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CORPORATE FINANCE - ANALYSIS
OF INDIAN IT COMPANIES
SECTION E
GROUP 1 Aakanksha Teotia
Abhinav Saha
Prateek Singh AtulyaSrivastava
Shruti Sharma
Vignesh
itesh !oel
ShashankSrivastava
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IT INDUSTRY OVERVIEW• "n#ia$s "T in#ustry %an be #ivi#e# into &ve main %om'onents( vi)* So
Pro#u%ts( "T servi%es( -ngineering an# ./ servi%es( "T-SP an# 4
• ASS6 estimates the revenue o+ the "TP in#ustry at :119 billi
12 'er %ent in 201;15
• ASS6 has also envisage# the "n#ian "T"T-S in#ustry to a%hieve
target o+ <S 225 bn* by 2020
• "n#ian "T %om'anies are in%reasingly a#o'ting the global #elivery m
• "n#ian !overnment is taking many initiatives to 'romote "T in#ustry*
igital "n#ia 'rogram
• a>or 'layers in the in#ustry are T6S( "n+osys( ?i'ro( 6ogni)ant( an#
Te%hahin#ra
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STANDARD & POOR’S CREDIT RATI
• A %re#it rating is an use+ul tool to 'ut a se%urity( %om'any or %ount
global ra#ar( attra%ting +oreign money an# boosting it@s e%onomy
S&P Rating Grade Risk
AAA "nvestment o,est .isk
AA "nvestment o, .isk
A "nvestment o, risk
BBB "nvestment e#ium .isk
BB, B unk 4igh .isk
CCC/CC/C unk 4ighest .isk
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CALCULATING BETA, COST OF EQUI
COST OF DEBT, AND WACC
• eta B 6ovarian%e CSto%k #aily returns( market #aily returnsDVarian%e Cm
returnsD
• 6ost o+ eEuity CFeD B .isk +ree rate C.+D G etaH .isk Premium C.'D
?here .+ B .isk+ree rate C7*75I in the %al%ulationsJ =iKe# #e'osits rat
An# .' B -K'e%te# .isk Premium C#erive# +rom risk+ree rate an# S/P
s'rea#D• 6ost o+ #ebt CF#D B "nterestebt H C1tD
?here t B %or'orate taK rate
• ?A66 B Fe C,eight o+ eEuityD G F# C,eight o+ #ebtD
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COMPANY ANALYSIS
Company Debt(in rores!"#$ity(inrores!
%nterest(inrores!
t' o debt t' o e#$ity
)CS 250*27 ;5;1L 30*3 0*005;803L 0*99;519L;
%nosys 0 ;80L8 0 0 1
)e*+a*indra 0 12;87 0 0 1
CompanyS&P
RatingRatingSpread
Risk reerate
Beta"-peted Risk
Premi$mCost oe#$ity
Cost odebt
AC
)CS A 1*20I 7*75I 0*353 8*95 10*91I 8*11I 10*89
%nosys A 1*20I 7*75I 0*389 8*95 11*23I 0I 11*23
)e*+a*indra
G 1*75I 7*75I 0*37L 9*50 11*32I 0I 11*32
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CONTD..
• As 'er the %al%ulations
the ?eighte# Average
6ost o+ 6a'ital is highest
+or Te%hahin#ra at
11*32I ,hi%h makes it
the riskiest o'tion +or an
investor to invest in*
• As 'er our analysis( it is
a#visable to invest in
T6S out o+ the three
%om'anies* T6S "n+osys T10*L0I
10*70I
10*80I
10*90I
11*00I
11*10I
11*20I
11*30I
11*;0I
10'.
11'2
?A66
?A66
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CONTD..
• Te%hahin#ra is aggressively a%Euiring
ne, %om'anies so their #ivi#en#
'ayout ratio is very less as %om'are# to
the other t,o %om'anies* Their
retention ratio is 73*L1I*
• T6S has 'rovi#e# a PS o+ .s* 79 on a
+a%e value o+ .s* 1 in the 'revious&nan%ial year ,ith an earning retention
ratio o+ 17*38I*
• "n+osys has 'rovi#e# a PS o+ .s* L0 on
a =V o+ .s* 5 in the 'revious =M ,ith an
earning retention ratio %lose to L0I*ar $11 ar $12 ar $13 ar $1; ar
0
10
20
30
;0
50
L0
70
80
90
ivi#en# Per Share
"n+osys T6S Te%hahin#ra
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CONTD..
• Te%hahin#ra has in%rease# its
outstan#ing shares +rom 233;*73
la% to 9L07*89 la% in the last =M
an# hen%e a huge #e%line in the
-PS is ,itnesse# by the
sharehol#ers
• "n+osys has in%rease# itsoutstan#ing shares +rom 571;*03
la% to 11;8;*72 la% in last =M
• T6S has been maintaining a
%onsistent outstan#ing shares@
&gure sin%e 2011
ar $11 ar $12 ar $13 ar $1; ar0
20
;0
L0
80
100
120
1;0
1L0
180
200
-arning 'er Share
"n+osys T6S Te%hahin#ra
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RECOMMENDATIONS
• ut o+ the three %om'anies( T6S an# "n+osys are %ash %o,s an# the
,ho are eK'e%ting a stea#y #ivi#en# 'ayout shoul# invest in them
Te%hahin#ra has been a%tive in /A o+ many &rms an# hen%e les
o+ #ivi#en#s is eK'e%te# in near +uture too*
• 6ost o+ %a'ital is lo,est +or T6S an# hen%e it is re%ommen#e# to in
T6S* The riskier o'tion o+ Te%hahin#ra is also very lu%rative +or th,ho are risktakers an# ,ant to take %han%es ,ith the eK'ansion s
Te%h*
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Thank MouN