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Profit & Loss account FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10
(Rs. mn) FY 31st March
Total Revenue 36,400 48,530 71,300 95,210 138,930 166,920 216,930
Software Development & Business Pro 18,230 25,387 37,650 50,660 74,580 92,070 117,650
Gross Profit 18,170 23,143 33,650 44,550 64,350 74,850 99,280
Gross Margin % 49.9 47.7 47.2 46.8 46.3 44.8 45.8
S & M Expenses 2,717 3,509 4,610 6,000 9,290 9,160 11,040
G & A Expenses 2,757 3,692 5,690 7,640 11,150 13,310 16,290
Total Cost 23,704 32,588 47,950 64,300 95,020 114,540 144,980
EBIDTA from Operations 12,696 15,942 23,350 30,910 43,910 52,380 71,950
EBIDTA % 34.9 32.8 32.7 32.5 31.6 31.4 33.2
Depreciation 1,903 2,367 2,870 4,370 5,140 5,980 7,610
Operating Profit 10,793 13,575 20,480 26,540 38,770 46,400 64,340
Non-Operating Income 1,003 1,234 1,240 1,390 3,720 7,040 4,730
Extraordinary Income 0 0 450 0 60 0
Provision for Investments 238 97 0 10 20 0
Profit before Tax 11,558 14,712 22,170 27,920 42,530 53,440 69,070
Tax 2,136 2,285 3,350 3,350 4,130 8,840 9,190
MAT Entitlement 0 0 0 0 0 -1,770
Defferred Tax -126 -10 -90 -220 -270 -220
Total Effective Tax 2,010 2,275 3,260 3,130 3,860 6,850 9,190
PAT before Minority Interest 9,548 12,436 18,910 24,790 38,670 46,590 59,880
Minority Interest 0.0 0.0 0.0 210.0 110.0 0.0 0
Profit after Tax after Minority Interest 9,548 12,436 18,910 24,580 38,560 46,590 59,880
Net Margin % 26.2 25.6 26.5 25.8 27.8 27.9 27.6
Dividend 1,788 8,625 3,100 12,380 6,490 19,020 13,450
Dividend Tax 123 1,105 422 1,740 1,020 3,230 2,280
Retained Profits 7,637 2,707 15,388 10,460 31,050 24,340 44,150
EPS
Basic 18.03 23.43 35.22 45.02 69.25 81.54 104.60Diluted 17.86 23.13 34.31 43.76 67.73 81.27 104.42
No. of Shares- Basic mn 530 531 537 546 557 571 572
No. of Shares- Diluted mn 535 538 551 562 569 573 573
Balance Sheet FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09
(Rs. mn) FY 31st March
LIABILITIES
Equity Capital 331 333 1350 1380 2860 2860 2860
Reserves & Surplus 28,244 32,163 50,900 68,280 109,690 135,090 179,680
Total Equity 28,575 32,496 52,250 69,660 112,550 137,950 182,540
Preference Share Capital 490 936 940 - - - -Net Worth 29,065 33,431 53,190 69,660 112,550 137,950 182,540
Minority Interest 0 0 0 680 40 0 0
Deferred Tax Liability (Net) -368 -400 -450 -650 -920 -1190 -1260
Capital Employed 28,697 33,032 52,740 69,690 111,670 136,760 181,280
ASSETS
Gross Block 12,790 16,337 22,870 29,830 46,420 54,390 70,930
Less: Depreciation 5,785 8,098 10,310 13,280 18,360 19,860 24,160
Net Block 7005 8238 12560 16550 28060 34530 46770
Capital WIP 774 2081 3180 5710 9650 13240 6770
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Investments 210 9455 12110 7550 250 720 0
Current Assets
Sundry Debtors 5,187 6,515 13,220 16,080 24,360 32,970 36,720
Cash and Bank Balance 13,465 17,215 15,760 34,290 58,710 69,500 96,950
Loans and Advances 9,135 7,211 10,240 12,970 12,140 27,710 32,790
Total Current Assets 27,787 30,940 39,220 63,340 95,210 130,180 166,460
Less: Current Liabilities and Provisions
Sundry Creditors 1,224 3,150 2,960 3,820 4,770 7,360 5,700
Provisions
Provision for Tax and Others 2,922 4,201 6,010 3,510 3,100 7,200 10,950
Provision for Dividend 961 7,664 1,760 10,610 3,710 15,590 7,730
Others Provisions 1,972 2,668 3,600 5,520 9,920 11,760 14,340
Total Current Liabilities 7,078 17,682 14,330 23,460 21,500 41,910 38,720
Check
Net Current assets 20,708 13,259 24,890 39,880 73,710 88,270 127,740
Capital Employed 28,697 33,032 52,740 69,690 111,670 136,760 181,280
Check 0.00 0.00 0.00 0.00 0.00 0.00 0.00
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Revenue Model-Basics
#Revenue of Infosys is a combination of revenue from BPO, Product Business and IT Services & Con
#Revenue = (No of Person months Billed /12) * No of hours in the year * Billing rate (this is specificall
#Revenue is divided in to onsite and offshore (this is specifically for IT Services and Consulting).
#Total Billed Person Months = Total Billable Months * Billed Percentage.
#Use the average of historical growth for progeon and product businesses.
Using the information given above and below, compute the billing rates per hour for Infosys.
Assuming the employee addtion of 15000, project the revenue for next year.
Assume, 2% rupee depreciation. Assume billing rates are declining by 1% both onsite & offshore.
Infosys Revenue Model 2007 2008 2009 2010
Total Revenue for the period ended ($ mn) 3,036 4,177 4,663
Growth 37.60% 11.64%
Total Revenue for the period ended (Rs mn 138,930 166,920 216,930
Growth
USD - INR rate
Realized 45.77 39.96 46.52
Progeon Revenue ($ mn) 113.70 235.20 279.46
Growth 106.86% 18.82%
Product Revenue ($mn) 97.00 149.88 180.94
Growth 54.51% 20.73%
IT services and consulting ($mn)
Onsite Revenue 1,533 2,012 2169.51
Growth 31.22% 7.83%
Offshore Revenue 1,292 1,780 2,033
Growth 37.80% 14.22%
Total Revenue 2,825 3,792 4,203
Growth 34.23% 10.83%
Growth Drivers
Effort and Utilization (IT services and Consulting)
Effort (person Months) - BILLED
Onsite 134,767 165,595 181,811
Offshore 274,989 357,196 415,550
Total Billed 409,756 522,790 597,361
Non Billed 129,559 167,187 226987.741
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Trainees 65,859 63,606 62756.937
Total (Sales n Support excluded) 605,174 753,583 887,106
Sales n Support 34,142 38,484 48997.7286
Total Workforce 639,316 792,067 936,103
Billed (% of billable) 64.73% 67.63% 72.12%
Theoretical Billable Max (based on no of billable emp) 633,012 773,064.00 828,300
Billed Effort Mix
Onsite 32.89% 31.68% 30.44%
Offshore 67.11% 68.32% 69.56%
Hours
Onsite 1980 1980 1980
Offshore 2208 2208 2208
Billing Rates
Onsite
Offshore
Employee Metrics 72,241 91,187 102,931
S/W Proffessionals 57,493 69,569 79,402
Billable 52,751 64,422 69,025
Banking Product Group 2,053 2,053 2,349
Trainees 2,689 3,094 8,028
Sales n Support 3,522 5,323 6,449
BPO 11,226 16,295 17,080
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sulting Business.
for IT Services and Consulting).
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FY 03 FY 04 FY 05 FY 06 FY 07
Method 1
Software Development & Business 18,230 25,387 37,650 50,660 74,580
Growth 39.3 48.3 34.6 47.2
Direct Cost (% Sales) 50.08 52.31 52.81 53.21 53.68
Hint: Project Direct Costs as % of revenue going up by 40 bps in FY10.
Method 2 FY 03 FY 04 FY 05 FY 06 FY 07
Total Employees 15,356 25,255 36,750 52,715 72,241
Hint: Use direct cost per employee as basis. Keep it same for next year, and project.
Indirect Costs
FY 03 FY 04 FY 05 FY 06 FY 07
Selling & Marketing Exp 2,717 3,509 4,610 6,000 9,290
% Growth 29.1 31.4 30.2 54.8
% of Sales 7.2 6.5 6.3 6.7
G&A Expenses 2,757 3,692 5,690 7,640 11,150
% Growth 33.9 54.1 34.3 45.9
% of Sales 7.6 8.0 8.0 8.0
Hint: Increase selling & Marketing Expenses by 100bps and keep G&A expenses % of
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FY 08 FY 09 FY10E
92,070 117,650 0
23.5 27.8
55.16 54.23
FY 08 FY 09 FY10E
91,187 104,850
FY 08 FY 09 FY10E
9,160 11,040
-1.4 20.5
5.5 5.1
13,310 16,290
19.4 22.4
8.0 7.5
ales constant.
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Projecting Current Year Depreciation:
For beginners, one should
compute depreciation as
% of gross block.
Process for Forecast
1 Forecast Gross Block
2 Based on this Gross b
Forecasting Gross BMethod 1 Gross Block is forecas
Method 2 Use gross block turno
Pls check GB turnover
Forecasting CWIP:
a Forecast CWIP as diff
b Forecast it as % of ca
Forecasting Capital
a Computing
=Change i
b Capital expenditure is
c Forecast it based on t
d Most of the times mna
e Moreover, it can not to
One will build mastery
Project Depreciation for FY11, FY12 and FY13.
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Depreciation 1903.4 2367.3 2870 4370 5140 5980
Depreciation % of Avg GB 16% 15% 17% 13% 12%
Hint: Keep, Depreciation as % of GB as constant.
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Gross Block 12,790 16,337 22,870 29,830 46,420 54,390
CWIP 774 2,081 3,180 5,710 9,650 13,240
Compute and forecast:
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Capital Expenditure 4,853 7,633 9,490 20,530 11,560
Ideally, one should look at each and every asset,
its useful life, and based on which method the
company uses to depreciate these assets, one
should forecast the depreciation.
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Addition to GB 3,546 6,534 6,960 16,590 7,970
Addtion to GB over CWIP of last year 2,772 4,453 3,780 10,880 -1,680
Addtion to GB over CWIP of last year 57% 58% 40% 53% -15%
Hint: Forecast Capital expenditure for FY10 as 15000mn to last year capex.
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ing Current Year Depreciation
for next Year.
lock and last year gross block, forecast depreciation.
lock:ted by addiing to it a portion of Capital Expenditure and total CWIP of last year.
er as a parameter to forecast the gross block.
ratio to avoid significant deviations.
erence between Capex and direct addition to gross block.
ital expenditure.
xpenditure
Capital Expenditure:
GB + Change in CWIP + Change in Intangibles
an incremental phenomenon.
e incremental 'key parameter' of the company for next year like capacity expansions, no. of towers a
gement will give you guidance on this.
be just forecasted looking at next year but vision of management over the years.
in forecasting this only over a period of time.
FY 09 FY10E
7610
12%
FY 09 FY10E
70,930
6,770
FY 09 FY10E
10,070
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16,540
3,300
33%
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ded, additional employees, etc.
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Taxes As % of PBT
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10E
Net Tax 2,010 2,275 3,260 3,130 3,860 6,850 9,190
ETR 17% 15% 15% 11% 9% 13% 13%
Hint: Assume Effective Tax Rate to be 20% in FY10.
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Dividend Payout
Dividend is projected as % of PAT or as % of Equity Ca
Preferably, project the dividend as % of PAT.
FY 03 FY 04 FY 05 FY 06 FY 07
Dividend 1,788 8,625 3,100 12,380 6,490
PAT 9,548 12,436 18,910 24,580 38,560
Dividend (% of PAT) 19% 69% 16% 50% 17%
Dividend Distribution Tax 123 1105 421.7 1740 1020
Dividend Distribution Tax (% of Dividends) 7% 13% 14% 14% 16%
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ital.
FY 08 FY 09 FY10E
19,020 13,450
46,590 59,880
41% 22%
3230 2280
17% 17%
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Project Debtors based on debtor turnover ratio.
Key Points:
Collection Period = 365/Revenue*Average Debtors
CP09= 365/Revenue09*(D09+D08)/2
Typically, do not increase or decease the collection period significantly.
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08
Debtors 5,187 6,515 13,220 16,080 24,360 32,970
Collection Period
Hint: Assume, CP10 = 60 Days
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FY 09 FY10E
36,720 ?
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Project creditors based on creditors turnover.
Key Points:
Creditor Period= 365/Purchases*Average Debtors
Creditor Period09= 365/Purchases09*(D09+D08)/2
Typically, do not increase or decease the collection period significantly.
FY 03 FY 04 FY 05 FY 06 FY 07
Sundry Creditors 1,224 3,150 2,960 3,820 4,770
Creditor Days
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FY 08 FY 09 FY10E
7,360 5,700
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FY 03 FY 04 FY 05
Provision for Tax and Others 2,922 4,201 6,010
Provision for Tax and Others (% of Taxes)
Provision for Dividend 961 7,664 1,760
Provision for Dividend (% of Dividends)
Project provisions for taxes as % of current year taxes.
Project provisions for dividends as % of dividends for current year.
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FY 06 FY 07 FY 08 FY 09 FY10E
3,510 3,100 7,200 10,950
10,610 3,710 15,590 7,730
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Other Income/ Non-Operating Income
Ideally, one should break up the other income into dividend income,
interest earned, foreign exchange gains and extraordinary items and
then project individually.
As a beginner, however, It is projected based on cash & equivalents
and liquid investments.
Key determinants are:
a Your view on the intere
b
Key Tips:
1 This item should be pr
2 Because, it is projecte
However, the logic for
3 To fix the circular refer
Computations to be done before projecting:
Other Income or Non-
Solve to project Non-Operating Income for FY10 and FY11:FY 03 FY 04
Non-Operating Income 1,003 1,234
Non-Operating Income % of Cash & Equivalents 6.12%
Cash & Cash Equivalents 13,675 26,670
Hint: Interest rates in the ec
year. After that it will in
It includes dividends received on the investments, interest earned on
the saving bank account cash. Sometimes, it also includes foreign
exchange gains and losses and extrordinry items.
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st rates in the economy in the coming years.
jected at the last.
based on cash and equivalents, it will involve circular reference.
ircular reference is right.
nce, go to Office Button, Excel Options, Formulas and Tick Iterative Computations options.
perating Income as % of Average(Cash & Equivalents and Liquid Investments)
FY 05 FY 06 FY 07 FY 08 FY 09 FY10E
1,240 1,390 3,720 7,040 4,730
27,870 41,840 58,960 70,220 96,950
onomy may be expected to go down. RBI has hinted that it may reduce the repo rates by about 150bps
rease by 75bps in FY11 to curb the inflation.
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ver next
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