Quantum of Solace - breport.myiris.combreport.myiris.com/DCMPL/MAHBRITE_20111219.pdf · Quantum of...

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December 19, 2011

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Quantum of Solace

Analyst: Rahul Jain Associate : Praveen KumarTel : +9122 4096 9754 Tel : +9122 4096 9723E-mail: [email protected] E-mail: [email protected]

USD-INR

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December 19, 2011 2

DOLAT CAPITAL

INDEX

Sector View 3

HCL Tech 11

Infosys 13

KPIT Cummins 15

Mindtree 17

Mphasis 19

OFSS 21

Persistent 23

TCS 25

Tech Mahindra 27

Wipro 29

December 19, 2011 3

DOLAT CAPITAL

Company Rating

Infosys Buy

TCS Buy

Wipro Accumulate

HCL Tech Buy

Tech Mahindra Buy

Mphasis Accumulate

Mindtree Buy

OFSS Buy

Persistent Buy

KPIT Cummins Buy

Quantum of SolaceIT Services stocks has outperformed the broader indices in the recent past(Sep – till date) with a return of 15% as against Sensex return of -4%. Webelieve that the outperformance would widen versus the indices owing tosustained business traction and favorable FX movement (Rupee depreciatedby 1600 bps Since Sep’11). We remain Overweight on the sector taking cuefrom the 2008 financial crisis.

Lead indicators intact: The key US data points such as industrial production,consumer confidence, employment, PMI indicates stable and improving economicsituations which we believe would help Indian IT Services player cover up for riskon slower demand in the European region The S&P 500 corporate earnings havescaled higher than its FY07 peak and are at their all time high. The corporate hasbenefited from outsourcing post 2008 financial crisis and would maintain theirbudgeted spends on IT Offshoring.

Challenges & Solution: We believe that the most of the key operating metricssuch as strong client wins, robust employee additions, deal/pipeline commentaryby the management suggest sustained traction for Indian IT players, in the ensuingquarters. Our sensitivity analysis suggests that the risk on earnings owing torelatively slower demand can be covered up through margin uptick on account ofsharp depreciation in Rupee. What gives confidence is the fact that the Indian ITServices companies continues to remain the first choice of outsourcing (cost savingof 40%/60% versus East Europe and US Tier II Cities) and would maintain tractionthrough incremental market share wins.

Cognizant 8k filing: Cognizant made its 8k filing with the SEC on award ofperformance units to its senior executives for 2012 with a base level growth of18.5% (20% in CY11). Indian IT services vendors have historically trailedCognizant’s growth, the gap has widened over the years. Our estimates for FY13incorporate a growth of high teens for most of the vendors, which we believe isachievable on our current outlook. Indian players have shown tremendous marginresilience in past and would continue to cover up pricing challenges throughmanaging various operating metrics – higher fix pricing contract and increasedoffshore efforts.

Latent demand: We believe even if macroeconomic situations worsens theearnings may get impacted for a quarter or two but would result in creation ofstrong latent demand as it happened in 2008. We feel that Indian players wouldbenefit from the dire state of European IT Services vendors as evident from themarket share win by Indian players. Indian Top Tier companies marked a strong5.8% Revenue CAGR during Q1FY10-Q2FY12 (7.2% – Q1FY07-Q2FY09).

Ownership to increase: Institutional ownership in IT stocks declined post financialcrisis in FY09 (except TCS) and then gradually recovered over FY10-11. Currently,the ownership has been largely stable since last few quarters owing to impendingmacro-concerns. We believe that the sector is under-owned at the moment andwould see incremental investor interest in view of strong financial performanceversus rest of BSE500 Q1FY10-Q2FY12 top line growth (CQGR) of 2.8% andfavorable Forex realizations.

Preferred pick: We maintain our Overweight stance on the sector as Indian ITplayers would continue to benefit from proxy Blue Ocean opportunity createdthrough incremental offshoring. We maintain TCS and Infosys as our preferredpick among the Tier I stocks. We also like OFSS, Tech Mahindra and KPITCummins in the small/mid Tier companies owing to their growth expectancy andlow downside risk.

December 19, 2011 4

DOLAT CAPITAL

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CNX IT BSE Sensex USD-INR

CNX IT - Sensex

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CNX IT Index relative performance with SENSEX and INR/USD

Source: Bloomberg, Dolat Research

Index relative performance

DOW Jones - Sensex

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December 19, 2011 5

DOLAT CAPITAL

050

100

150200

250300

350

400450

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Indian IT Services Global IT Services

2.0%2.6%

3.3%4.1%

5.0%

5.9% 6.2%6.9%

400

500

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FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY110%

1%

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6%

7%

8%

Global IT Services (bn USD) Market Share of Indian IT Services

Expanding Market Share of Indian IT Services players

Source: Gartner, Nasscom, Dolat Research

Relative Performance of Indian IT Services Versus Global IT Services

Source: Gartner, Nasscom, Dolat Research

Tier 1 stocks: Revenue CQGR (pre-post crisis)

Source: Company, Dolat Research* Pre Crisis (Q1FY07-Q2FY09); Post crisis (Q1FY10-Q2FY12)

December 19, 2011 6

DOLAT CAPITAL

Total Net Additions

0

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FY 06 FY 07 FY 08 FY 09 FY 10 FY 11

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Operating Cost per FTE (USD '000s per annum)

8357

3635

3030

28

2520

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0 20 40 60 80 100

US Tier IISao Paulo

PragueBudapestMonterrey

BucharestShanghai

Kuala LampurManila

Bangalore

India continues to remain lowest cost and most preferred destination foroutsourcing

Source: Nasscom, Dolat Research* Operating Cost per FTE for transactional BPO

Lower exposure to continental Europe

FY06 FY11Revenues from Europe (USD bn) 5.9 17.0Share in total 25.1% 28.8%Rev from Continental Europe (USD bn) 2.3 6.8Share in total 9.8% 11.6%CAGR over FY06-11 24%

Source: Nasscom, Dolat Research

Robust employee additions

Source: Company, Dolat Research* calculated for our coverage universe

December 19, 2011 7

DOLAT CAPITAL

5 Year Revenue CAGR (%)

4.2

2.5

9.9

12.8

0

2

4

6

8

10

12

14

Capgemini Atos Origin Logica IndraSistemas

Revenue Growth (CAGR %)

2.5

18.3

6.37.3

0

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18

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IBM Oracle HP Accenture

01020304050607080

90100

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S&P 500 Quarterly EPS reached all time high


Source: Company, Dolat Research


S&P 500 earnings gaining momentum – Rolling 4quarter trailing


Employee Growth (CAGR %)

21.0

15.8

3.7

13.9

0

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15

20

25

IBM Oracle HP Accenture

5 Year Employee CAGR (%)18.2 17.6

6.6

14.8

02468

10

121416

1820

Capgemini Atos Origin Logica IndraSistemas

Performance of Global IT Giants

Dire state of European IT Services vendors

December 19, 2011 8

DOLAT CAPITAL

Ownership (FII+DII)

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30

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60

Infosys HCL Tech KPIT Cummins NIIT Tech

%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 Q2FY12

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25

TCS Wipro OFSS

%

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 Q2FY12

Ownership Trends

Source: BSE, Dolat Research

Ownership Trends

Source: BSE, Dolat Research

Source: BSE/Bloomberg, Dolat Research

December 19, 2011 9

DOLAT CAPITAL

Hedge Positions

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Infosys TCS Wipro HCL Tech

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FY08 Q2FY12

Hedged & no speculation


Hedge Positions

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Mphasis Tech M Mindtree KPIT NIIT Tech e-Clerx Persistent

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Other Income Yield

Year Infosys TCS Wipro HCL Tech Mphasis Tech M OFSS Mindtree Persistent KPIT NIIT TechFY 06 6.0 1.5 3.1 0.5 1.8 5.2 4.3 1.9 7.7 2.9 1.5FY 07 6.1 3.2 4.6 1.1 5.2 7.9 5.3 1.9 3.2 4.4 2.2FY 08 10.3 5.2 5.5 2.9 5.3 7.2 5.9 7.2 4.5 2.8 2.1FY 09 10.4 6.6 6.9 6.2 3.5 2.5 7.1 5.0 4.8 2.5 3.0FY 10 7.4 3.7 6.0 5.7 3.7 0.7 4.3 3.1 1.9 3.0 2.2FY 11 7.8 4.6 9.8 6.4 5.7 0.3 6.3 4.3 4.1 3.0 3.2Source: Company, Dolat Research

Other Income Contribution to PBT

Year Infosys TCS Wipro HCL Tech Mphasis Tech M OFSS Mindtree Persistent KPIT NIIT TechFY 06 8.9 3.1 6.5 12.3 (3.8) 12.2 11.5 6.6 5.6 3.5 11.2FY 07 8.9 4.5 10.6 29.6 (6.2) 1.0 9.5 22.5 3.7 5.6 5.6FY 08 14.4 8.7 10.8 12.8 6.7 25.0 6.8 4.0 28.8 29.5 13.8FY 09 12.4 4.1 3.6 12.4 4.9 (3.3) 6.6 29.6 4.4 (69.7) 19.5FY 10 11.8 3.3 7.0 6.9 9.0 7.9 18.7 18.5 9.1 (24.0) 15.4FY 11 13.0 5.5 11.2 11.7 17.8 13.4 9.4 24.8 22.9 2.3 8.1Source: Company, Dolat Research

December 19, 2011 10

DOLAT CAPITAL

IBM

HP

Accenture

Oracle Infosys

TCSWipro

HCL Tech

CognizantCapgemini

Atos Origin

Logica

Indra Sistemas

-5

0

5

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Revenues CAGR (FY06-11) %

Em

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-11)

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Coverage universe - Valuation Matrix

Particulars CMP Target Upside Sales CAGR % PAT CAGR % EPS (`̀̀̀̀) PE Ratio(`̀̀̀̀) (`̀̀̀̀) (%) FY11-FY13E FY11-FY13E FY11 FY12E FY13E 1Yr.FWD Target

Infosys 2722 3300 21 20.4 17.5 119.7 139.5 165.1 16.5 20TCS 1151 1416 23 25.4 20.2 44.5 52.1 64.4 17.9 22Wipro 403 452 12 17.0 13.8 21.8 23.8 28.2 14.3 16HCL Tech 417 502 20 21.2 25.3 24.6 31.8 38.6 10.8 13Tech Mahindra 565 853 51 13.9 36.1 51.2 81.5 94.8 6.0 9Mphasis 337 392 16 14.8 9.1 39.1 40.4 46.6 7.2 9Mindtree 403 508 26 22.1 48.6 25.6 46.3 56.5 7.1 9OFSS 1975 2662 35 20.9 8.7 132.4 134.4 156.6 12.6 17Persistent 297 368 24 25.7 8.1 34.9 34.2 40.8 7.3 9KPIT 150 201 34 25.0 36.6 10.8 13.8 20.1 7.5 10


Global IT Services performance mapping

Global IT Valuation Matrix

Bloomberg Code Price (USD) Market Cap (USD bn) PE Sales (USD mn) PAT(USD mn) EPSIBM IBM:US 183.8 216 16.2 103333 13867 11.3HP HPQ:US 25.8 51 7.8 127245 7074 3.3Oracle ORCL:US 29.2 147 17.5 35662 8547 1.7Accenture ACN:US 54.2 35 16.0 25507 2369 3.4Cognizant CTSH:US 65.5 20 22.2 6128 906 2.9Capgemini* CAP:FP 24.2 4 16.5 9512 228 1.5Atos Origin* ATOS:FP 33.2 3 12.2 4952 199 3Logica** LOG:LN 59.6 1 6.1 3880 159 9.8Indra Sistemas* IDR SM 9.9 2 6.5 2572 193 1.5

* - EURO** - GBP



December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 1358mn

Face Value ` 2/-

Market Cap ` 289bn

USD 5.4bn

52 week High / Low ` 528 / 360

Avg. Volume (no) 736,684

BSE Code 532281

NSE Symbol HCLTECH

Bloomberg Code HCLT IN

Reuters Code HCLT.BO

Shareholding Pattern as on Sept’11 (%)

Promoter 64.3

MF/Banks/FIs 6.7

FIIs 20.5

Public / Others 8.5

HCL Technologies

CMP: `̀̀̀̀ 412 Target Price: `̀̀̀̀ 500 BuyRobust deal win: HCL Tech has recorded best revenue growth postfinancial crisis at CQGR of 6.4% over Q1FY10-Q1FY12 ahead of other TierI peers. The growth engines for HCL has fired well post the financial crisisas it continued to invest on sales/lateral talent resulting in sustained winmomentum. HCL Tech is the only large players that has clocked fastergrowth post crisis as compared for pre crisis (Q1FY07-Q2FY09) – 5.6%.

Balanced and broad based growth: The company has marked broadbased growth through its balanced (lower dependency on any Geography/vertical/service line) and distinguished business strategy. It has been ableto scale up on its client ticket size over last 12 quarters – currently serves37 20mn+ client as compared for just 15 in CY2008.

Profit lags topline growth: Though the HCL Tech has performed superiorto its peer on topline growth it has grossly underperformed on operatingprofit growth. HCL Tech has clocked a revenue growth of 23% over FY09-11; however the EBITDA grew by just 9% during the same period. Webelieve the margins would not improve in near term and would remain inhigh teens (17-18%) as it continues its reliance on lateral hiring.

Outlook: We believe that the aggressive approach by HCL Tech has resultedin strong topline growth in the recent past but we believe the company wouldgo slow on deals once it achieve a critical mass of USD 5bn in sales. Tillthat time we believe that the slow growth in earnings would not lead to anyre-rating of the stock.

· Valuation: We have built in Revenue/PAT CAGR of 21%/25% for FY11-13E. We maintain our BUY rating with a target price of Rs 500, valued at13x of its FY13E earnings.

HCL Tech 11

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12Revenues (USD mn) 652 685 738 804 864 914 963 1002QoQ(%) 3.4 5.1 7.6 9.0 7.5 5.8 5.3 4.1Revenues 30,325 30,757 34,254 36,115 38,884 41,382 42,995 46,513QoQ(%) 0.0 1.4 11.4 5.4 7.7 6.4 3.9 8.2EBITDA 6,386 6,073 6,381 5,876 6,305 7,165 7,942 7,949Q0Q(%) -7.3 -4.9 5.1 -7.9 7.3 13.6 10.8 0.1PAT 2967 3439 3418 3225 3970 4682 5105 4967Q0Q(%) -7.3 15.9 -0.6 -5.6 23.1 17.9 9.0 -2.7

ProfitabilityEBITDA Margin (%) 21.1 19.7 18.6 16.3 16.2 17.3 18.5 17.1PAT Margin(%) 9.8 11.2 10.0 8.9 10.2 11.3 11.9 10.7Tax Rate (%) 18.7 18.3 6.9 19.9 20.5 21.7 25.0 25.8

Key Operating MetricsVolume Growth (%) 2.9 1.4 NA 7.4 11.0 4.8 4.0 5.1Net Employee Additions 1245 2441 6428 5661 2049 1153 3626 3464Client Addition 36 39 51 48 46 58 70 66Utilisation (%) 76.4 76.2 72.9 70.1 70.1 71.9 72.5 69.7

Financials (US GAAP)Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`̀̀̀̀) growth(%) PER(x) ROANW(%) ROACE(%)FY10 125,650 18.6 25,729 20.5 13,027 10.4 19.2 0.7 21.4 20.5 20.3FY11 159,376 26.8 27,548 17.3 17,246 10.8 24.6 27.9 16.7 22.3 21.1FY12E 199,018 24.9 35,862 18.0 22,300 11.2 31.8 29.3 12.9 24.1 25.4FY13E 234,292 17.7 39,408 16.8 27,057 11.5 38.6 21.3 10.7 24.4 24.0Figure in ` mn

HCL Tech relative to Sensex

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December 19, 2011

DOLAT CAPITAL

HCL Tech 12

INCOME STATEMENT `̀̀̀̀ mnParticulars June10 June11 June12E June13ENet Sales 125,650 159,376 199,018 234,292Total Income 125,650 159,376 199,018 234,292Total Expenditure 99,921 131,828 163,156 194,884Cost of Revenues 81,957 108,302 133,550 159,251SG&A 17,964 23,526 29,606 35,633EBIDTA (Excl. Other Income) 25,729 27,548 35,862 39,408EBIDTA (Incl. Other Income) 20,440 27,004 35,881 39,808Depreciation 5,010 4,933 5,764 6,650EBIT 20,719 22,615 30,098 32,758Other Income (5,289) (544) 19 400PBT 15,430 22,071 30,117 33,158Tax Expenses 2,403 4,825 7,817 6,101Net Profit 13,027 17,246 22,300 27,057Minority Interest (2) 0 0 0Net Profit 13,025 17,246 22,300 27,057

BALANCE SHEETParticulars June10 June11 June12E June13ESources of FundsEquity Capital 1,358 1,358 1,358 1,358Other Reserves 69,010 82,987 99,728 119,637Net Worth 70,368 84,345 101,086 120,995Secured Loans 34,018 21,240 21,240 21,240Unsecured Loans 0 6,887 6,437 5,987Loan Funds 34,018 28,127 27,677 27,227Total Capital Employed 104,386 112,472 128,763 148,222

Applications of FundsNet Block 28,126 32,557 35,793 41,743Other Non Current Assets 43,122 41,878 41,878 41,878Investments 8,527 2,780 2,780 2,780Current Assets, Loans & AdvancesSundry Debtors 30,496 34,065 34,907 46,907Cash and Bank Balance 16,599 22,409 37,122 41,844Other Current Assets 8,845 12,546 12,546 12,546sub total 55,940 69,020 84,575 101,297Less : Current Liabilities & ProvisionsCurrent Liabilities 31,329 33,763 36,263 39,476Net Current Assets 24,611 35,257 48,312 61,821

Total Assets 104,386 112,472 128,763 148,222E-estimates

IMPORTANT RATIOSParticulars June10 June11 June12E June13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 20.5 17.3 18.0 16.8EBIT Margin 16.5 14.2 15.1 14.0Tax/PBT 15.6 21.9 26.0 18.4Net Profit Margin 10.4 10.8 11.2 11.5

(B) As Percentage of Net SalesCost of revenues 65.2 68.0 67.1 68.0SG&A 14.3 14.8 14.9 15.2

(C) Measures of Financial StatusNet ‘Debt / Equity (x) 0.2 0.1 (0.1) (0.1)Debtors Period (days) 89 78 64 73Fixed Assets Turnover (x) 1.8 2.1 2.6 2.8Working Capital Turnover (x) 5.1 4.5 4.1 3.8Non Cash Working Capital (` Mn) 8,012 12,848 11,190 19,977

(D) Measures of InvestmentEPS (`) 19.2 25.1 32.5 39.4CEPS ( )̀ 26.1 31.6 40.0 48.1DPS (`) 3.9 6.7 6.8 8.7Dividend Payout (%) 24.3 31.9 24.9 26.4Book Value (`) 103.9 122.7 147.1 176.1RoANW (%) 20.5 22.3 24.1 24.4RoACE (%) 15.5 20.4 25.0 23.9RoAIC (%) (Excl Cash & Invest.) 20.0 26.5 34.2 34.5

(E) Valuation RatiosCMP (`) 412 412 412 412P/E (x) 21.4 16.4 12.7 10.5Market Cap. ( ̀Mn.) 285,848 289,487 289,487 289,487MCap/ Sales (x) 2.3 1.8 1.5 1.2EV (` Mn.) 294,740 292,425 277,262 272,090EV/Sales (x) 2.3 1.8 1.4 1.2EV/EBDITA (x) 11.5 10.6 7.7 6.9P/BV (x) 4.0 3.4 2.8 2.3Dividend Yield (%) 0.9 1.6 1.6 2.1

E-estimates

CASH FLOWParticulars June10 June11 June12E June13EProfit before tax 14,724 22,071 30,117 33,158Depreciation & w.o. 4,181 4,933 5,764 6,650Net Interest Expense 487 0 0 0Direct taxes paid (3,351) 4,825 7,817 6,101Chg. in Working Capital 1,706 10,134 6,500 8,787Other 164(A) CF from Operating Activities 17,912 41,963 34,564 42,494Capex {Inc./ (Dec.) in FA n WIP} (6,828) 4,431 9,000 12,600Inc./ (Dec.) in Investments (4,891) (5,747) 0 0Other 1,578 0 0 0(B) CF from Investing Activities(10,141) (1,316) 9,000 12,600Issue of Equity/ Preference 1,040 0 0 0Inc./(Dec.) in Debt (3,753) (5,891) (450) (450)Interest exp net (1,413) 0 0 0Dividend Paid (Incl. Tax) (3,152) (5,500) (5,559) (7,148)Fx differences 298 0 0 0(C) Cash Flow from Financing (6,980) (11,391) (6,009) (7,598)Net Change in Cash 791 29,256 37,555 47,496Opening Cash balances 4,043 4,833 34,089 71,644Closing Cash balances 4,833 34,089 71,644 119,140Deposits with financial institutions-11766 11680 34522 77296E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15490

NSE Nifty 4652

Scrip Details

Equity ` 2860mn

Face Value ` 5/-

Market Cap ` 1567bn

USD 30bn

52 week High / Low ` 3494 / 2169

Avg. Volume (no) 1,243,630

BSE Code 500209

NSE Symbol INFY

Bloomberg Code INFO IN

Reuters Code INFY.BO


Promoter 16.0

MF/Banks/FIs 10.7

FIIs 36.7

Public / Others 36.6

Infosys

CMP: `̀̀̀̀ 2739 Target Price: `̀̀̀̀ 3300 Buy

Infosys 13

Financials and Key Operating metrics

Particulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 1232 1296 1395 1496 1585 1602 1671 1746QoQ(%) 6.7 5.2 7.6 7.3 5.9 1.1 4.3 4.5Revenues 57410 59440 61980 69470 71060 72500 74850 80990QoQ(%) 2.8 3.5 4.3 12.1 2.3 2.0 3.2 8.2EBITDA 20380 20220 17550 20980 21470 21020 19520 22810Q0Q(%) 5.4 -0.8 -13.2 19.5 2.3 -2.1 -7.1 16.9PAT 15820 16170 14880 17370 17800 18180 17220 19060Q0Q(%) 2.7 2.2 -8.0 16.7 2.5 2.1 -5.3 10.7


Key Operating MetricsVolume Growth (%) 6.1 5.2 7.6 7.2 3.1 -1.4 4.0 4.5Pricing Growth (%) 1.1 -1.5 -1.6 3.2 1.7 2.5 1.2 0.5Net Employee Additions 4429 3914 1026 7646 5311 3041 2740 8262Client Addition 32 47 38 27 40 34 26 45Utilisation (%) 68 69.2 73.5 75.2 72.7 67.7 69.6 70.6Financials (IFRS)

Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(Rs) growth(%) PER(x) ROANW(%) ROACE(%)FY10 227,420 4.8% 78,610 34.6 62,660 27.6 109.7 4.5 25.0 30.3 37.4FY11 275,010 20.9% 89,680 32.6 68,350 24.9 119.7 9.1 22.9 27.9 37.7FY12E 335,249 21.9% 94,712 28.3 79,704 23.8 139.5 16.6 19.6 28.2 39.4FY13E 398,631 18.9% 112,940 28.3 94,311 23.7 165.1 18.3 16.6 28.0 39.1Figure in Rs.mn

Strategy Revisited: The Company has redesigned its vertical/service lineclassification and clustered them into three prong strategic lines – BusinessTransformation, Business Operation and Innovation. The strategy wouldfructify in the ensuing quarter.

Tactical sales move: The company has started chasing smaller deals andis looking at Global 2000 companies to widen its market. The strategy wasintroduced tactically in view of the granulation of the deal size witnessed inCY11. Gartner study suggests threefold rise in sub-USD 50mn deals andsignificant decline in the deals valued over USD 100mn.

Conservative hedge policy: The company has most conservative hedgestrategy and covers for about just 4-5month net exposure; which wouldensure sustained higher revenue realization and margin gains in the comingquarters.

Outlook: the company has clocked a 20% growth in Revenues (USD) inthe first half and is likely to beat its full year guidance of 17-19% growth forFY12. Notably Infosys underperformance has been on account of a fewselect accounts which have ramped down over last few quarters. We expectthis to normalize going forward and thus the revenue growth would matchthe peers.

Valuation: We maintain our positive view on the stock despite the cautiousmanagement commentary owing to its re-aligned sales strategy and potentialof margin resilience/enhancement. We expect a Revenue/EBIT CAGR of20%/17% over FY11-13E and expect it to outperform the broader indices.We maintain our Buy rating on the stock with a target price of Rs 3300,valued at 20x of its FY13E earnings.

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December 19, 2011

DOLAT CAPITAL

Infosys 14

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 227,420 275,010 335,249 398,631Total Income 227,420 275,010 335,249 398,631Total Expenditure 148,810 185,330 240,536 285,691Employee Expenses 128,100 159,480 197,446 234,331SG&A 20,710 25,850 43,090 51,360EBIDTA (Excl. Other Income) 78,610 89,680 94,712 112,940EBIDTA (Incl. Other Income) 87,950 101,790 111,362 131,651Depreciation 9,050 8,540 0 0EBIT 69,560 81,140 94,712 112,940Other Income 9,340 12,110 16,650 18,710PBT 78,900 93,250 111,362 131,651Extra Ordinary Exps/(Income) (90) 0 0 0Tax Expenses 16,810 24,900 31,659 37,340Net Profit before MI 62,180 68,350 79,704 94,311Minority Interest 480 0 0 0Net Profit 62,660 68,350 79,704 94,311

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 2,860 2,860 2,860 2,860Share premium 30,270 30,620 30,620 30,620Other Reserves 197,360 226,280 272,665 333,599Net Worth 230,490 259,760 306,145 367,079Deferred Tax Liability (2,000) (3,210) 0 0

Total Capital Employed 228,490 256,550 306,145 367,079

Applications of FundsGross Block 78,390 85,010 93,010 105,010Less: Accumulated Depreciation 28,930 32,660 32,660 32,660Net Block 49,460 52,350 60,350 72,350Capital Work in Progress 4,090 5,250 12,250 25,250Investments 37,120 1,440 1,440 1,440Current Assets, Loans & AdvancesSundry Debtors 34,940 46,530 56,030 69,030Cash and Bank Balance 105,560 150,950 172,585 195,094Loans and Advances 41,870 53,200 54,450 55,950Other Current Assetssub total 182,370 250,680 283,065 320,074Less : Current Liabilities & ProvisionsCurrent Liabilities 44,550 53,170 50,960 52,035sub total 44,550 53,170 50,960 52,035Net Current Assets 137,820 197,510 232,105 268,039


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 34.6 32.6 28.3 28.3EBIDTA Margin (incl. O.I.) 38.7 37.0 33.2 33.0EBIT Margin 43.7 42.0 41.1 41.2Tax/PBT 21.3 26.7 28.4 28.4Net Profit Margin 27.6 24.9 23.8 23.7

(B) As Percentage of Net SalesEmployee Expenses 56.3 58.0 58.9 58.8SG&A 9.1 9.4 12.9 12.9

(C) Measures of Financial StatusNet ‘Debt / Equity (x) (0.5) (0.6) (0.6) (0.5)Debtors Period (days) 57.4 67.6 67.0 68.7Fixed Assets Turnover (x) 4.2 4.8 4.6 4.1Working Capital Turnover (x) 1.7 1.4 1.4 1.5Non Cash Working Capital (` Mn) 32,260 46,560 59,520 72,945

(D) Measures of InvestmentEPS (`) (excl EO) 109.4 119.5 139.3 164.9EPS (`.) 109.5 119.5 139.3 164.9CEPS (`.) 125.4 134.4 139.3 164.9DPS (`) 25.1 60.2 50.0 50.0Dividend Payout (%) 26.7 58.7 41.8 35.4Profit Ploughback (%) 73.3 41.3 58.2 64.6Book Value (`) 403.0 454.1 535.2 641.7RoANW (%) 30.3 27.9 28.2 28.0RoACE (%) 38.5 38.5 39.6 39.1RoAIC (%) (Excl Cash & Invest.) 63.8 57.1 51.3 87.0

(E) Valuation RatiosCMP (`) 2,739 2,739 2,739 2,739P/E (x) 25.0 22.9 19.7 16.6Market Cap. ( ̀Mn.) 1,566,708 1,566,708 1,566,708 1,566,708MCap/ Sales (x) 6.9 5.7 4.7 3.9EV (` Mn.) 1,424,028 1,414,318 1,392,683 1,370,174EV/Sales (x) 6.3 5.1 4.2 3.4EV/EBDITA (x) 18.1 15.8 14.7 12.1P/BV (x) 6.8 6.0 5.1 4.3Dividend Yield (%) 0.9 2.2 1.8 1.8

CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 78,990 93,250 1,113,622 1,316,504Depreciation & w.o. 9,050 8,540 0 0Net Interest Expense (8,810) (11,540) (166,500) (187,100)Direct taxes paid (17,530) (28,460) (316,587) (373,399)Chg. in Working Capital (570) (14,280) (87,500) (124,250)Other 740 10 0 0(A) CF from Opt. Activities 61,870 47,520 543,035 631,755Capex {Inc./ (Dec.) in FA WIP} (8,310) (13,080) (150,000) (250,000)Inc./ (Dec.) in Investments (36,980) 35,580 0 0Other 9,260 11,480 0 0(B) CF from Investing Activities(36,030) 33,980 (150,000) (250,000)Issue of Equity/ Preference 890 240 0 0Interest exp net 0 0 (166,500) (187,100)Dividend Paid (Incl. Tax) (15,740) (36,640) (333,190) (333,762)Exchange differences (310) 450 0 0(C) Cash Flow from Financing (15,160) (35,950) (499,690) (520,862)Net Change in Cash 10,680 45,550 (106,655) (139,107)Opening Cash balances 110,430 121,110 1,509,500 1,725,845Closing Cash balances 121,110 166,660 1,402,845 1,586,738Deposits with Financial Inst. 15,550 15,710 1,230,261 0E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity `176mn

Face Value ` 2/-

Market Cap ` 13bn

USD 293mn

52 week High / Low ` 199 / 130


BSE Code 532400

NSE Symbol KPIT

Bloomberg Code KPIT IN

Reuters Code KPIT.BO


Promoter 26.7

MF/Banks/FIs 16.7

FIIs 22.2


KPIT Cummins


Niche expertise: The Company is likely to benefit from its focused approachon its niche strength in the automotive IT. It has been ranked ahead of TierI IT players for its domain-specific competences in the automotive industryby independent researcher Ronald Berger, among most third party serviceproviders

Strong Enterprise Solution capabilities: KPIT is targeting a total of USD100mn practice on the Oracle platform in the manufacturing sector throughconsulting edge, domain expertise and references (through the acquisitionof SYSTIME and CPG).

Strong deal inflow in SAP SBU: KPIT has strategically focused its SAPbusiness on the SME market majority in the US, an opportunity expected tobe worth billions of dollars (won nearly USD 50mn worth of business in thepast 60 days).

‘Revolo’ution on the cards: KPIT is on a trail phase for multiple batterymanufacturers in India, China, Europe and the US for both — lead acid andlithium ion varieties. Commercial launch is expected in Q3 FY13.Negotiations with OEMs and fleet operators (retrofitter) are on track. Thefavorable outcome in the ongoing negotiations to bring down the exciseduty on hybrid vehicles will help absorb product cost substantially.

Outlook: We expect it to deliver upper end of its annual Revenue/earningsguidance for FY12E despite the divestment of its BFS division (3% impacton revenues). Operating margins to pick up going forward as it gainsefficiency through integration of Systime.

Valuation: We expect a Revenue/PAT CAGR of 25%/35% for FY12/FY13E.We value stock at 10x of FY13E EPS, implying a target price of Rs. 204(+23% from current levels)

KPIT Cummins 15

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 39.48 42.67 45.04 50.74 60.37 65.51 70.09 70.38QoQ(%) 8.6 8.1 5.6 12.7 19.0 8.5 7.0 0.4Revenues 1848 1971 2006 2349 2737 2972 3161 3250QoQ(%) 4 7 2 17 17 9 6 3EBITDA 394 386 339 364 385 433 397 444Q0Q(%) -16.0 -1.8 -12.2 7.3 5.8 12.3 -8.3 11.7PAT 214 208 194 237 251 263 241 352Q0Q(%) 1 -3 -7 23 6 5 -8 46


Key Operating MetricsVolume Growth (%) NA NA 3.0 8.0 NA 10.0 4.0 5.0Net Employee Additions 312 169 426 609 276 285 70 -40Client Addition 2 2 3 3 5 3 4 4Utiliastion (%) 68 68 66 64 65 67 68 70

FinancialsYear Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`) growth(%) PER(x) ROANW(%) ROACE(%)FY10 7,316 -7.8 1,614 22.1 857 11.7 10.9 29.5 13.7 31.1 27.0FY11 10,065 37.6 1,522 15.1 946 9.4 10.8 -1.3 13.9 19.1 18.8FY12E 13,074 29.9 1,867 14.3 1,214 9.3 13.8 28.3 10.9 18.4 20.5FY13E 15,715 20.0 2,481 15.8 1,765 11.2 20.1 45.4 7.5 22.1 26.3Figure in ` mn

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December 19, 2011

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KPIT Cummins 16

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 7,316 10,065 13,074 15,690Other Operational income 0 0 0 26Total Income 7,316 10,065 13,074 15,715Total Expenditure 5,702 8,543 11,207 13,235Employee Expenses 3,972 5,364 6,948 8,176Other COR 118 1,073 1,602 1,903S&M Expenses 664 762 1,019 1,172G&A Expenses 948 1,343 1,638 1,966Revolo Expenses 0 0 0 17EBIDTA (Excl. Other Income) 1,614 1,522 1,867 2,481EBIDTA (Incl. Other Income) 1,362 1,548 1,960 2,636Depreciation 308 411 430 420EBIT 1,306 1,111 1,437 2,061Interest paid 27 34 30 25Other Income (253) 26 92 155Profit Before Tax & EO Items 1,026 1,103 1,499 2,191Extra Ordinary Exps/(Income) 0 0 0 0Tax Expenses 169 155 333 492Net Profit 857 948 1,166 1,699Minority Interest 0 (1) 48 66Net Profit 857 946 1,214 1,765

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 157 176 176 176Share premium 751 1,945 1,945 1,945Other Reserves 2,963 3,911 5,032 6,695Net Worth 3,871 6,032 7,153 8,815Minority Interest 0 9 0 0Secured Loans 1,108 1,105 1,105 1,105Unsecured Loans 0 0 (500) (800)Loan Funds 1,108 1,114 605 305Deferred Tax Liability 51 55 0 0


Applications of FundsGross Block 3,464 4,241 4,741 5,341Less: Accumulated Depreciation 1,278 1,678 2,108 2,528Net Block 2,186 2,563 2,633 2,813Capital Work in Progress 286 317 317 317Investments 747 477 477 677Current Assets, Loans & AdvancesSundry Debtors 1,388 2,526 3,126 3,846Cash and Bank Balance 1,052 2,096 2,288 2,901Loans and Advances 677 1,097 1,147 1,197sub total 3,117 5,719 6,561 7,944Less : Current Liabilities & ProvisionsCurrent Liabilities 1,076 1,636 2,230 2,630Provisions 230 238 0 0sub total 1,306 1,875 2,230 2,630Net Current Assets 1,811 3,844 4,331 5,314


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 22.1 15.1 14.3 15.8EBIDTA Margin (incl. O.I.) 18.6 15.4 15.0 16.8Interest / Sales 0.4 0.3 0.2 0.2Gross Profit Margin 45.7 46.7 46.9 48.0Net Profit Margin 0.1 0.1 0.1 0.0

(B) As Percentage of Net SalesEmployee Expenses 54.3 53.3 53.1 52.0Other COR 1.6 10.7 12.3 12.1S&M Expenses 9.1 7.6 7.8 7.5G&A Expenses 13.0 13.3 12.5 12.5

(C) Measures of Financial StatusNet ‘Debt / Equity (x) 0.0 (0.2) (0.2) (0.3)Average Cost Of Debt (%) 2.5 3.1 5.0 8.2Debtors Period (days) 66 106 99 98Fixed Assets Turnover (x) 3.0 3.5 4.4 5.0Working Capital Turnover (x) 4.0 2.6 3.0 3.0Non Cash Working Capital (` Mn) 759 1,748 2,043 2,413


(E) Valuation RatiosCMP (`) 150 150 150 150P/E (x) 13.7 13.9 10.9 7.5Market Cap. ( ̀Mn.) 11,778 13,179 13,179 13,179MCap/ Sales (x) 1.6 1.3 1.0 0.8EV (` Mn.) 11,087 11,721 11,020 9,907EV/Sales (x) 1.5 1.2 0.8 0.6EV/EBDITA (x) 6.9 7.7 5.9 4.0P/BV (x) 3.0 2.2 1.8 1.5Dividend Yield (%) 0.5 0.7 0.7 0.7E-estimates

CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 1,026 1,103 1,499 2,191Depreciation & w.o. 308 411 430 420Net Interest Expense 27 10Direct taxes paid (213) (249) (333) (492)Chg in Working Capital (169) (690) (350) (370)Other 97 (53) 48 66(A) CF from Operating Activities 1,076 532 1,294 1,815Capex {Inc./ (Dec.) in FA n WIP} (238) (930) (500) (600)Inc./ (Dec.) in Investments (747) 309 0 (200)Other (399) 55(B) CF from Investing Activities (1,383) (565) (500) (800)Issue of Equity/ Preference 27 1,203 0 0Inc./(Dec.) in Debt (37) (52) (500) (300)Interest exp net (68) (42) 0 0Dividend Paid (Incl. Tax) (55) (64) (102) (102)Exchange differences 32 31(C) Cash Flow from Financing (101) 1,075 (602) (402)Net Change in Cash (408) 1,042 192 613Opening Cash balances 1,460 1,052 2,096 2,288Closing Cash balances 1,052 2,094 2,288 2,901E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 400mn

Face Value ` 10/-

Market Cap ` 16bn

USD 303mn

52 week High / Low ` 571 / 321

Avg. Volume (no) 31377

BSE Code 532819

NSE Symbol MINDTREE

Bloomberg Code MTCL IN

Reuters Code MINT.BO


Promoter 24.3

MF/Banks/FIs 8.0

FIIs 18.5


Mindtree


Welcome comeback: Mindtree has reported a Topline/PAT growth of about21%/127% in H1FY12, signaling sharp recovery after the dismal FY11. Thecompany has completely exited the white label product business and isdone with all contingent liabilities and provision on the mobile handsetbusiness.

Strong client/deal win: It has been able to bag several key deals and hasscaled up on its large clients despite the challenges of mass exodus in themid/senior level managers. It has been chasing several deals and addedabout 223 new clients in last 8 quarters negating any risk due to movementof key management personnel.

Margin recovering: It has witnessed sharp recovery in its operating profitfrom the lows of mid-single digit number to 9-10% as it improved on utilization,offshore efforts and rationalization of underutilized resources. Robust growthin the high margin IT Services segment has also resulted in improved portfolioprofitability.

Outlook: The management is confident on the outlook for IT services buthas cautioned on opportunities from the semi-conductor and consumerdevice segments in the coming period. We believe it would gain onprofitability by about 200+ bps in the coming quarter owing to improvedproductivity and declining attrition levels.

Valuation: We expect a revenue/EPS CAGR of 22/49% over FY11-13E asthe company gains from improved demand environment and strong dealpipeline. We believe the stock will see earning/target upgrades and willoutperform in near term. Thus, we maintain our Buy rating on it with arevised target price to ` 510

Mindtree 17

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 70 74 77 82 85 86 93 101QoQ(%) 7.9 5.7 3.4 7.0 3.5 1.2 7.3 9.5Revenues 3318 3444 3487 3844 3848 3912 4131 4567QoQ(%) 5.4 3.8 1.3 10.2 0.1 1.7 5.6 10.6EBITDA 657 632 441 447 449 440 460 588Q0Q(%) -0.3 -3.8 -30.3 1.5 0.4 -2.0 4.5 27.8PAT 538 545 158 232 304 320 345 545Q0Q(%) 7.8 1.3 -70.9 46.7 30.8 5.3 7.8 58.0


Key Operating MetricsVolume Growth (%) 12.8 -0.9 7.0 8.2 -0.1 2.0 6.2 6.1Pricing Growth (%) 1.0 NA 1.5 0.8 3.6 3.6 1.1 3.5Net Employee Additions 677 170 715 572 87 -124 30 1003Client Addition 35 27 31 21 30 39 25 21Utilisation (%) 71 71 71 70 69 71 73 71

FinancialsYear Net Sales growth(%)EBITDA OPM(%) PAT PAT Mg EPS(`̀̀̀̀) growth(%) PER(x) ROANW(%) ROACE(%)FY10 12,960 4.7 2,480 19.1 2,149 16.6 54.8 297.9 7.3 34.2 37.2FY11 15,091 16.4 1,779 11.8 1,017 6.7 25.6 (53.3) 15.7 14.1 18.0FY12E 18,559 23.0 2,414 13.0 1,859 10.0 46.3 80.9 8.7 21.4 25.6FY13E 22,511 21.3 3,297 14.6 2,270 10.1 56.5 22.1 7.1 21.3 26.1Figures in ` mn

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December 19, 2011

DOLAT CAPITAL

Mindtree 18

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 12,960 15,091 18,559 22,511Total Income 12,960 15,091 18,559 22,511Total Expenditure 10,480 13,312 16,145 19,214Cost of Revenues 8,218 10,145 12,363 14,712SG&A 1,114 3,167 3,782 4,502Other Expenses 1,148 0 0 0EBIDTA (Excl. Other Income) 2,480 1,779 2,414 3,297Depreciation 652 712 735 852EBIT 1,828 1,067 1,679 2,446Other Income 770 242 553 350Interest 27 4 1 0PBT 2,571 1,305 2,231 2,796Extra Ordinary Exps/(Income) (25) 0 0 0Tax Expenses 398 288 372 525Net Profit 2,149 1,017 1,859 2,270

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 395 400 400 400Other Reserves 7,718 7,362 9,174 11,375Net Worth 8,114 7,762 9,574 11,775Unsecured Loans 31 46 46 0Loan Funds 31 46 46 0Total Capital Employed 8,144 7,808 9,620 11,775

Applications of FundsGross Block 5,133 5,624 7,424 9,724Less: Accumulated Depreciation 2,521 2,618 3,353 4,205Net Block 2,612 3,006 4,071 5,519Other Non Current Assets 401 28 28 28Investments 1,272 1,112 1,562 2,062Current Assets, Loans & AdvancesSundry Debtors 2,370 2,825 3,275 3,975Cash and Bank Balance 403 459 576 642Loans and Advances 2,068 2,506 2,656 2,856sub total 4,841 5,790 6,507 7,473Less : Current Liabilities & ProvisionsCurrent Liabilities 1,900 1,598 2,548 3,308Provisions 490 530 0 0sub total 2,390 2,128 2,548 3,308Net Current Assets 2,451 3,662 3,959 4,165Misc Expenses 1,407 0 0 0


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 19.1 11.8 13.0 14.6EBIT Margin 14.1 7.1 9.0 10.9Tax/PBT 15.5 22.1 16.7 18.8Net Profit Margin 16.6 6.7 10.0 10.1

(B) As Percentage of Net SalesCost of revenues 63.4 67.2 66.6 65.4SG&A 8.6 21.0 20.4 20.0Provisions & Write Offs 0.2 0.0 0.0 0.0Other Expenses 8.9 0.0 0.0 0.0

(C) Measures of Financial StatusNet ‘Debt / Equity (x) (0.0) (0.1) (0.1) (0.1)Average Cost Of Debt (%) 0.9 0.1 0.0 0.0Debtors Period (days) 66.7 68.3 64.4 64.5Fixed Assets Turnover (x) 4.3 5.0 4.5 4.1Working Capital Turnover (x) 5.3 4.1 4.7 5.4Non Cash W Capital (` Mn) 2,048 3,203 3,383 3,523



CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 2,547 1,304 2,231 2,796Depreciation & w.o. 652 712 735 852Net Interest Expense (24) (65) 554 350Direct taxes paid (436) (533) 372 525Chg in Working Capital 673 (844) (180) (140)Other (1,110) (141) 0 0(A) CF from Operating Activities 2,302 433 2,968 3,332Capex {Inc./ (Dec.) in FA n WIP} (695) (775) (1,800) (2,300)Inc./ (Dec.) in Investments (309) 392 (450) (500)(B) CF from Investing Activities (1,004) (383) (2,250) (2,800)Issue of Equity/ Preference 94 139 0 0Inc./(Dec.) in Debt (1,363) 15 0 (46)Interest exp net (27) (2) (552) (350)Dividend Paid (Incl. Tax) (46) (150) (47) (70)Exchange differences (8) 4 0 0(C) Cash Flow from Financing (1,350) 6 (599) (466)Net Change in Cash (52) 56 119 66Opening Cash balances 455 403 459 578Closing Cash balances 403 459 578 644E-estimates

December 19, 2011

DOLAT CAPITALMphasis

CMP: `̀̀̀̀ 343 Target Price: `̀̀̀̀ 390 Accumulate

Parent trouble continues to concern: Mphasis ended its FY11 (oct end)fiscal with a disappointing performance with a Revenue/PAT growth of 1.2%/-24%. The business challenge at parent HP level has resulted in weakeroutsourcing deals and constant renegotiations on pricing for Mphasis.Revenues from HP declied by 6% during the year resulting in 500bps declinein revenue contribution to 66% in FY11.

Non-Enterprise business to cover some ground: though the businessfrom HP has declined for Mphasis; the company has started doing morebusiness on the Non-enterprise side of business from HP. HP Non-Enterprise segment contributed a mere USD 35mn in FY11 but themanagement expects to achieve USD 100mn mark in FY12. Also its masterservice agreement (pricing renegotiations) will come for renewal in late FY12which would ensure sustained pricing outlook in the current fiscal.

Direct channel continue to drive: Mphasis direct channel (non-HP)segment continues to drive momentum for the company. The segmentclocked 18% revenue growth in FY11 and it has been gaining strengththrough its wide ITO offerings.

Profitability remains the key concerns: We believe the company woulddeliver high mid teen growth in revenues in FY12 but we believe the recoveryin profitability would continue to remain the biggest concern. Operatingmargins have slipped by over 500+ bps in FY11 and would remain staticunless it negotiates its rack rates with parent HP.

Valuations: The stock is trading at an economical PER of 7.2x on its FY13Eearnings; however we believe that the weak business visibility and poorprofitability would remain a concern in the short to medium term. We expectRevenue/PAT CAGR of 15%/9% over FY11-13E and maintain ourAccumulate rating with a target price of ` 390 per share.

Mphasis 19

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 2096mn

Face Value ` 10/-

Market Cap ` 72bn

USD 1356mn

52 week High / Low ` 712 / 277


BSE Code 526299

NSE Symbol MPHASIS

Bloomberg Code MPHL IN

Reuters Code MBFL.BO


Promoter 60.5

MF/Banks/FIs 11.4

FIIs 20.3

Public / Others 7.8

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11Revenues (USD mn) 257 271 276 296 271 282 290 276QoQ(%) 8.9 5.4 1.8 7.2 -8.4 4.1 2.8 -4.8Revenues 11915 11868 12791 13454 12164 12461 12811 13242QoQ(%) 5.2 -0.4 7.8 5.2 -9.6 2.4 2.8 3.4EBITDA 2681 2748 3179 3204 2574 2407 2517 2351Q0Q(%) -9.0 2.5 15.7 0.8 -19.7 -6.5 4.6 -6.6PAT 2682 2672 2712 2840 2267 2173 1948 1830Q0Q(%) 9.5 -0.4 1.5 4.7 -20.2 -4.1 -10.4 -6.1


Key Operating MetricsVolume Growth (%) 15.0 NA NA 4.9 NA 2.6 3.0 4.4Pricing Growth (%) 1.0 1.0 -0.4 0.2 1.4 0.9 -3.7 -3.4Net Employee Additions 2166 1429 1156 253 1069 644 -474 -856Client Addition 19 22 22 22 18 30 27 25Utilisation (%) 74.3 72.9 72.1 71.2 69.9 72.1 71.8 74.5Financials

Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`) growth(%) PER(x) ROANW(%) ROACE(%)FY10 50,365 18.1 12,652 25.1 10,907 21.7 52.0 19.8 6.6 42.8 45.1FY11 50,980 1.2 9,845 19.3 8,218 16.1 39.1 -24.7 8.8 24.0 27.5FY12E 59,892 17.5 11,119 18.6 8,483 14.2 40.4 3.2 8.5 20.3 26.6FY13E 67,236 12.3 12,665 18.8 9,789 14.6 46.6 15.4 7.4 19.8 26.0Figures in ` mn

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Mphasis Sensex

December 19, 2011

DOLAT CAPITAL

Mphasis 20

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 50,365 50,980 59,892 67,236Total Income 50,365 50,980 59,892 67,236Total Expenditure 37,713 41,135 48,773 54,571COR 32,614 36,977 43,083 48,250G&A 2,767 1,839 2,875 3,227S&M 2,331 2,319 2,815 3,093EBIDTA 12,652 9,845 11,119 12,665Depreciation 1,638 1,551 1,908 2,216EBIT 11,014 8,294 9,211 10,449Other Income 1,085 1,801 1,950 2,431Interest 0 49 0 0PBT 12,099 10,046 11,161 12,880Tax Expenses 1,192 1,828 2,679 3,091Net Profit 10,907 8,218 8,483 9,789Net Profit 10,907 8,218 8,483 9,789

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 2,096 2,096 2,096 2,096Share premium 1,669 1,669 1,669 1,669Other Reserves 29,616 37,222 44,846 52,589Net Worth 33,382 40,987 48,611 56,354Unsecured Loans 33 33 33 33Loan Funds 33 33 33 33Total Capital Employed 33,415 41,020 48,644 56,387

Applications of FundsGross Block 12,044 14,544 17,344 20,144Less: Accumulated Depreciation 8,518 10,069 11,977 14,192Net Block 3,526 4,475 5,367 5,951Capital Work in Progress 627 1,127 1,327 1,527Investments 9,612 11,612 15,112 18,612Current Assets, Loans & AdvancesSundry Debtors 10,814 12,564 14,214 15,864Cash and Bank Balance 7,549 9,705 10,857 12,435Loans and Advances 7,740 8,440 9,240 10,040Other Current Assets 201 451 701 951sub total 26,304 31,160 35,012 39,290Less : Current Liabilities & ProvisionsCurrent Liabilities 9,603 10,303 11,123 11,943Net Current Assets 16,701 20,857 23,889 27,346Misc Expenses 2,949 2,949 2,949 2,949


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginGross Profit Margin 74.9 80.7 81.4 81.2EBIDTA Margin 25.1 19.3 18.6 18.8Tax/PBT 9.8 18.2 24.0 24.0Net Profit Margin 21.7 16.1 14.2 14.6

(B) As Percentage of Net SalesCOR 64.8 72.5 71.9 71.8G&A 5.5 3.6 4.8 4.8S&M 4.6 4.5 4.7 4.6

(C) Measures of Financial StatusNet ‘Debt / Equity (x) 0.2 0.2 0.2 0.2Debtors Period (days) 80.2 90.5 86.6 86.1Fixed Assets Turnover (x) 0.2 0.3 0.3 0.3Working Capital Turnover (x) 0.3 0.4 0.4 0.4Non Cash Working Capital (` Mn) 9,152 11,152 13,032 14,912

(D) Measures of InvestmentEPS (`) (excl EO) 49.2 36.0 40.4 46.6EPS (`) 52.0 39.1 40.4 46.6CEPS ( )̀ 59.8 46.5 49.5 57.2DPS (`) 4.0 2.5 3.5 4.5Cash per share 81.7 101.5 123.7 147.9Dividend Payout (%) 7.7 6.4 8.6 9.6Profit Ploughback (%) 92.3 93.6 91.4 90.4Book Value (`) 145.0 181.2 217.5 254.4RoANW (%) 42.8 24.0 20.3 19.8RoACE (%) 45.1 27.5 26.6 26.0


CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 12,099 10,046 11,161 12,880Depreciation & w.o. 1,638 1,551 1,908 2,216Net Interest Exp (499) (1,136) (1,950) (2,431)Direct taxes paid 1,192 1,828 2,679 3,091Chg in Working Capital (1,300) (2,000) (1,880) (1,880)(A) CF from Opt Activities 10,746 6,633 6,561 7,694Capex {Inc./ (Dec.) in FA n WIP} 2,500 3,000 3,000 3,000Free Cash Flow 8,246 3,633 3,561 4,694Inc./ (Dec.) in Investments 2,000 2,000 3,500 3,500(B) CF from Investing Activities 4,500 5,000 6,500 6,500Interest exp net 499 1,136 1,950 2,431Dividend Paid (Incl. Tax) 979 613 858 2,047(C) Cash Flow from Financing (480) 523 1,092 385Net Change in Cash 5,766 2,156 1,152 1,578Opening Cash balances 1,786 7,549 9,705 10,857Closing Cash balances 7,552 9,705 10,857 12,436E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 420mn

Face Value ` 5/-

Market Cap ` 164bn

USD 3.3bn

52 week High / Low ` 2375 / 1699


BSE Code 532466

NSE Symbol OFSS

Bloomberg Code OFSS IN

Reuters Code ORCL.BO


Promoter 80.4

MF/Banks/FIs 5.0

FIIs 2.7


Oracle Financials Services Software


Still a Blue Ocean: OFSS, with its leadership positioning in banking products,is likely to benefit from improved demand (spends) in the BFSI segment(Flexcube) and increased importance of the efficient compliance system(Reveleus, Mantas). The current penetration of core banking solution isjust about 11-15% across geographies.

China to drive growth: Though the demand in Europe has been moderatein the recent past we believe that the company has covered up strong groundsin other geographies (China & LATAM) to ensure the sustenance ofmomentum. The company has bagged 4 clients in China and is likely togain traction as the proof of concept is already established. We believe theopportunity could gain a size of about USD 100mn+ by CY2014 in view oflower competition (Temenos have no major presence), large size of thebanking industry and the existing leverage of parent Oracle relationship inChinese banks.

Margin profile to improve: The company is witnessing strong traction forits Analytical suite Reveleus and expects it to contribute 10%+ to productlicense revenues in FY13. It has also reviewed its focus on the prime sourcingbusiness and expects improved growth numbers in FY13-14E. We believethe enrichment of the portfolio through higher product revenue share, uptickin AMC charges (22% as against portfolio rate at about 17% at present) andimproved average license ticket size due to Reveleus.

Valuation: We expect 24% CAGR in new licence sales over FY11-13E,which will lead to a sustained strong margins profile. We expect 21% CAGRin overall revenues, translating into an EBIDTA/EPS CAGR of 23%/8% overFY2011-13E. We believe the stock deserves re-rating in view of improvedperformance, favourable business outlook and current discount versus peersand its historical average. We value OFSS at 17x of its FY13E EPS of Rs157 (15% discount to its five-year average).

OFSS 21

Financial and key operating matrixParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 156 165 142 156 165 192 160 163QoQ(%) 11.2 5.9 -13.8 9.4 5.6 16.9 -16.6 1.6Revenues 7272 7578 6503 7436 7376 8654 7121 7562QoQ(%) 7.1 4.2 -14.2 14.3 -0.8 17.3 -17.7 6.2EBITDA 2864 3067 1976 2691 2842 3710 2295 2484Q0Q(%) 43.6 7.1 -35.6 36.2 5.6 30.5 -38.1 8.2PAT 2273 1558 1933 2635 2824 3717 2042 2087Q0Q(%) 11.1 -31.4 24.1 36.3 7.2 31.6 -45.1 2.2


Key Operating MetricsNew License sales 26 31 7 24 14 39 13 9Client Additions 22 15 11 15 18 26 17 13Net Employee Additions -186 55 -547 -532 194 86 -311 168Financials

Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`̀̀̀̀) growth(%) PER(x) ROANW(%) ROACE(%)FY10 28,740 (1.8) 10,281 35.8 7,736 26.9 92.3 4.9 21.2 19.8 26.9FY11 29,969 4.3 11,220 37.4 11,110 37.1 132.4 43.5 14.8 22.9 25.2FY12E 35,252 17.6 13,568 38.5 11,293 32.0 134.4 1.5 14.5 18.9 26.3FY13E 43,780 24.2 16,916 38.6 13,152 30.0 156.6 16.5 12.5 18.2 26.5Figures in ` mn

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December 19, 2011

DOLAT CAPITAL

OFSS 22

INCOME STATEMENT ̀mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 28,740 29,969 35,252 43,780Total Expenditure 18,459 18,749 21,684 26,863COR 14,986 13,294 16,176 19,884G&A 1,586 2,721 2,751 3,644S&M 1,887 2,734 2,756 3,335EBIDTA 10,281 11,220 13,568 16,916Depreciation 489 408 447 594EBIT 9,792 10,812 13,120 16,322Other Income (1,556) 273 333 (350)Interest 700 1,395 2,639 2,816Profit Before Tax & EO Items 7,537 9,689 10,814 13,156Tax Expenses 1,198 1,370 4,799 5,637Net Profit 6,339 8,319 6,015 7,520Minority Interest (2) 0 0 0Net Profit 6,337 8,319 6,015 7,520

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 419 419 420 420Share premium 9,525 9,574 9,799 9,799Other Reserves 32,952 44,063 55,356 68,508Net Worth 42,896 54,057 65,576 78,728Minority Interest 8 1 0 0Loan Funds 8 1 0 0Total Capital Employed 42,904 54,058 65,576 78,728

Applications of FundsGross Block 12,000 12,829 15,579 18,979Less: Accumulated Depreciation 3,637 3,484 3,931 4,525Net Block 8,363 9,346 11,648 14,454Capital Work in Progress 1,304 640 740 690Investments 10 10 10 10Current Assets, Loans & AdvancesSundry Debtors 6,782 8,206 14,054 16,554Cash and Bank Balance 22,046 29,023 36,189 44,485Loans and Advances 7,725 9,338 9,688 10,138Other Current Assets 2,328 3,976 627 927sub total 38,881 50,543 60,558 72,104Less : Current Liabilities & ProvisionsCurrent Liabilities 4,624 5,088 7,381 8,531Provisions 1,030 1,392 0 0sub total 5,654 6,481 7,381 8,531Net Current Assets 33,227 44,062 53,178 63,574


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginGross Profit Margin 64.2 62.6 61.5 61.4EBIDTA Margin 35.8 37.4 38.5 38.6Tax/PBT 13.4 11.0 29.8 30.0Net Profit Margin 26.9 37.1 32.0 30.0

(B) As Percentage of Net SalesCOR 52.1 44.4 45.9 45.4G&A 5.5 9.1 7.8 8.3S&M 6.6 9.1 7.8 7.6

(C) Measures of Financial StatusDebtors Period (days) 114 143 146 138Fixed Assets Turnover (x) 0.4 0.4 0.4 0.4Working Capital Turnover (x) 1.2 1.5 1.5 1.5Non Cash Working Capital (` Mn) 11,181 15,038 16,988 19,088

(D) Measures of InvestmentEPS (`) 92.3 132.4 134.4 156.6CEPS ( )̀ 98.1 137.3 139.8 163.7Cash per share 263.0 346.1 431.0 529.7Profit Ploughback (%) 100.0 100.0 100.0 100.0Book Value (`) 511.6 644.3 780.7 937.3RoANW (%) 19.8 22.9 18.9 18.2RoACE (%) 26.9 25.2 26.3 26.5

(E) Valuation RatiosCMP (`) 1,956 1,956 1,956 1,956P/E (x) 21.2 14.8 14.5 12.5Market Cap. ( ̀Mn.) 164,020 164,098 164,294 164,294MCap/ Sales (x) 5.7 5.5 4.7 3.8EV (` Mn.) 141,972 135,066 128,094 119,799EV/Sales (x) 4.9 4.5 3.6 2.7EV/EBDITA (x) 13.8 12.0 9.4 7.1P/BV (x) 3.8 3.0 2.5 2.1Dividend Yield (%) 0.0 0.0 0.0 0.0E-estimates

CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 8,936 12,480 16,092 18,788Depreciation & w.o. 489 408 447 594Net Interest Exp (697) (1,393) (2,639) (2,816)Direct taxes paid 2,424 2,932 4,799 5,637Chg in Working Capital (410) (2,283) 1,950 2,100Other (424) 4,549 0 0(A) CF from Opt. Activities 7,139 6,298 7,151 8,830Capex {Inc./ (Dec.) in FA n WIP} (588) (662) 2,850 3,350Free Cash Flow 7,726 6,960 4,301 5,480Inc./ (Dec.) in Investments (4,702) (10,508) 0 0Other 667 1,075 0 0(B) CF from Investing Activities (4,622) (10,096) 2,850 3,350Issue of Equity/ Preference 78 43 226 0Inc./(Dec.) in Debt (12) (12) 0 0Interest exp net 0 0 2,639 2,816Other (640) 232 0 0(C) Cash Flow from Financing (574) 262 2,864 2,816Net Change in Cash 1,942 (3,536) 7,166 8,296Opening Cash balances 15,490 22,046 29,023 36,189Closing Cash balances 6,855 3,319 36,189 44,485E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 16003

NSE Nifty 4801

Scrip Details

Equity ` 400mn

Face Value ` 10/-

Market Cap ` 12bn

USD 230mn

52 week High / Low ` 467 / 281


BSE Code 533179

NSE Symbol PERSISTENT

Bloomberg Code PSYS IN

Reuters Code PERS.BO


Promoter 39.0

MF/Banks/FIs 26.5

FIIs 5.7


Persistent Systems

CMP: `̀̀̀̀ 303 Target Price: ` 368` 368` 368` 368` 368 Buy

Incubation WIP: Persistent has recently partnered with several technologycompanies for co-production of next-gen products and is also working onseveral inhouse technologies in its 300 member incubation R&D. It haspartnered with Proactive, Dassault Systems, Cloudsense, AgilentTechnologies in the current fiscal in its efforts to up move in the technologycreation value chain. We believe the efforts on klisma (e-retail) and emee(gamification tool) initiatives may start reaping dividends for the company inFY13-14.

Well on track of Guidance: PSL has marked 27% growth in its topline inH1FY12 and is likely to meet its full year revenue guidance of USD 220mn.The growth in the next gen technology has been robust; however thetraditional OPD business has been growing moderately (2-3% QoQ),impacting overall revenue growth rates.

Profitability remains a concern: It has consistently delivered better thanpeers’ revenue growth; however the growth in profits has not matched withthe growth in topline in the current year. The mid-term hike offered Jan’11has resulted in higher employee cost (500bps impact on profitability) in thecurrent fiscal. Also, the margin gains expectancy on account of higher IPled revenues has also been deferred owing to longer decision making cycle.Sharp jump in tax rate from single digit in FY11 to 30% in FY12 has resultedin absolute fall in profits versus H1FY11.

Valuation: PSL is trading at an economical valuations of 7.2x of its FY13Eearnings; however given its drag in the profitability growth we believe thestock would continue to underperform in the near term and would onlyrecover in case of any major monetization of its next-generation-technologyefforts. We expect Revenue/PAT CAGR of 25%/8% over FY11-13E andmaintain our Buy rating with a target price of ` 368 per share.

Persistent 23

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 34.0 37.3 39.5 40.6 43.2 47.0 51.3 50.3QoQ(%) 18.2 9.9 5.8 2.8 6.5 8.9 9.1 -2.0Revenues 1584 1717 1811 1870 1949 2129 2297 2325QoQ(%) 13.9 8.5 5.4 3.3 4.2 9.2 7.9 1.2EBITDA 389 383 344 430 428 381 401 454Q0Q(%) 1 -2 -10 25 -1 -11 5 13PAT 309 397 344 358 362 331 276 324Q0Q(%) 15 28 -13 4 1 -9 -17 17


Key Operating MetricsVolume Growth (%) NA 11.0 3.0 2.9 3.6 NA NA 2.0Pricing Growth (%) 10.0 3.6 2.3 -4.7 3.6 0.6 -2.8 1.9Net Employee Additions 213 144 249 370 179 900 260 280Utilisation (%) 72.6 76.5 76.8 71.7 74.2 71 72.7 73.8

FinancialsYear Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`) growth(%) PER(x) ROANW(%) ROACE(%)FY10 6,012 1.2 1,464 24.3 1,150 19.1 28.8 56.0 10.3 22.3 20.2FY11 7,758 29.1 1,583 20.4 1,397 18.0 34.9 21.5 8.5 20.2 15.4FY12E 9,777 26.0 2,038 20.8 1,374 14.1 34.2 -2.2 8.7 16.9 13.1FY13E 12,163 24.4 2,478 20.4 1,650 13.6 40.8 19.5 7.3 17.3 13.5Figures in ` mn

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December 19, 2011

DOLAT CAPITAL

Persistent 24

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 6,012 7,758 9,777 12,163Total Income 6,012 7,758 9,777 12,163Total Expenditure 4,548 6,175 7,739 9,685Employee Expenses 3,687 5,123 6,414 7,982SG&A 860 1,052 1,325 1,703EBIDTA (Excl. Other Income) 1,464 1,583 2,038 2,478EBIDTA (Incl. Other Income) 1,464 1,583 2,038 2,478Depreciation 335 424 509 636EBIT 1,128 1,159 1,529 1,842Interest 0 0 0 0Other Income 112 344 448 515 PBT 1,241 1,504 1,977 2,357Extra Ordinary Exps/(Income) 0 0 0 0Tax Expenses 91 108 603 707Net Profit 1,150 1,396 1,374 1,650Minority Interest 0 (2) 0 0Net Profit 1,150 1,397 1,374 1,650

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 400 400 402 404Share premium 1,739 1,737 1,797 1,857Other Reserves 4,251 5,334 6,547 8,036Net Worth 6,390 7,471 8,746 10,296Secured Loans 45 30 0 0Loan Funds 45 30 0 0Deferred Tax Liability (7) (60) 0 0


Applications of FundsGross Block 3,714 4,543 5,343 5,943Less: Accumulated Depreciation 1,881 2,281 2,790 3,426Net Block 1,833 2,261 2,553 2,517Capital Work in Progress 485 605 405 305Investments 1,562 2,500 2,800 3,300Current Assets, Loans & AdvancesInventories 0 0 0 0Sundry Debtors 1,363 1,582 1,892 2,262Cash and Bank Balance 1,918 1,000 1,719 2,785Loans and Advances 638 869 919 994Other Current Assets 340 226 326 426sub total 4,258 3,677 4,856 6,467Less : Current Liabilities & ProvisionsCurrent Liabilities 1,394 1,206 1,867 2,292Provisions 317 396 0 0sub total 1,710 1,602 1,867 2,292Net Current Assets 2,548 2,075 2,989 4,175Misc Expenses 0 0 0 0


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 24.3 20.4 20.8 20.4Interest / Sales 0.0 0.0 0.0 0.0Gross Profit Margin 38.7 34.0 34.4 34.4Tax/PBT 7.3 7.2 30.5 30.0Net Profit Margin 19.1 18.0 14.1 13.6

(B) As Percentage of Net SalesEmployee Expenses 61.3 66.0 65.6 65.6SG&A 14.3 13.6 13.6 14.0

(C) Measures of Financial StatusNet ‘Debt / Equity (x) (0.3) (0.1) (0.2) (0.3)Debtors Period (days) 0.2 0.2 0.2 0.2Fixed Assets Turnover (x) 2.6 2.7 3.3 4.3Working Capital Turnover (x) 2.4 3.7 3.3 2.9Non Cash Working Capital (` Mn) 630 1,075 1,270 1,390

(D) Measures of InvestmentEPS (`) (excl EO) 28.8 34.9 34.2 40.8EPS (`) 28.8 34.9 34.2 40.8CEPS ( )̀ 37.1 45.5 46.8 56.6DPS (`) 2.9 5.5 4.0 4.0Dividend Payout (%) 10.0 15.7 11.7 9.8Book Value (`) 159.7 186.8 217.6 254.9RoANW (%) 22.3 20.2 16.9 17.3RoACE (%) 23.9 21.6 24.3 24.8RoAIC (%) (Excl Cash & Invest.) 25.0 17.8 21.8 24.5


CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 1,241 1,504 1,977 2,357Depreciation & w.o. 335 424 509 636Net Interest Exp (1) (24) 0 0Direct taxes paid 248 342 603 707Chg. in W Capital (Non Cash) 498 48 (135) (120)Other (215) (34)(A) CF from Opt. Activities 1,611 1,575 1,748 2,166Capex {Inc./ (Dec) in FA & WIP} (475) (970) (600) (500)Inc./ (Dec.) in Investments (709) (1,684) (300) (500)Other 43 124(B) CF from Investing Activities (1,142) (2,529) (900) (1,000)Issue of Equity/ Preference 1,246 (417) 62 62Inc./(Dec.) in Debt 45 (15) (30) 0Dividend Paid (Incl. Tax) 27 280 161 162(C) Cash Flow from Financing 1,264 (712) (129) (100)Net Change in Cash 1,733 (1,666) 719 1,066Opening Cash balances 163 1,896 1,000 1,719FD not considered for cash 22 770Closing Cash balances 1,918 1,000 1,719 2,785E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 1957mn

Face Value ` 1/-

Market Cap ` 2309bn

USD 44bn

52 week High / Low ` 1247 / 903

Avg. Volume (no) 1,482,190

BSE Code 532540

NSE Symbol TCS

Bloomberg Code TCS IN

Reuters Code TCS.BO


Promoter 74.1

MF/Banks/FIs 8.1

FIIs 12.8

Public / Others 5.0

TCS


Financial Outperformer: TCS has outperformed its peer with strongrevenue CQGR of 6.1% over Q1FY10-Q2FY12 (Infy – 5%; Wipro – 4%).The performance has been superior consistently with the higher revenuegrowth over the other Tier I vendors in last six quarters.

Confident commentary: The management continues to remain confidentin its commentary and has been consistently delivering ahead of streetexpectations over last several quarters. The confidence is derived over thehealthy pipeline and strong deal win ratio; providing the much needed comfortfor medium term visibility.

Productivity driven margin improvement: TCS has best utilized variousoperating levers over last 10 quarters and has gained over 400bps onoperating profitability. The offshore/fix price contract efforts has increasedby over 300bps in last 10 quarters and Utilization has improved by 440bpsduring the same period.

Mini Corporation structure: It has delivered broad based growth acrossverticals/service lines and geographies. Service offering has been enrichingas it has been leveraging the downstream revenues derived from Consulting,Products (core banking) and platforms. Its strategy of business units actingas mini corporations has helped in better all round performance throughbetter reporting and faster decision making.

Valuation: we maintain our positive view on the stock owing to its sustainedrobust financial outperformance and productivity driven margin maintenancecapabilities. The stock has outperformed its peers over 12/24month returnand would continue to remain preferred pick on account of business visibilityand traction. We maintain our Buy rating on the stock with a target price of` 1415, valued at 22x its FY13E earnings.

TCS 25

Financials and Key Operating metrics

Particulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 1635 1686 1794 2004 2144 2244 2412 2525QoQ(%) 6.3 3.1 6.4 11.7 7.0 4.7 7.5 4.7Revenues 76,503 77365 82173 92864 96633 101575 107970 116335QoQ(%) 2.9 1.1 6.2 13.0 4.1 5.1 6.3 7.7EBITDA 22,718 23121 24155 27773 29177 30881 30310 33829Q0Q(%) 6.45 1.8 4.5 15.0 5.1 5.8 -1.8 11.6PAT 17977 19312 18633 21260 23463 23810 23804 24390Q0Q(%) 10.7 7.4 -3.5 14.1 10.4 1.5 0.0 2.5

ProfitabilityEBIT Margin (%) 29.7 29.9 29.4 29.9 30.2 30.4 28.1 29.1PAT Margin(%) 23.5 25.0 22.7 22.9 24.3 23.4 22.0 21.0Tax Rate (%) 15.1 14.3 19.1 18.8 18.8 21.8 22.7 24.3

Key Operating MetricsVolume Growth (%) 6.6 4.0 8.1 11.2 5.7 2.9 7.4 6.3Pricing Growth (%) 0.0 -0.05 -0.3 -0.3 1.2 0.8 -0.5 -1.0Net Employee Additions 7692 10775 3271 10717 12497 11700 3576 12580Client Addition 32 39 36 30 35 39 24 35Utilisation (%) 77 74 75 78 77 75 76 76

Financials (IFRS)Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`) growth(%) PER(x) ROANW(%) ROACE(%)FY10 300,289 8.0 86,800 28.9 68,728 22.9 35.1 32.9 33.9 36.9 42.3FY11 373,245 24.3 111,986 30.0 87,166 23.4 44.5 26.8 26.0 36.5 42.7FY12E 473,959 27.0 135,921 28.7 102,030 21.5 52.1 17.1 22.2 34.3 42.0FY13E 564,695 19.1 162,384 28.8 124,305 22.0 63.5 21.8 18.0 34.8 42.5Figures in ` mn

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December 19, 2011

DOLAT CAPITAL

TCS 26

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 300,289 373,245 473,959 564,695Total Income 300,289 373,245 473,959 564,695Total Expenditure 213,489 261,259 338,037 402,310Employee Expenses 149,125 199,370 255,114 306,312SG&A 56,247 61,889 82,923 95,998Other Expenses 8,118 0 0 0EBIDTA (Excl. Other Income) 86,800 111,986 135,921 162,384EBIDTA (Incl. Other Income) 87,335 111,986 135,921 162,384Depreciation 7,209 7,214 8,829 9,306EBIT 79,591 104,772 127,093 153,078Interest 536 0 0 0Other Income 2,781 5,324 7,884 11,805PBT 81,835 110,096 134,977 164,883Tax Expenses 12,088 21,739 31,716 38,748Net Profit before MI 69,747 88,357 103,261 126,136Minority Interest (1,019) (1,191) (1,231) (1,831)Net Profit 68,728 87,166 102,030 124,305

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 1,957 1,957 1,957 1,958Share premium 23,401 23,401 23,401 23,401Other Reserves 184,046 235,513 301,843 354,945Net Worth 209,404 260,871 327,201 380,304Minority Interest 3,768 3,768 3,768 3,768Unsecured Loans 6,843 6,243 3,243 1,743Loan Funds 10,611 10,011 7,011 5,511Total Capital Employed 220,015 270,882 334,212 385,815

Applications of FundsGross Block 48,788 76,091 99,325 117,375Less: Accumulated Depreciation 0 7,214 16,043 25,349Net Block 48,788 68,877 83,282 92,026Capital Work in Progress 51,436 25,333 25,333 25,333Investments 37,839 40,339 43,439 50,639Current Assets, Loans & AdvancesInventories 178 183 188 193Sundry Debtors 70,109 70,959 91,504 110,004Cash and Bank Balance 46,773 100,574 130,749 155,863Loans and Advances 0 200 1,545 3,887Other Current Assets 21,089 21,214 21,389 21,564sub total 138,149 193,130 245,375 291,511Less : Current Liabilities & ProvisionsCurrent Liabilities 56,197 56,797 63,217 73,694sub total 56,197 56,797 63,217 73,694Net Current Assets 81,952 136,332 182,158 217,816


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (incl. O.I.) 29.1 30.0 28.7 28.8Interest / Sales 0.9 1.4 1.7 2.1EBIT Margin 26.5 28.1 26.8 27.1Tax/PBT 14.8 19.7 23.5 23.5Net Profit Margin 22.9 23.4 21.5 22.0

(B) As Percentage of Net SalesEmployee Expenses 49.7 53.4 53.8 54.2SG&A 18.7 16.6 17.5 17.0Other Expenses 2.7 0.0 0.0 0.0

(C) Measures of Financial StatusNet ‘Debt / Equity (x) (0.2) (0.3) (0.4) (0.4)Interest Coverage (x) 0.0 0.0 0.1 0.1Average Cost Of Debt (%) 0.3 0.5 1.1 2.1Debtors Period (days) 85 69 70 71Closing stock (days) 0.2 0.2 0.1 0.1Inventory Turnover Ratio (x) 1,688 2,041 2,522 2,927Fixed Assets Turnover (x) 3.0 4.0 4.4 4.8Working Capital Turnover (x) 3.7 2.7 2.6 2.6Non Cash Working Cap. ( ̀Mn) 35,178 35,758 51,408 61,953


(E) Valuation RatiosCMP (`) 1,156 1,156 1,156 1,156P/E (x) 32.9 26.0 22.2 18.0Market Cap. (` Mn.) 2,262,523 2,262,523 2,262,523 2,263,679MCap/ Sales (x) 7.5 6.1 4.8 3.9EV ( ̀Mn.) 2,188,522 2,131,621 2,095,346 2,060,629EV/Sales (x) 7.3 5.7 4.4 3.5EV/EBDITA (x) 25.2 19.0 15.4 12.5P/BV (x) 10.8 8.7 6.9 5.9Dividend Yield (%) 1.2 1.4 1.4 1.5

E-estimates

CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 81,835 109,148 134,977 164,883Depreciation & w.o. 7,209 7,990 8,829 9,306Net Interest Expense 12,088 21,204 31,716 38,748Chng in Working Capital (26,214) (69,194) (18,960) (13,812)(A) CF from Operating Activities 74,918 69,148 93,129 121,630Capex {Inc./ (Dec.) in FA n WIP} (9,971) (17,285) (23,234) (18,050)Inc./ (Dec.) in Investments (45,295) (1,378) (3,100) (7,200)Other 0 0 89,857 2,637(B) CF from Investing Activities (55,266) (18,663) 63,523 (22,613)Issue of Equity/ Preference 54 0 (3,000) (1,500)Inc./(Dec.) in Debt (3,960) (310) (2,345) (1,200)Interest exp net 0 0 0 0Dividend Paid (Incl. Tax) (19,594) (45,832) (35,699) (71,203)effect of Fx on cash flows (529) 487 0 0(C) Cash Flow from Financing (24,029) (45,656) (41,044) (73,903)Net Change in Cash (4,377) 4,829 115,608 25,114Opening Cash balances 14,625 10,249 15,078 130,749Closing Cash balances 10,249 15,078 130,686 155,863E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 15491

NSE Nifty 4652

Scrip Details

Equity ` 1264mn

Face Value ` 10/-

Market Cap ` 71bn

USD 1.3bn

52 week High / Low ` 621 / 524


BSE Code 532755

NSE Symbol TECHM

Bloomberg Code TECHM IN

Reuters Code TEML.BO


Promoter 70.1

MF/Banks/FIs 15.3

FIIs 4.4

Public / Others 9.2

Tech Mahindra

CMP: `̀̀̀̀ 563 Target Price: `̀̀̀̀ 850 BuySynergy to sip in (2+2=5): Tech Mahindra would be benefited from crosssell opportunities, wherein it will sell its managed services capabilities toMahindra Satyam’s clients and leverage the enterprise services strength ofSatyam for its Telco clients. It has been able to bag a few deals on itsintegrated strength in H1FY12.

Satyam to drive traction: Mahindra Satyam is likely to witness strong growthin FY12 as it has overcome the pre-bid qualification hindrance of maintainingthe last three year’s financials. This criterion restricted its qualifications onvarious contracts prior to the Q4FY11 results. We expect a Revenue/EBITDACAGR of 24%/67% over FY11-13E as it continue to improve in deal winratio and gains from better efficient utilization of operating levers.

Overcoming hangover: We believe that as FY13 unfolds, the combinedTechM-Satyam hangovers (weak demand in telecom, high clientconcentration (BT), stagnancy in top accounts and settlement of variousclaims/cases on Satyam) will recede.

Outlook: We have build in 14% Revenue CAGR over FY11-13E and stableprofitability during the same period for Tech Mahindra.

Tech M versus Satyam: Though the growth has been largely driven by theassociate company, we believe one should play Tech Mahindra to leverageon Satyam’s growth owing to expected fair/favourable swap ratio in processof integration with Tech Mahindra. Also the lower institutional interest inSatyam would restrict the re-rating of the stock in neat term.

Valuation: We believe TechM’s current valuation is quite attractive at 6x ofits FY13E earnings. We maintain our positive view on the stock with a Buyrating at a target price of Rs 850, valued at 9x of its FY13E consolidatedearnings (Standalone EPS of Rs 57.8).

Tech Mahindra 27

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 254 259 251 328 269 279 290 296QoQ(%) 7 2 (3) 31 (18) 4 4 2Revenues 11873 11833 11337 15339 12111 12615 12925 13333QoQ(%) 4 0 -4 35 -21 4 2 3EBITDA 2807 2788 2126 2818 2498 2590 2417 2042Q0Q(%) -4 -1 -24 33 -11 4 -7 -16PAT 1728 2270 1443 1507 2570 921 2764 2404Q0Q(%) 2 31 -36 4 71 -64 200 2404

ProfitabilityEBITDA Margin (%) 23.6 23.6 18.8 18.4 20.6 20.5 18.7 15.3PAT Margin(%) 14.6 19.2 12.7 9.8 21.2 7.3 21.4 18.0Tax Rate (%) 14 19 18 18 15 10 22 22

Key Operating MetricsBT Revenues (USD mn) 116 119 113 115 118 114 116 110BT Revenues (% of Rev.) 46 46 45 35 44 41 40 37Net Employee Additions 3,889 3,120 1,743 -1,260 201 4,125 3,887 1,437Utilisation (%) 73 73 69 75 76 74 71 72

Financials (including Satyam)Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`̀̀̀̀) growth(%) PER(x) ROANW(%) ROACE(%)FY10 46,254 3.6 11,326 24.5 7,005 15.1 57.3 (31.3) 9.8 28.9 32.6FY11 51,402 11.1 10,033 19.5 6,442 12.5 51.2 (10.6) 11.0 23.7 22.1FY12E 55,687 8.3 10,698 19.2 10,650 19.1 81.5 59.1 6.9 18.1 18.8FY13E 66,632 19.7 12,874 19.3 11,977 18.0 94.8 16.4 5.9 17.0 20.1Figures in ` mn

Tech Mah relative to Sensex

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December 19, 2011

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Tech Mahindra 28

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 46,254 51,402 55,687 66,632Total Income 46,254 51,402 55,687 66,632Total Expenditure 34,928 41,369 44,989 53,758Employee Expenses 21,226 24,791 28,158 33,451Cost of Revenues 4,984 5,237 7,128 8,596G&A 2,774 3,389 3,926 4,864S&M 5,407 7,333 5,123 6,064Other Expenses 537 619 654 785EBIDTA (Excl. Other Income) 11,326 10,033 10,698 12,874EBIDTA (Incl. Other Income) 12,126 11,208 11,398 12,524Depreciation 1,339 1,435 1,547 1,894EBIT 9,987 8,598 9,151 10,980Other Income 800 1,175 700 (350)Interest 2,184 999 1,261 1,143PBT 8,603 8,774 8,590 9,487Extra Ordinary Exps/(Income) (131) 0 0 0Tax Expenses 1,440 1,316 1,924 2,182Net Profit bfr MI & Associate 7,032 7,458 6,666 7,305Minority Interest 27 (20) 0 0Net Profit bfr Associate share 7,005 7,478 6,666 7,305Profit/Loss from Satyam 0 (996) 3,984 4,672Net PAT 7,005 6,442 10,650 11,977

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 1,225 1,260 1,264 1,264Share premium 2,374 2,599 2,774 2,774Other Reserves 25,266 29,655 35,747 42,319Net Worth 28,865 33,514 39,784 46,356Minority Interest 139 159 0 0Secured Loans 7,500 12,227 12,227 12,227Unsecured Loans 6,172 0 (800) (800)Loan Funds 13,811 12,386 11,427 11,427Total Capital Employed 42,676 45,900 51,211 57,783

Applications of FundsGross Block 11,312 12,783 16,283 21,283Less: Accumulated Depreciation 5,269 6,613 8,160 10,054Net Block 6,043 6,170 8,123 11,229Other Non Current Assets 3,208 1,105 1,055 1,030Investments 30,145 29,080 29,030 29,030Current Assets, Loans & AdvancesInventories 14 6 6 6Sundry Debtors 10,420 12,468 12,568 12,693Cash and Bank Balance 2,187 2,666 5,949 9,276Loans and Advances 6,725 8,315 8,315 8,295Other Current Assets 0 0 10 20sub total 19,346 23,455 26,848 30,290Less : Current Liabilities & ProvisionsCurrent Liabilities 13,296 10,830 13,845 13,795Provisions 2,770 3,080 0 0sub total 16,066 13,910 13,845 13,795Net Current Assets 3,280 9,545 13,003 16,495


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 24.5 19.5 19.2 19.3Interest / Sales 4.7 1.9 2.3 1.7EBIT Margin 21.6 16.7 16.4 16.5Tax/PBT 16.7 15.0 22.4 23.0Net Profit Margin 15.1 14.5 12.0 11.0

(B) As Percentage of Net SalesCost of revenues 10.8 10.2 12.8 12.9Employee Expenses 45.9 48.2 50.6 50.2SG&A 17.7 20.9 16.3 16.4

(C) Measures of Financial StatusNet ‘Debt / Equity (x) 0.4 0.3 0.1 0.0Interest Coverage (x) 0.2 0.1 0.1 0.1Average Cost Of Debt (%) 0.2 0.1 0.1 0.1Debtors Period (days) 82 89 82 70Fixed Assets Turnover (x) 5.0 7.1 6.1 5.4Working Capital Turnover (x) 14.1 5.4 4.3 4.0Non Cash Working Capital (` Mn) 1,093 6,879 7,054 7,219

(D) Measures of InvestmentEPS (`) (excl EO) 56.1 59.3 52.8 57.8EPS (`) (incl Satyam) 57.2 51.1 84.3 94.8CEPS ( )̀ 68.1 70.7 65.0 72.8DPS (`) 3.5 5.0 5.0 5.0Dividend Payout (%) 7.1 9.8 11.0 10.0Book Value (`) 235.6 266.0 314.9 366.9RoANW (%) 29.0 24.0 18.2 17.0RoACE (%) 34.7 22.1 20.3 19.5RoAIC (%) (Excl Cash & Invest.) 107.0 79.8 64.8 59.5

(E) Valuation RatiosCMP (`) 563 563 563 563P/E (x) 9.8 11.0 6.7 5.9Market Cap. (` Mn.) 68,968 70,938 71,135 71,135MCap/ Sales (x) 1.5 1.4 1.3 1.1EV (`. Mn.) 80,142 80,278 76,283 72,957EV/Sales (x) 1.7 1.6 1.4 1.1EV/EBDITA (x) 7.1 8.0 7.1 5.7P/BV (x) 2.4 2.1 1.8 1.5Dividend Yield (%) 0.6 0.9 0.9 0.9E-estimates

CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 8,472 8,774 8,590 9,487Depreciation & w.o. 1,339 1,435 1,547 1,894Net Interest Expense 2,184 909 1,261 1,143Direct taxes paid (1,840) (2,087) 1,924 2,182Chg. in Working Capital 5,028 (2,743) 3,458 3,491Other (680) (1,651) 0 0(A) CF from Opt. Activities 14,503 4,637 12,932 13,833Capex {Inc./ (Dec.) in FA n WIP} (4,106) (1,513) 5,453 8,106Inc./ (Dec.) in Investments (25,940) 89 (50) 0Other 121 90 0 0(B) CF from Investing Activities(29,925) (1,334) 5,403 8,106Issue of Equity/ Preference 51 260 4 0Inc./(Dec.) in Debt 13,700 (1,524) (800) 0Interest exp net (1,535) (1,059) 1,261 1,143Dividend Paid (Incl. Tax) 0 (508) 733 733Exchange differences 61 (36) 0 0(C) Cash Flow from Financing 12,277 (2,867) 1,198 1,876Net Change in Cash (3,145) 436 19,533 23,815Opening Cash balances 5,358 2,213 2,666 22,199Adj: Unrealised loss (26) 17 16,250 36,738Closing Cash balances 2,187 2,666 22,199 46,013E-estimates

December 19, 2011

DOLAT CAPITAL

BSE Sensex 16003

NSE Nifty 4801

Scrip Details

Equity ` 4908mn

Face Value ` 2/-

Market Cap ` 1016bn

USD 19bn

52 week High / Low ` 496 / 310


BSE Code 507685

NSE Symbol WIPRO

Bloomberg Code WPRO IN

Reuters Code WIPR.BO


Promoter 79.2

MF/Banks/FIs 4.2

FIIs 5.1


Wipro

CMP: `̀̀̀̀ 401 Target Price: `̀̀̀̀ 450 Accumulate

Restructuring underway: Wipro has been the biggest underperformeramong the Tier I stocks as it just coming off from its top managementstructuring. The company has redesigned the business unit structure andis covering up gaps left due to several mid/senior level exodus.

Growth moderated post crisis: The revenue growth rate has halved postthe financial crisis to just 4% (Q1FY10-Q2FY12) as compared for 8.2%CQGR during Q1FY07-Q2FY09. It continues to witness challenges inManufacturing and Telecom clients.

Client size enriching: Traditionally the average size of the client for Wiprohas been smaller than its peer; however it has worked on its strategy tomine its GAMMA accounts and has resulted in improved client size. Thenumber of clients with USD 100mn+ run rate has gone up to 5 from just 1 inQ1FY10.

SAIC Acquisition: It has acquired Oil & Gas practice from SAIC for USD150mn giving it access to Tier I and Tier II upstream companies in the NorthAmerica, Europe. The acquisition seems to be desperate attempt forcompany to maintain its topline growth rate, considering the fact that thecompany paid handsomely at about USD 0.1mn per employee for SAICs’1500 odd talent pool. Nevertheless it would get a superlative edge overpeers in the Oil & Gas space.

Valuation: The company is trading at an economical valuations of 14x itsFY13E earnings; however we believe that it would continue to trade at asignificant discount to Tier I peers owing to low revenue growth visibility andweak profitability. We maintain an underweight stance on the stock with atarget price of Rs 450 per share (valued at 16x of its FY13E earnings)

Wipro 29

Financials and Key Operating metricsParticulars ( `̀̀̀̀ mn) Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12Revenues (USD mn) 1127 1166 1204 1273 1344 1400 1408 1472QoQ(%) 15.7 3.5 3.2 5.7 5.6 4.2 0.5 4.5Revenues 69774 69829 71906 77303 78293 83024 85640 90945QoQ(%) 0.9 0.1 3.0 7.5 1.3 6.0 3.2 6.2EBITDA 15519 15583 16377 16001 16435 17068 17290 17398QoQ(%) 1.6 0.4 5.1 -2.3 2.7 3.9 1.3 0.6PAT 12063 12135 13253 12997 13259 13813 13398 12999Q0Q(%) 2.5 0.6 9.2 -1.9 2.0 4.2 -3.0 -3.0


Key Operating MetricsVolume Growth (%) 4.7 4.1 4.7 6.6 1.5 1.9 1.8 6.0Pricing Growth (%) -1.8 0.0 -2.4 0.5 2.8 1.4 -0.5 -3.0Net Employee Additions 4855 5325 4854 2975 3591 2894 4105 5240Client Addition 31 27 22 29 36 68 49 44Utilisation (%) 81 79 78 78 76 76 77 76

Financials (IFRS)Year Net Sales growth(%) EBITDA OPM(%) PAT PAT Mg EPS(`) growth(%) PER(x) ROANW(%)ROACE(%)FY10 271,957 5.9 51,511 18.9 46,116 17.0 18.9 18.3 21.2 26.8 25.4FY11 310,542 14.2 57,668 18.6 53,321 17.2 21.8 15.2 18.4 24.4 23.3FY12E 369,955 19.1 65,482 17.7 58,217 15.7 23.8 9.0 16.9 22.7 23.5FY13E 424,851 14.8 77,748 18.3 69,177 16.3 28.2 18.8 14.2 23.7 26.0Figures in ` mn

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December 19, 2011

DOLAT CAPITAL

Wipro 30

INCOME STATEMENT `̀̀̀̀ mnParticulars Mar10 Mar11 Mar12E Mar13ENet Sales 271,957 310,542 369,955 424,851Total Income 271,957 310,542 369,955 424,851Total Expenditure 220,446 252,874 304,473 347,103Cost of Revenues 186,299 212,808 254,159 289,748G&A 14,823 18,339 24,047 28,465S&M 18,608 22,172 26,267 28,890Other Expenses 716 (445) 0 0EBIDTA (Excl. Other Income) 51,511 57,668 65,482 77,748EBIDTA (Incl. Other Income) 55,410 64,968 73,293 86,808EBIT 51,511 57,668 65,482 77,748Other Income 3,899 7,300 7,811 9,061Interest 0 1,933 974 337PBT 55,410 63,035 72,319 86,472Tax Expenses 9,294 9,714 14,102 17,294Net Profit 46,116 53,321 58,217 69,177

BALANCE SHEETParticulars Mar10 Mar11 Mar12E Mar13ESources of FundsEquity Capital 2,936 4,908 4,908 4,909Share premium 29,188 30,124 30,124 30,124Other Reserves 163,988 204,648 237,245 275,109Net Worth 196,112 239,680 272,277 310,142Minority Interest 437 691 691 691Secured Loans 2,882 2,586 1,000 2,000Unsecured Loans 24,505 27,567 12,153 153Loan Funds 27,824 30,844 13,844 2,844Deferred Tax Liability (1,306) (1,166) 0 0


Applications of FundsGross Block 57,469 113,463 122,463 131,463Less: Accumulated Depreciation 0 0 0 0Net Block 57,469 113,463 122,463 131,463Other Non Current Assets 67,251 21,206 21,206 21,206Investments 2,345 2,993 6,493 8,993Current Assets, Loans & AdvancesInventories 7,926 9,707 9,907 10,207Sundry Debtors 67,636 85,776 102,731 112,731Cash and Bank Balance 64,878 61,141 85,078 123,413Loans and Advances 0 0 4,800 10,320Other Current Assets 60,737 75,690 71,635 72,385sub total 201,177 232,314 274,151 329,056Less : Current Liabilities & ProvisionsCurrent Liabilities 103,338 98,291 138,189 177,729Provisions 2,274 2,324 0 0sub total 105,612 100,615 138,189 177,729Net Current Assets 95,565 131,699 135,962 151,327Misc Expenses 0 0 0 0


IMPORTANT RATIOSParticulars Mar10 Mar11 Mar12E Mar13E(A) Measures of Performance (%)Contribution MarginEBIDTA Margin (excl. O.I.) 18.9 18.6 17.7 18.3EBIT Profit Margin 18.9 18.6 17.7 18.3Tax/PBT 16.8 15.4 19.5 20.0Net Profit Margin 17.0 17.2 15.7 16.3

(B) As Percentage of Net SalesEmployee Expenses 68.5 68.5 68.7 68.2G&A 5.5 5.9 6.5 6.7S&M 6.8 7.1 7.1 6.8Other Expenses 0.3 (0.1) 0.0 0.0

(C) Measures of Financial StatusNet ‘Debt / Equity (x) (0.2) (0.1) (0.3) (0.4)Average Cost Of Debt (%) 0.0 0.1 0.1 0.1Debtors Period (days) 90.8 100.8 101.4 96.9Closing stock (days) 10.6 11.4 9.8 8.8Inventory Turnover Ratio (x) 34.3 32.0 37.3 41.6Fixed Assets Turnover (x) 2.2 2.3 2.6 2.8Working Capital Turnover (x) 2.8 2.4 2.7 2.8Non Cash Working Capital (` Mn) 30,687 70,558 50,884 27,914

(D) Measures of InvestmentEPS (`) (excl EO) 31.4 21.7 23.7 28.2EPS (`) 31.4 21.7 23.7 28.2CEPS ( )̀ 31.4 21.7 23.7 28.2DPS (`) 6.0 8.0 9.0 11.0Dividend Payout (%) 21.9 42.7 44.0 45.3Book Value (`) 133.6 97.7 111.0 126.4RoANW (%) 26.9 24.5 22.7 23.8RoACE (%) 27.5 26.4 26.4 29.0RoAIC (%) (Excl Cash & Invest.) 35.7 31.7 37.7 48.1


CASH FLOWParticulars Mar10 Mar11 Mar12E Mar13EProfit before tax 55,095 62,348 72,319 86,472Depreciation & w.o. 7,543 7,891 0 0Net Interest Expense (4,360) (6,652) 0 0Direct taxes paid (7,914) (9,293) 14,102 17,294Chg. in Working Capital (6,495) (21,146) 23,200 22,470Other 7,129 7,289 0 0(A) CF from Opt Activities 50,998 40,437 81,417 91,647Capex {Inc./ (Dec.) in FA n WIP} (15,080) (12,351) (9,000) (9,000)Inc./ (Dec.) in Investments (22,474) (11,251) (3,500) (2,500)Other 3,739 6,363 0 0(B) CF from Investing Activities(33,815) (17,239) (12,500) (11,500)Issue of Equity/ Preference 87 25 0 0Inc./(Dec.) in Debt 7,766 (11,202) (17,000) (11,000)Interest exp net (1,194) (696) 0 0Dividend Paid (Incl. Tax) (6,823) (15,585) (25,620) (31,313)Exchange differences (1,258) 523 (2,360) 501(C) Cash Flow from Financing (1,422) (26,935) (44,980) (41,812)Net Change in Cash 15,761 (3,737) 23,937 38,335Opening Cash balances 49,117 64,878 61,141 85,078Closing Cash balances 64,878 61,141 85,078 123,413E-estimates

December 19, 2011

DOLAT CAPITAL

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DOLAT CAPITAL

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