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Submitted To:

Prof. (Dr.) Surendra Sunderarajan

A Report on Financial Analysis Of


Prepared By:
Bhatt Nistha (Roll No.02)
Ramchandani Hitesh (Roll No.26)

Ratio Analysis
Financial Condition (LIQUIDITY RATIOS)
Sr.
Ratio
Formula
2013 14 2012 13
No
.
1.
Current
Current
43019/913 35313/628
Ratio
Assets/
8
6
Current
Liabilities
= 4.7077
= 5.6177

Interpretation
It is computed to assess the short term financial
position of the company. The current ratio here is
reduced from 5.61 to 4.70. This means that firms
ability to meet its short term obligation has gone
down in current year as compared to last year.

Financial Performance (ACTIVITY RATIOS)


Sr.
No
.
1.

Ratio

Formula

2013 14

2012 13

Interpretation

Fixed
Assets
Turnover
Ratio

Net Sales/
Fixed
Assets

50133/822
9

40352/683
6

= 6.0922
times

= 5.9028
times

The ratio here indicates that how well the


company has utilized its fixed assets to improve
its sales. And here the ratio has improved from
last year means that use of less fixed assets made
possible higher generation of sales. (increase in
fixed assets = 20.3774% & increase in Net sales=
24.2392% )

PROFITABILITY RATIOS
Sr.
Ratio
Formula 2013 14
No.
1.
Gross
Gross
17992/
Profit
Profit/
50133
Ratio
Sales
=
35.8885%
2.

Net
Profit
Ratio

Profit
after Tax/
Sales

10648/
50133
=
21.2395%

2012 -13
15072/
40352
=
37.3513%
9421/
40352
=
23.3470%

Interpretation
This ratio establishes the relationship of gross
profit on sales of a company. It shows the average
margin on goods sold. The ratio here is
deteriorated by 1.4628% compared to last year
means that average margin on goods sold has
gone down.
This ratio helps in determining the profitability
and managerial efficiency of the business. The
ratio here has gone down means that operational
efficiency of company has been deteriorated.

3.

Return
on
Equity

Profit
after Tax/
Net
Worth

10648/
47530
=
22.4026%

MARKET VALUE RATIOS


Sr.
Ratio
Formula 2013 14
No
.
1.
EPS
PAT/
10648/
(Basic)
No. of
(2865)
shares
=
186.1538
2.

3.

P/E Ratio

Dividend
Yield
Ratio

Share
Price
(closing as
on
31.3.2013
)/EPS
Dividend
per Share/
Share
price

3278.85/
186.1538
= 17.6136

63/3278.85
=1.9214%

9421/
39797
=
23.6726%

It indicates that how well the company has


utilised its shareholders funds & explains the
return available to the equity shareholders as a
percentage of their claim to the firm. The ratio
here has gone down indicates that the share
holders funds are not utilised in an effective
manner.

2012
13

Interpretation

9421/
(2865)
=
164.7028

The proportion of companies profit allocated to


each of common stock. It serves as an indicator of
companies profitability from the owners point of
view. The improved EPS indicates that profit INR
21.45 per share has increased.
2295.7/
A high price earning ratio resulting from
164.7028 increased market price per share is beneficial to
the shareholders. It indicates high managerial
= 13.9384 efficiency, high profitability and good market
reputation. Ratio is increased INR 3.68. It
indicates increasing cash generating ability of the
firm.
42/2295.7 It is a ratio which shows how much a company
pays out in dividends each year relative to its
=1.8295% share price. The improved ratio indicates that
company has paid more dividend per share
compared to last year.

CAPITAL ASSET PRICING MODEL (CAPM)


E(r) = Rf + i (E (rm) - Rf)
E(r) = cost of equity
Rf = risk-free rate of return = 8.50%
(Source: http://www.rbi.org.in/home.aspx#)
= beta value of Infosys = 0.70 (source: http://in.reuters.com/finance/stocks/overview?symbol=INFY.NS)
E (rm) = Expected average return on the capital market = 25.36
(Source: http://ycharts.com/companies/INFY/return_on_equity) (Dec. 31, 2014)
E (Ri) = Rf + [(E (Rm) Rf ) ]
= 8.50 + (25.36 8.50) * 0.70
= 8.50 + 11.802
= 20.302%
Thus, as per the CAPM model, the investors can expect a 20.302% rate of return on equity in 2015
for Infosys equity shares which is above the risk free rate. So investors can still invest in the Infosys
stocks.
2

Trend Analysis of Sales, EPS and Stock Price

Sales
60000
50000
40000
30000
20000
Sales (Crore Rs.) 10000
0

22742 27501

33734

40352

50133
Sales

Year
200910
201011
201112
2012-

Sales
22742
27501
33734

Years

Here, we can see its sales have been increased by 24.24% in 2013-14 over 2012-13. This indicates
that company has used its operational ability effectively which lead to improved sales.

EPS
200
186.35
164.87
150
145.55
119.45
100 108.99
EPS (Rs.)
50
0
2009-10 2010-11 2011-12 2012-13 2013-14

EPS

Year
200910
201011
201112
2012-

EPS
108.99
119.45
145.55

Year

Here EPS is increasing continuously, but if we see ROE, then its deceasing. That means Infosys has
not utilized share holders fund properly.

Stock Price
4000
2752.2 2905.22373.052295.43260.45
3000
2000
1000
Share Proce (Rs.)
0

Stock Price

Year
200910
201011
201112
2012-

Stock
Price
2752.2
2905.2
2373.05

Years

The Stock Price here is fluctuating. Now, goal of any Finance manager is to maximize share holders
wealth i.e. to maximize stock price. Now generally good decisions are always reflected in term of
3

increase in stock price. In case of Infosys, stock price is fluctuating, that means decisions made by
Infosys are not consistent.
CAPITAL STRUCTURE OF INFOSYS
Infosys is debt free company. It doesnt have any outstanding debt or fixed deposits. The company
presently generates sufficient cash internally to finance all its operational, financing and investment
requirements.

Advantages

Loan can be easily procured in future, if required.


Cost of Bank loan can be avoided.
Absence of maturity date eliminates the obligation of future payment.
Dividend can be foregone.
No dependence on external borrowers.
Capital gains on equity are treated favourable in terms of taxation.
It is inflation hedge.

Disadvantages

Raising equity finance is costly, time consuming and may take the management focus away
from the core business activities.
Company being debt free, gives lower earnings per share (EPS) to the share holders.
Dilution of voting power, due to subsequent issue.
Most expensive source of financing, as dividend is paid out of PAT i.e. Profit after Tax.
Floatation cost is also high.

Dividend Policy
Announcement
Date
15-04-2014
26-09-2013
12-04-2013

Effective
Date
29-05-2014
17-10-2013
30-05-2013

Dividend
Type
Final
Interim
Final

Dividend
(%)
860%
400%
540%

Remarks
Rs.43.0000 per share(860%)Final Dividend
Rs.20.0000 per share(400%)Interim Dividend
Rs. 27.0000 per share (540%) Final Dividend

As per the stated dividend policy, Infosys Ltd. can pay up-to 30% of the consolidated profit
after tax as dividend. The company declares dividend twice a year (i.e. October and April).
The Board has decided to increase the dividend pay-out ratio up to 40% of post-tax profits
effective fiscal 2014.

Dividend Payout Ratio


Formula

2013 14

2012 13

Interpretation

Dividend
per
share/EPS

63/186.1538
= 33.8429%

42/164.7028 Here increased dividend payout ratio indicates that the greater
= 25.5004% portion of profit available to the equity shareholders has been
distributed while a smaller portion has been retained. The
shareholders are likely to get more cash dividend.