Date post: | 15-Jul-2015 |
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Economy & Finance |
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Founded on 2nd July 1981 with a capital of Rs.10,000
went Public in 1993.
1st Indian Company to be listed on Nasdaq on 11th March 1999.
Global footprint : Over 50 offices and development centers
Employees: 1,73,000(As on 31st oct 2014).
Certified at SEI- CMM Level 5.
Major Clients: British Telecom, Bank Of America, Citigroup,
Wall mart
Infosys Profile
Macro Economic Indicator:-
GDP-annual rate of 5.63% 3rd quarter of 2014
Inflation rate:-last reported 6.3 % in sep-2014
Interest Rate:-reverse repo reported @5.5 %.
Trade deficit 20210.90 Millions in oct-2014
Tax rate India 30% ,less than Spain , France etc
Saving rate -35.7%
PEST AnalysisPolitical Economic• Political stability
• Government owned companies
and PSUs have decided to give
more IT projects to Indian IT
companies.
• Terrorist attack or war.
• Global IT spending
(demand)
• Domestic IT Spending
(Demand)
• Currency Fluctuation
• Real Estate Prices
TechnologicalSocial• Language spoken: English
• Education: A number of
technical institutes and
universities over the
country offer IT education.
• Working age population
• Telephony
• Internet Backbone
• New IT Technologies like
SOA, Web 2.0, High-
definition content, grid
computing, etc
Porter’s Five Forces Model Threat of Substitutes: Medium
1. Other offshore locations such as Eastern Europe, the
Philippines and China
2. Price
Bargaining power of supplier: High to Low
1. Due to slowdown, the job-cuts, the layoffs and bleak IT
outlook.
2. No longer Demand and supply of IT professionals
3. Vast talent pool – fresher's and experienced.
Porter’s Five Forces ModelBarriers to Entry : Low
1. Low capital requirements.
2.Large value chain, space for small enterprises.
Bargaining Power of Customers: Very High
1. Large number of IT companies
2. Huge decline in IT expenditure
Rivalry Among Firms: High
1.'low-cost, little-differentiation' positioning.
2.Strong competitors – few number of large
companies.
SWOT Analysis
STRENGTHS WEAKNESSES
• Trusted Brand & Client Relations
• Proven GDM
• Wide spectrum of Services
• Leadership & Management
• Quality Standards
• Dependence on BFSI Segment for revenues
• Dependence on North America for revenues
• Weak Player in domestic Mkt
• Rising Operating Expenditure
• Low R & D focus
SWOT Analysis
OPPORTUNITIES
• Untapped Domestic
Market
• New Geographies
• Acquisitions
• High End Consulting
• Intense Competition
• High dependency on small
no. of clients
• Currency Fluctuations
THREATS
Infosys Ratio:-YEAR RATIO March 12 March 13 March 14
Liquidity Ratio:-
Current Ratio 4.91 4.75 3.70
Quick Ratio 4.88 4.69 3.65
Leverage Ratio:-
Return on Total Assets 518.21 627.95 736.64
Profitability Ratio:-
Gross profit Ratio 28.23 30.66 31.04
Net profit Ratio 27.37 27.52 26.31
Financial Ratio:-
Fixed Asset To. Ratio 1.15 1.12 1.13
Debtors To. Ratio 6.50 6.25 6.74
DPS Ratio 35.86 26.45 31.49
Reported EPS147.50 158.75 178.40
Analysis:-Liquidity Ratio:-Use of liquidity ratio is good but comparison of previous year
the ratio is decreased.
Leverage/ Gearing Ratio:-The company is debt free and maintains sufficient cash to meet
its strategic objectives. In the year 2014, Internal Cash flows have
more than adequately covered working capital requirements ,
Capital expenditure , investment in subsidiaries and dividend payments.
Profitability Ratio:- Net profit ratio is decreased in comparison of previous year
but company doing aggressive selling and its not affect to much in company..
Financial Ratio:- Efficiency of Assets utilisation has Increased. All debtors are considered
good and realizable. The ratio has increased largely due to the increase
in the sales.
Dividend per share ratio & EPS is excellent in the comparison of previous year of the company.
Recommendation Intrinsic value =EPS*(P/E Ratio)
EPS=178.40
P/E Ratio=18.40
Intrinsic value=3282.56
Market Value=4295.75
-Market Value>Intrinsic value
Sell shares of infosys
Strategies : Long Call For aggressive investors who are very bullish about the prospects for a stock /
index, buying calls can be an excellent way to capture the upside potential with
limited downside risk.
When to Use:
Investor is very bullish on the stock / index.
Risk:
Limited to the Premium.
(Maximum loss if market expires at or below the option strike price).
Reward: Unlimited
Breakeven: Strike Price + Premium
LONG CALL
Mr. Amar is bullish on Infosys on 29th Nov, when the market
price at 4356.53. He buys a call option with a strike price of Rs.
4400 at a premium of Rs. 36.35, expiring on 30th Dec. If the
Market price goes above 4436.35, Mr. Amar will make a net
profit (after deducting the premium) on exercising the option.
In case the market price stays at or falls bellow 4400, he can
forego the option (it will expire worthless) with a maximum
loss of the premium.
Analysis This strategy limit the downside risk to the extent of premium
paid by Mr. Amar (Rs. 36.35)
But the potential return is unlimited in case of rise in Market
Price.
A long call option is the simplest way to benefit if you believe
that the market will make an upward move and the most
common choice among first time investors in option.
As the stock price rises the long call moves into profit more and
more quickly.
Strategies: Long Call
The Payoff
Schedule
On expiry Infosys
Close at
Net Payoff from call
Option (Rs.)
4100 -36.65
4200 -36.65
4300 -36.65
4400 -36.65
4436.65 0
4500 63.35
4600 163.35