8 10.4 12.0 11.6 11.5

Return Ratios (%)

RoNW 13.6 14.8 18.0 16.4 16.2

RoCE 16.7 23.5 26.8 25.5 25.3

RoIC 24.8 36.4 44.1 44.3 46.8

Valuation Ratios (x times)

P/E 13.6 11.7 8.4 7.9 7.1

EV / EBITDA 7.6 5.1 3.9 3.6 3.2

EV/Total Revenues 1.2 0.9 0.7 0.7 0.6

MCap/Total Revenues 1.6 1.2 1.0 0.9 0.8

Turnover Ratios (x times)

Debtors days 79 73 76 78 77

Creditors days 30 24 18 18 18

Fixed Asset Turnover ratio 4.5 5.6 6.3 6.7 7.3

Solvency Ratios (x times)

Debt / Equity 0.0 0.0 0.0 0.0 0.0

Current Ratio 6.5 4.9 5.4 5.8 5.9

Quick Ratio 6.5 4.9 5.4 5.8 5.9



RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: > 10%/ 15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai – 400 093

[email protected]

ANALYST CERTIFICATION We /I, Abhishek Shindadkar MBA, Aishwariya KPL, MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

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March 21, 2013 Infotech Enterprises (INFENT - ICICI...

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