Mindtree Model Reference
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Reference Model
MindtreePrepared By: Neerav Koli, Distance Learning , Mumbai
http://proschoolonline.com
Email ID : [email protected]
Mumbai
IMS Proschool Pvt Ltd,
Maharashtra High School Complex,
Principal N.M Kale Marg, Off Gokhale Rd,
Dadar (W), Mumbai 400028
Tel. No. :022-65285393/94
+91 9372895050
http://proschoolonline.com/http://proschoolonline.com/ -
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Directions
IMS Proscho
Maharashtra
Principal N.M
Dadar (W),
Tel. No. :0
+91 937289
Email ID :
Mindtree is one of the young IT company of the country which has seen commendable success within a f
of such a company is in great demand in the investment market. This gave us the opportunity to guide ou
financial model on the company. These exercises help the student at IMS Proschool to hone their financi
This model is being developed by a financial modeling student at IMS Proschool. This is provided as refer
purpose only. Keeping in view the objective of the reference model, the formulas and linkages of the mod
IMS Proschool provides certificate programs in Financial Modeling. The program grooms the candidates f
sector which require financial analysis and modeling skills. The program aims to impart the necessary skil
Financial Research Analyst. The program equips students with the practical skill sets required to perform
valuation through Excel.
For more details, please contact the address furnished below. You can also email us at the below mentio
http://proschoolonline.com/wp/certificate-programs/financial-modeling/ -
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l Pvt Ltd,
High School Complex,
Kale Marg, Off Gokhale Rd,
umbai 400028
2-65285393/94
050
w span of time. A financial model
student to come out with a
l modeling skills.
ence model and is for information
l are kept intact.
or entry level jobs in the finance
ls required to perform the role of a
financial analysis, modeling and
ed email-id.
-
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Mindtree Ltd.
Click on the name of Tab to go to the relevant sheet
No. Name of Tab
1 Company Overview
2 Summary
3 Profit & Loss A/c
4 Balance Sheet
5 Cash Flow Statement
6 Geographic Revenue
7 Segment-wise Revenue
8 Cost Analysis
9 Debt Schedule
10 Fixed Asset
11 Valuation
12 Beta Calculation
13 Notes
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Description
Overview of the Company
Financial snapshot of the company
Historical and forecasted income statement
Historical and forecasted balance sheet
Forecasted cash flow statement
Geographic revenue breakup for the historical years as reported by the Company
Segment-wise revenue breakup for the historical years as reported by the Company
Cost Structure
Debt Schedule
Fixed Asset & Depreciation Schedule
DCF Valuation
Beta Calculation of Company relative to Sensex
Notes related to preparation of Financial Statement
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Mindtree Ltd.Company Overview(Rs. In Lacs, except per share data)
Company Information Company Description
Industry IT Consulting & Software
Sector Software-Medium
Country India
BSE/NSE Code 532819/MINDTREEMarket Index BSE - 500
Year end 31-Mar Products & Services
Reporting currency Rs.
Stock Data Per Share Data & Key Ratios
Price as on 22nd Oct 2010 512.7
52 Week High 729.9
52 Week Low 491 EPS diluted
YTD Change -84.95 Gross Profit
YTD Change % -14.7% EBITDA/sales (%)
Shares Outstanding 407 Net income/sales (%)
Market Capitalization(Lacs) 208,669 ROE (TTM)
Beta Vs Sensex 1.16 EV/SalesEV/EBITDA
P/E
P/Sales
P/BV
Geo revenue breakup for 2010
USA 84,209
Europe 25,552
India 7,737
APAC / Rest of the World 12,101
Total 129,598
Revenue Forecast
Mindtree Ltd. Limited , formerly is an i
development. It operates in two units:
engineering (SPE). SPE provides full life c
production support for customers in mansupply chain management, enterprise res
Internet & Enabling Technologies, Data
Application Maintenance
65%
20%
6%
9%
USA Europe India APAC / Rest of the World
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2010 2011 2012 2013 2014 2015E 2016E 2017E
% y/y Growth
Total Revenue
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Revenue Data
2010 2011 2012 2013 2014 2015E
Total Revenue 129,598 133,358 138,077 145,127 155,286 166,156
% y/y Growth 3% 4% 5% 7% 7%
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2009-10 A 2010-11 E 2011-12 E 2012-13 E
52.79 43.04 45.35 48.35
38% 38% 38% 38%
19% 19% 19% 19%
17% 13% 13% 14%
32% 21% 18% 16%
1.58 1.5 1.5 1.4
16 8 8 7
9.71 11.9 11.3 10.6
1.61 1.6 1.4 1.4
3.18 2.5 2.1 1.7
Segment Revenue Breakup for 2010
IT Services 69,802
PE Services 59,796
Total 129,598
nternational information technology (IT) consulting and implementation company. It delivers business solutions through global software
roduction engineering (PE) services and IT services. PE services include research and development (R&D) services and software product
cle product engineering, professional services and sustained engineering services. IT Services offer consulting and implementation and post
ufacturing, financial services, travel and leisure and other industries, in the areas of e-business, data warehousing and business intelligence,urce planning (ERP) and maintenance and re-engineering of legacy mainframe applications.
Warehousing /Business Intelligence, Supply Chain Management, ERP, Product Engineering, Product Assurance & Testing, Web Services.
54%
46%
IT Services PE Services
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2016E 2017E
177,787 186,677
7% 5%
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2007-08A 2008-09A 2009-1A 2010-11E
P&L
Revenue 73,384 123,747 129,598 133,358
Gross Profit 26,606 54,069 49,773 51,217
EBITDA 12,580 33,095 24,556 25,251
PBT 11,273 6,039 25,467 20,587
PAT 10,419 5,231 21,484 17,519
Cash Flow
Cash Flow from operations 9,063 17,980 23,017 23,730
Cash Flow from investing (15,003) (22,235) (10,045) (3,655)
Cash Flow from financing 3,739 2,256 (13,415) (1,106)
Net Cash Flow (2,214) (1,958) (522) 18,969Capex (21,778) (4,346) (4,573) (4,706)
Free Cash Flow to Firm (12,714) 13,634 18,444 19,025
Balance Sheet
Share Capital 3,792 3,800 3,951 3,951
Share Application Money 5 0.03 - -
Reserves & Surplus 49,605 51,328 63,112 79,912
Total Debt 9,172 17,213 305 -
62,575 72,340 67,369 83,863
Net Fixed Assets 25,897 29,616 28,587 27,609
Goodwill - 14,605 1,543 1,543
Investments 16,549 10,133 12,725 12,725
Deferred tax assets, net 898 1,897 2,136 2,136
Net Current Assets 19,230 16,088 22,379 39,852
62,575 72,340 67,369 83,863
Margins
Gross Profit 36% 44% 38% 38%
EBITDA 17% 27% 19% 19%EBIT 12% 22% 14% 15%
PBT 15% 5% 20% 15%
Net Profit 14% 4% 17% 13%
Per share Data
EPS - Basic 27.69 13.84 54.77 44.66
EPS - Diluted 26.75 13.70 52.79 43.04
Financial Summary Of Mindtree
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Book Value 137 136 161 202
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2011-12E 2012-13E
138,077 145,127
53,029 55,737
26,145 27,480
21,690 23,126
18,457 19,679
22,193 27,879
(3,821) (4,070)
(771) (771)
17,601 23,038(4,872) (5,121)
17,321 22,758
3,951 3,951
- -
97,649 121,554
- -
101,601 125,505
26,975 26,692
1,543 1,543
12,725 12,725
2,136 2,136
58,222 82,410
101,601 125,506
38% 38%
19% 19%15% 15%
16% 16%
13% 14%
47.05 50.17
45.35 48.35
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246 305
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Mindtree Ltd.Profit & Loss Account
(Rs. In Lacs, except per share data) Audited Audited Audited
2007-08 A 2008-09 A 2009-10 A 2010-11 E 2011-12 E
Revenues 73,384 123,747 129,598 133,358 138,077
Cost of Revenues (46,778) (69,678) (79,825) (82,141) (85,047)
Gross Profit 26,606 54,069 49,773 51,217 53,029
Selling, General & Administrative expenses (13,875) (20,168) (24,978) (25,703) (26,612)
Provision for bad & doubtful debts (151) (806) (239) (263) (273)
Operating profit before interest and depreciation 12,580 33,095 24,556 25,251 26,145
Interest including finance charges (590) (1,620) (267) (30) -
Depreciation (3,493) (5,696) (6,518) (5,685) (5,506)
Operating Profit 8,497 25,779 17,771 19,536 20,639
Foreign exchange gain/(loss) 399 (20,892) 6,734 - -
Other Income 2,377 1,152 962 1,051 1,051
Profit Before Tax 11,273 6,039 25,467 20,587 21,690
Provision for taxation including FBT (1,290) (1,386) (3,796) (3,069) (3,233)
Deferred tax (charge)/credit 436 681 (288) - -
MAT Credit Entitlement/(reverse) - 33 101 - -
Share of profits of associates 274 - - -
Minority interest (410) - - -
Net profit after tax 10,419 5,231 21,484 17,519 18,457
EPS Basic 27.69 13.84 54.77 44.66 47.05
EPS Diluted 26.75 13.70 52.79 43.04 45.35
Weighted average number of shares
Basic 376.3 378 392 392 392
Diluted 389.5 382 407 407 407
Growth Analysis - Y/Y
Revenues - 69% 4.7%
EBITDA - 163% -26%
Operating Profit - 203% -31%
Net Profit - -50% 311%
Growth Analysis - Q/Q
Revenues
EBITDA
Operating Profit
Net Profit
Margin Analysis ( as a % of Revenues)
Gross Profit Margin 36% 44% 38% 38% 38%
EBITDA 17% 27% 19% 19% 19%
EBIT 12% 22% 14% 15% 15%
PBT 15% 5% 20% 15% 16%
Net Profit Margin 14% 4% 17% 13% 13%
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Interest Cover 21 20 92
Effective Tax rate 11% 11% 15% 15% 15%
Financial Leverage 1.5 1.3 1.4 1.3 1.3
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2012-13 E
145,127
(89,390)
55,737
(27,971)
(287)
27,480
-
(5,404)
22,075
-
1,051
23,126
(3,447)
-
-
-
-
19,679
50.17
48.35
392
407
38%
19%
15%
16%
14%
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15%
1.2
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Mindtree Ltd.Balance Sheet
(All Figs in Lacs) Standalone Consolidated Consolidated
Audited Audited Audited
Sources Of Funds 2007-08 A 2008-09 A 2009-10 A 2010-11 E 2011-12 E
Shareholders Funds
Share Capital ( Face Value of Rs. 10 Each) 3,792 3,800 3,951 3,951 3,951
Share Application Money 5 0.03 - - -Reserves & Surplus 49,605 51,328 63,112 79,912 97,649
53,403 55,127 67,064 83,863 101,601
Minority Interest - 3,276 - -
Loan Funds
Secured Loans 9,172 13,757 - - -
Unsecured Loans - 180 305 - -
Total Shareholders Funds & Liabilities 62,575 72,340 67,369 83,863 101,601
Application Of Funds
Fixed AssetGross Block 34,744 49,409 51,334 56,040 60,912
Less Accumulated Depreciation (11,176) (21,096) (25,212) (30,896) (36,402)
Net Block 23,568 28,313 26,122 25,143 24,510
Capital Work In Progress 2,329 1,304 2,466 2,466 2,466
25,897 29,616 28,587 27,609 26,975
Goodwill - 14,605 1,543 1,543 1,543
Investments 16,549 10,133 12,725 12,725 12,725
Deferred tax assets, net 898 1,897 2,136 2,136 2,136
Current assets, loans and advances
Sundry debtors 17,217 27,923 23,699 28,589 29,600
Cash and bank balances 5,465 4,876 4,033 23,002 40,603
Loans and advances 9,927 14,111 20,683 18,177 18,820
Total Current Assets 32,609 46,910 48,414 69,768 89,024
Current liabilities and provisions
Current Liabilities 11,153 28,599 21,135 25,016 25,901
Provisions 2,226 2,223 4,900 4,900 4,900
Total Current Liabilities 13,379 30,822 26,035 29,916 30,801
Net Current Assets 19,230 16,088 22,379 39,852 58,222
Total Assets 62,575 72,340 67,369 83,863 101,601
Check: Assets = Liab + Equity ? - - (0) (0) (0)
ROE (TTM) 19.51% 9.49% 32.04% 20.89% 18.17%
Book Value 137 136 161 202 246
Days Sales Outstanding(TTM) 86 82 67 78 78
Liquidity Ratio
Current Ratio 2.4 1.5 1.9 2.3 2.9
Capital Structure Ratio
Debt Equity Ratio(Times) 0.17 0.25 0.005 0.000 0.000
Debt to Total Funds(%) 15% 20% 0.45% 0% 0%
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% of Revenues
Loans and Advances 14% 11% 16% 14% 14%
% of Cost of revenue
Current Liabilities 24% 41% 26% 30% 30%
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2012-13 E
3,951
-121,554
125,505
-
-
-
125,505
66,033
(41,806)
24,227
2,466
26,692
1,543
12,725
2,136
31,112
63,641
19,781
114,534
27,224
4,900
32,124
82,410
125,506
(0)
15.68%
305
78
3.6
0.000
0%
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14%
30%
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Mindtree Ltd.Cash Flow Statement
(All Figs in Lacs)
2007-08 A 2008-09 A 2009-10 A
Standalone Consolidated Consolidated
Cash flows from operating activities:
Profit Before Tax 11,273 6,039 25,468Adjustments:
Depreciation 3,493 5,696 6,518
Amortization of Stock Compensation 192 100 51
Interest Expense 589 1,620 267
Interest / dividend income (1,743) (870) (500)
Loss /(profit) on sale of fixed assets (6) (189) 6
Profit on sales of investments (253) (58) (110)
Exchange difference on derivatives - 15,229 (11,131)
Effect of exchange differences on translation of foreign currency cash
and cash equivalents 13 (41) 79
Operating profit before working capital changes 13,560 27,525 20,649
Decrease/(Increase) in sundry debtors (5,501) (3,352) 4,542
Decrease/(Increase) in loans and advances (417) (21) 6(Decrease)/Increase in current liabilities and provisions 3,270 (3,304) 2,181
Income taxes and FBT paid (1,848) (2,869) (4,360)
Net cash provided by / (used in) operating activities 9,063 17,980 23,017
Cash flow from investing activities
Purchase of fixed assets (21,778) (4,346) (4,573)
Proceeds on sale of fixed assets 75 651 50
Purchase of business/acquisition - (29,195) (2,925)
Investment in subsidiaries - - -
Interest /dividend received from investments 847 627 500
Inter-corporate advances granted - - (615)
Purchase of investments (22,918) (80,764) (104,479)
Sale/maturities of investments 28,770 90,792 101,997
Net cash Provided/ (used) in investing activities (15,003) (22,235) (10,045)
Cash flow from financing activities
Issue of share capital (net of issue expenses paid) (1,193) 56 941
Receipt of share application money 5 0 (0)
Interest paid on loans (591) (1,586) (267)
Proceeds from term loans 9,550 10,180 -
Repayment of term loans (1,277) (13,691) (5,157)
Repayment of finance lease obligation (232) (382) -
Proceeds/ (repayment) of short term loans, net (1,647) 8,583 (8,475)
Increase/(decrease) in bank overdraft - - -
Dividends paid (including distribution tax) (877) (904) (458)
Net cash Provided/(used) by financing activities 3,739 2,256 (13,415)
Effect of exchange differences on translation of foreign currency cash
and cash equivalents (13) 41 (79)
Net increase/(decrease) in cash and cash equivalents (2,214) (1,958) (522)
Cash and cash equivalents of MindTree Wireless Pvt Ltd as on the date
of acquisition - - 764
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Cash and cash equivalents at the beginning of the year 7,680 6,834 3,791
Cash and cash equivalents at the end of the year 5,465 4,876 4,033
Calculation of Free Cash Flow
Operating Cash Flow 9,063 17,980 23,017
Capital expenditure (21,778) (4,346) (4,573)
Free Cash Flow(12,714) 13,634 18,444
Cash Flow Ratios
Operating Cash Flow / Revenues 0.12 0.15 0.18
Free Cash Flow / Operating Cash Flow -140.28% 75.83% 80.13%
Dividends paid (including distribution tax) % of Share Capital 23% 24% 12%
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2010-11 E 2011-12 E 2012-13 E
20,587 21,690 23,126
5,685 5,506 5,404
51 51 51
30 - -
(1,051) (1,051) (1,051)
- - -
- - -
- - -
- - -
25,302 26,196 27,531
(4,890) (1,012) 1,511
2,506 (643) 9613,881 885 1,323
(3,069) (3,233) (3,447)
23,730 22,193 27,879
(4,706) (4,872) (5,121)
- - -
- - -
- - -
1,051 1,051 1,051
- - -
- - -
- - -
(3,655) (3,821) (4,070)
- - -
- - -
(30)
- - -
(305) - -
- - -
- - -
- - -
(771) (771) (771)
(1,106) (771) (771)
18,969 17,601 23,038
- - 0
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4,033 23,002 40,603
23,002 40,603 63,641
23,730 22,193 27,879
(4,706) (4,872) (5,121)
19,025 17,321 22,758
0.18 0.16 0.19
80.17% 78.05% 81.63%
20% 20% 20%
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Mindtree Ltd.Geographic Revenue Model(All Figs in Lacs)
Q1 Jun-08 Q2 Sep-08 Q3 Dec-08 Q4 Mar-09
Geographic Wise Revenues
USA 48,440 13,511 19,894 24,097 23,178
Europe 13,486 5,398 6,403 7,231 5,360India 4,210 1,031 1,664 2,426 2,697
APAC / Rest of the World 7,247 2,281 3,241 2,626 2,571
Total 73,383 22,221 31,202 36,380 33,806
Y/Y (%) Growth in Geographic Revenues
USA - 20% 63% 103% 77%
Europe - 102% 93% 102% 37%
India - 49% 73% 92% 109%
APAC / Rest of the World - 53% 88% 36% 23%
Total - 38% 71% 95% 66%
Q/Q (%) Growth in Geographic Revenues
USA - 3% 47% 21% -4%
Europe - 38% 19% 13% -26%
India - -20% 61% 46% 11%
APAC / Rest of the World - 9% 42% -19% -2%
Total - 9% 40% 17% -7%
Geographic Revenues as % of Total
USA 66% 61% 64% 66% 69%
Europe 18% 24% 21% 20% 16%
India 6% 5% 5% 7% 8%
APAC / Rest of the World 10% 10% 10% 7% 8%
Total 100% 100% 100% 100% 100%
4
Amount In Rs.
31,202 36,380 33,806
Q2 Sep-08 Q3 Dec-08 Q4 Mar-09USA 19,894 24,097 23,178
Europe 6,403 7,232 5,360
India 1,664 2,425.95 2,697
APAC/ ROW 3,241.7 2,625.76 2,571
Total 31,202 36,380 33,806
------------------------------------------------------------------------------------------------------------
3 % Wise Contribution to total Sales
Q2 Sep-08 Q3 Dec-08 Q4 Mar-09
USA 64% 66% 69%
Europe 21% 20% 16%
India 5% 7% 8%
2007-08 A
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APAC/ ROW 10% 7% 8%
Total 100% 100% 100%
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Q1 Jun-09 Q2 Sep-09 Q3 Dec-09 Q4 Mar-10
2010-11 E
80,680 20,507 20,699 21,393 21,610 84,209 88,027
24,392 6,034 6,972 6,105 6,441 25,552 27,1807,818 1,983 1,456 2,121 2,177 7,737 7,149
10,719 1,953 2,371 3,566 4,210 12,101 11,003
123,747 30,477 31,498 33,185 34,438 129,598 133,358
67% 52% 4% -11% -7% 4% 5%
81% 12% 9% -16% 20% 5% 6%
86% 92% -12% -13% -19% -1% -8%
48% -14% -27% 36% 64% 13% -9%
69% 37% 1% -9% 2% 5% 2.9%
- -12% 4% -11% -7% -
- 13% 9% -16% 20% -
- -26% -12% -13% -19% -
- -24% -27% 36% 64% -
- -10% 3% 5% 4% -
65% 67% 66% 64% 63% 65% 66%
20% 20% 22% 18% 19% 20% 20%
6% 7% 5% 6% 6% 6% 5%
9% 6% 8% 11% 12% 9% 8%
100% 100% 100% 100% 100% 100% 100%
2008-09 A 2009-10 A
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100000
0
0
0
0
-
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2011-12 E 2012-13 E
92,121 96,514
28,918 30,6296,654 6,085
10,384 11,900
138,077 145,127
5% 5%
6% 6%
-7% -7%
-6% 15%
4% 5%
67% 67%
21% 21%
5% 4%
8% 8%
100% 100%
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Mindtree Ltd.
Segment Wise Revenue
(All Figs in Lacs)
2007-08 A 2008-09 A 2009-10 A
Segment Revenue
R & D Services 16,087 21,934 -
IT Services 57,297 79,247 69,802
AztecSoft Business - 22,566 -
PE Services - - 59,796
Total 73,384 123,747 129,598
Other Income (Excluding Forex Gains/Losses)
Interest on deposits 612 145 143
Profit on sale of investments 253 96 110Profit from sale of assets, net 6 163 -
Dividend from investments 1,132 350 357
Bad debts recovered - - 163
Liabilities no longer required written back - - 143
Miscellaneous income 376 34 46
Total 2,378 788 962
Minority interest
Share of P&L in Associate - 232 -
Minority interest - (410) -
Total Minority Interest - (178) -
Sales Growth Analysis - Y-Y
R & D Services - 36% -
IT Services - 38% -12%
Aztec Business - - -
PE Services - - 34%
Total Sales - 69% 5%
Sales Growth Analysis - Q-Q
R & D Services - - -
IT Services - - -
Aztec Business - - -
PE Services - - -
Total Sales - - -
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Sales Weightage Analysis
R & D Services 22% 18% -
IT Services 78% 64% 54%
Aztec Business - 18% -
PE Services - - 46%
Total 100% 100% 100%
Other Income Analysis
Interest on deposits 612 145 143
Dividend from investments 1,132 350 357
As % of Closing Investment
Interest on deposits 3.70% 1.44% 1%
Dividend from investments 7% 3.45% 3%
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2010-11 E 2011-12 E 2012-13 E
- - -
274 274 274
- - -- - -
777 777 777
- - -
- - -
- - -
1,051 1,051 1,051
- -
- -
- - -
-
- - -
- - -
- - -
- - -
- - -
- - -
- - -
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0% 0% 0%
274 274 274
777 777 777
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Mindtree Ltd.Cost Analysis(Rs. In Lakhs )
Cost Structure 2007-08 A 2008-09 A 2009-10 A 2010-11 E
Cost of Revenues 46,778 69,658 79,825 82,141
Selling, General & Administrative expenses 13,875 20,105 24,978 25,703
Total Operating Expnese(excluding bad debts) 60,653 89,763 104,803 107,844
Provision for bad & doubtful debts 151 806 239 263
Total Operating Expnese 60,804 90,569 105,042 108,107
As % of Revenues
Cost of Revenues 64% 56% 62% 62%
Selling, General & Administrative expenses 19% 16% 19% 19%
Total Operating Expnese(excluding bad debts) 83% 73% 81% 81%
Provision for bad & doubtful debts 0.21% 0.65% 0.18% 0.20%
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2011-12 E 2012-13 E
85,047 89,390
26,612 27,971
111,660 117,361
273 287
111,932 117,648
62% 62%
19% 19%
81% 81%
0.20% 0.20%
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Mindtree Ltd.Debt Schedule(Rs. In Lakhs )
2007-08 A 2008-09 A 2009-10 A 2010-11 E 2011-12 E 2012-13 E
Debt Schedule
Secured LoansFrom Banks -
Term Loans 8,848 5,157 - -
Other Loans - 8,600 - -
Finance lease obligation 324 -
Total Secured Loans 9,172 13,757 - - - -
Unsecured Loans -
Council for Scientific and Industrial Research - 180 305 305 - -
-
Total Unsecured Loan - 180 305 305 - -
Total 9,172 13,937 305 305 - -
Interest Expense (Q Wise) 590 1,620 267 30 - -Interest Expense Rate (Q wise) 6.43% 11.62% 87.54% 9.89%
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Mindtree Ltd.
Fixed Asset & Depreciation Schedule
Fixed Assets 2007-08 A 2008-09 A
Gross Block 34,744 49,409
Less Accumulated Depreciation (11,176) (21,096)
Net Block 23,568 28,313
Capital Work in Progress 2,329 1,304
25,897 29,616
Depreciation Schedule 2007-08 A 2008-09 A
Depreciation 3,493 5,696
Implied Depreciation Rate 15% 20%
Acquisition of Property and Equipment (Capex) 21,778 4,346
Capex as % Revenues 30% 4%
Notes
Projected Fixed Assets & Depreciation,
PY=Previous Year, CY=Current Year
1 Gross Block= PY Gross Block + New Capex
2 Accumulated Depreciation= PY Accumulated Dep. + CY Dep
3 Net Block= Gross Block - Accumulated Depreciation
4 Depreciation = Assuming Company buys new fixed asset half-way through the year
for new fixed assets(capex) purchased in C Y.
CY Depreciation= Half Dep of New Capex + Full Depreciation from Net Block Of PY
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2009-10 A 2010-11 E 2011-12 E 2012-13 E
51,334 56,040 60,912 66,033
(25,212) (30,896) (36,402) (41,806)
26,122 25,143 24,510 24,227
2,466 2,466 2,466 2,466
28,587 27,609 26,975 26,692
2009-10 A 2010-11 E 2011-12 E 2012-13 E
6,518 5,685 5,506 5,404
25% 20% 20% 20%
4,573 4,706 4,872 5,121
4% 4% 4% 4%
, so I have taken only half year depreciation
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Mindtree Ltd.DCF Valuation(All Figs in Lacs)
Growth Assumptions Enterpsire Value (EV)
Long term IT Industry growth rate 15%
513
407
CAPM Assumptions 208,669
Ke 16.28% 305
RFR 7.0% 4,033
Beta 1.16 204,942
Rp 8%
Calculation of Free Cash Flow
2009-10A 2010-11 E 2011-12 E 2012-13 E 2014E 2015E
Revenues 129,598 133,358 138,077 145,127 155,286 166,156
EBITDA 24,556 25,251 26,145 27,480 29,403 31,461
EBIT 18,038 19,567 20,639 22,075 23,621 25,274
Tax Expense (3,796) (3,069) (3,233) (3,447) (3,688) (3,947)Net Operating Profit After Tax 14,242 16,498 17,406 18,628 27,309 29,221
Depreciation & Amortisation 6,518 5,685 5,506 5,404 5,782 6,187
Working Capital Change 6,729 1,497 (770) 3,795 3,795 3,795
Operating Cash Flow 14,031 20,686 23,681 20,237 29,297 31,613
Capex (4,573) (4,706) (4,872) (5,121) (5,480) (5,863)
FCF 9,458 15,980 18,809 15,116 23,817 25,750
Diluted Shares 407 407 407 407 407 407
Projection Year 1 2 3 4 5
Discount Factor 0.86 0.74 0.64 0.55 0.47
Present Value of FCF 13,744 13,913 9,617 13,033 12,119
Y/Y Growth AnalysisRevenues 3% 4% 5% 7% 7%
EBITDA 3% 4% 5% 7% 7%
EBIT 8% 5% 7% 7% 7%
Depreciation & Amortisation -13% -3% -2% 7% 7%
Margin Analysis (As % of Revenues)
EBITDA Margin 19% 19% 19% 19% 19% 19%
EBIT Margin 14% 15% 15% 15% 15% 15%
Depreciation & Amortisation 5% 4% 4% 4% 4% 4%
Capex 4% 4% 4% 4% 4% 4%
Tax Rate (Tax Expense/EBIT) -21% -16% -16% -16% -16% -16%
Terminal Value Equity Value
Sum of PV of FCF for explicit forecast 73,686 Enterprise Value 179,288
WACC 16.27% - Debt (305)
Long term growth in Revenues 5% + Cash 4,033
Present Value of terminal value 105,602 Net Debt 3,727
Terminal Value as % of Total Value 59% Equity Value 183,015
Sensitivity - Varying Terminal Growth Rate
Enterprise Value (in lacks)
Explicit Forecast Period
Current Market Price
Diluted Shares
Market Capitalisation
Long Term Liabilities
Less: Cash & Cash Equivalents
First Stage of Valuation
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WACC PV of FCF 105,602 2% 3% 3%
10.0% 104,473 10.0% 92,943 99,770 107,573
11.0% 100,717 11.0% 76,846 81,885 87,553
16.3% 83,921 12.2% 62,204 65,827 69,843
13.0% 93,788 13.0% 54,504 57,463 60,718
14.0% 90,590 14.0% 46,562 48,895 51,441
Sensitivity - EV/EBITDA Exit Multiple
WACC PV of FCF 5.0 5.5 6.0
10.0% 104,473 170,046 187,050 204,055
11.0% 100,717 169,424 186,366 203,309
16.3% 83,921 166,273 182,901 199,528
13.0% 93,788 168,204 185,024 201,844
14.0% 90,590 167,605 184,365 201,126
Recommendation
Mindtree is likely to clock EPS of 45.35 in FY2012 E. By assigning average PE pf IT Industry.i.e.12, we recommend a hold position with
Target Price 544
Industry Avg Pe 12
Forward EPS FY 2012 E 45.35
PV of Terminal Value
PV of Terminal Value (EV/EBITDA)
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Debt Equity Weightage
E/(D+E) @ Enterprise Value 99.85%
D/(D+E) @ Enterprise Value 0.15%
Interest Rate (%) 12%
Tax Rate (@) 15%
WACC Calculation
WACC 16.27%
2016E
177,787 186,677
33,664 35,347
27,043 28,395
(4,223) (4,434)31,266 32,829
6,620 6,951
3,795 3,795
34,091 35,986
(6,274) (6,587)
27,818 29,398
407 407
6
0.40
11,260 -
7% 5%
7% 5%
7% 5%
7% 5%
19% 19%
15% 15%
4% 4%
4% 4%
-16% -16%
Intrinsic Value
Equity Value 183,015
Diluted Shares 407
Intrinsic Value 450
Second Stage Valuation
Terminal Year
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Intrinsic Value
2% 3% 3%
494 511 530
445 458 472
368 377 387
374 381 389
346 352 358
5 5.5 6
684 725 767
673 715 756
624 665 706
653 694 736
644 685 726
arget price of Rs.544/- in
Intrinsic Value
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I was unable to get current beta of company , hence I calculated beta using book method
Input In Blue
Month Stock R Market R Stk R - StkR
Mkt R - MktR
1 3 0.95 4 -2
2 2 12 3 9
3 -5 1 -4 -2
4 -4 1 -2 -2
5 0 4 1 1
6 -4 -3 -3 -6
7 -2 0 -1 -3
8 11 7 12 49 -9 0 -8 -3
10 -16 -6 -15 -9
11 7 3 9 0
12 8 6 9 3
StkR
MktR
n 12 -1.023 2.595
Formula Covsm
Formula 2
m
Date Close Return Date
01-Oct-10 525 2.54% 01-Oct-10 20,261
01-Sep-10 512 1.75% 01-Sep-10 20,069
02-Aug-10 503 -5.35% 02-Aug-10 17,971
01-Jul-10 531 -3.50% 01-Jul-10 17,868
01-Jun-10 551 0.00% 01-Jun-10 17,701
03-May-10 551 -4.24% 03-May-10 16,945
01-Apr-10 575 -2.33% 01-Apr-10 17,559
Beta or
Stk R - Stk R x Mkt R - Mkt R
n-1
(Mkt R - Mkt R)2
n-1
Mindtree Sen
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02-Mar-10 589 10.58% 02-Mar-10 17,528
01-Feb-10 533 -8.73% 01-Feb-10 16,430
04-Jan-10 583 -16.10% 04-Jan-10 16,358
01-Dec-09 695 7.48% 01-Dec-09 17,465
03-Nov-09 647 7.67% 03-Nov-09 16,926
22-Oct-09 601 0.54% 22-Oct-09 15,896
22-Sep-09 598 #DIV/0! 22-Sep-09 16,886
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Covsm 1.16
2
m
Stk R - StkR
x Mkt R - MktR
(Mkt R - MktR)
2
-6 3
26 88
7 3
4 3
1 2
18 31
3 7
51 1920 7
130 74
3 0
30 12
288 248
288 26
11
248 23
11
0.95%
12%
1%
1%
4%
-3%
0%
ex
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7%
0%
-6%
3%
6%
-6%
#DIV/0!
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Profit & Loss A/c
1) Figures for FY 2007-08 are standalone including Audited Balance Sheet
2) For Q1 of 2008-09, I have taken standalone results, and from Q2 all figures are Consolidated
3) I have adjusted Share Count(Basic & Diluted) wherever necessary to align with reported EPS
Balance Sheet(BS)4) 2007-08 figures are standalone, as I have taken standalone figures in Profit & Loss A/c
5) For 2008-09 Figs. For 3M,6M,9M and 12M I have taken standalone figs for Balance Sheet, a
Audited BS is Consolidated.
6) 2009-10 BS is Consolidated
Cash Flow Statement(CFS)
7) I have prepared CFS on yearly basis for simplicity, as I was getting errant figures by breaking
Geographic Revenue
8) I have done some small calculation, for converting USD*wise Geographic revenue into Rs.
as Compnay did not reported consolidated figs. Geographic wise in Rs. terms.( Q1 figs. Are s
by the Company. I took the Consolidated figs. From the fact sheet of respective quarters, an
to that respective quarters.(calculation is below the Geographic revenues break-up figures)
*Despite taking exchange rates for calculation, I was not getting the accurate figs
Segment Revenue
9) Upto Q1 of 2008-09, all figs. are standalone, after that all figs. are consolidated
From FY 09-10, Segment R & D Services and AztecSoft Business is grouped under PE Service
Hence, while calculating YoY & QoQ growth in % for 2009-10, I have grouped R&D Serv. and
Projection Assumptions
11) Share Capital = is projected on as it is/straight line basis
Debt = Assumed that it will be paid in 2010-11, hence not shown in closing balance
Fixed Asset = Detailed working is in Fixed Asset Sheet
Goodwill, Investments & Tax Assets = straight line basis
Sundry Debtors = is calculated by ; Avg. Days Sales O/s * (Projected Revenue/365)
Cash = linked from Cash Flow St.
Loans & Advances = is calculated by ; Avg % of Loans to Revenues * Projected Revenues
Current Liabilities = is calculated by ; Avg % of CL to Cost of Revenues * Projected Cost of Re
Provisions = straight line basis
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2009-10 Annual Report Excerpts
1 As per NASSCOM, Indian IT exports is estimated to grow by 5.5% in F
2 EBITDA margins on our services business is likely to be stable.
3 effective tax rate based on current taxes is about 15.6% as
compared to about 11% in the previous year.
4 NiW form part of PE Services
5 Our NIW, business is developing a ready to brand 3G smart phone an
6 On our services business, based on current trends, we expect that w
than industry growth estimates of 13-15%
7 pg 51 for report
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, including Audited Balance Sheet
by the company, as all figures in the model are in Lacs.
Consolidated Figs. were not provided by the company, however
it into periods/quarters
ise Geographic revenue for consolidated figs, from Q2-2008-09,
tandalone, as consolidated break-up of Geograhic Revenues were not provided
d applied the USD region wise weighted % to total figure of reported Revenues
.
Aztec under PE Services
venues
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Y2010
d IP in the area of cellular infrastructure. We expect to launch these products to the market in Q3/Q4 of 20
will attain growth rates higher
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10-11. Since this is a new initiative, the financial performance of the NIW business would depend onthe
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success of the products when they are launched.If these initiatives are successful, they will greatly enh
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nce our revenues and profitability