“POWER OF TALENT” “Our Core Corporate Walk Out Every Evening.

It is Our Duty To Make S

ure That these Assets return the next Morning, Mentally And Physically Enthusias
tic And Energetic. ”
Presented By: Saurabh Sharma Saurav kumar Sreelal M.S. Sandeep Sahu
Fact File of Infosys
ØInfosys Technologies Ltd . delivers IT enabled business solutions to enable Globa
l 2000 companies win in a Flat World . Ø ØInfosys has a global footprint with sales
offices in 30 countries and development centres in India , US , China , Australi
a , UK , Canada , Japan and many other countries . Ø ØInfosys has over 105 , 000 emp
loyees of 73 nationalities .
Fact File of Infosys..
Financial Summary* (LTM Sep 09)
Total Income : Net profit after taxes : Earnings per share (Rs. 5) : Total asset
s : Cash and cash equivalents : Rs. 22,478 crore Rs. 6,321 crore Rs. 110.34 (bas
ic) Rs. 20,757 crore Rs. 13,796 crore
* Indian GAAP
Ratio Analysis of Financial Statements
Financial Ratios..
Financial ratios are tools for interpreting financial statements to provide a ba
sis for valuing securities and appraising financial and management performance.
In general, there are 4 kinds of financial ratios that a financial analyst will
use most frequently, these are: ØPerformance ratios ØWorking capital ratios ØLiquidity
ratios ØSolvency ratios
Liquidity Ratios Can the company continue to pay its liabilities and debts?
Current Ratio
Current Ratio = Total Current Assets/ Total Current Liabilities ØThe ratio is rega
rded as a test of liquidity for a company. Ø ØIt expresses the 'working capital' rel
ationship of current assets available to meet the company's current obligations.
Current Ratio..
Mar-05 2.8 Mar-06 2.75 Mar-07 4.96 Mar-08 3.3 Mar-09 4.71
By Industry norm current ratio for service industry is around 1.2
Current Ratio..
Inferences ØIn current scenario Infosys has Rs. 4.71 to pay Rs. 1 i.e. it has 370%
more capacity to repay its short term liabilities. Ø ØThis depicts a sound financia
l heath of the company as far as repaying short term obligations are concerned. Ø ØC
urrent ratio decreased from 4.96 in Mar-07 to 3.3 in Mar-08. Ø ØReason??
Quick Ratio
Quick Ratio = (Cash + Account receivables + short term investments)/ Current lia
bilities
Mar-09 4.67 Mar-08 3.28 Mar-07 4.91 Mar-06 2.73 Mar-05 2.77
Profitability Ratio
Return on Assets: ROA
The return on assets (ROA) percentage shows how profitable a company's assets ar
e in generating revenue.
Net Income ROA := Total Assets
Mar-09 32.14
Mar-08 32.06
Mar-07 32.34
Mar-06 31.35
Mar-05 31.66
Return on Equity: ROE
•It measures a firm's efficiency at generating profits from every unit of sharehol
ders' equity (also known as net assets or assets minus liabilities). •ROE shows ho
w well a company uses investment funds to generate earnings growth.
Net Income ROE := Total Common Equity
Mar-09 32.67
Mar-08 33.14
Mar-07 33.89
Mar-06 35.1
Mar-05 36.32
Return on Capital Employed (ROCE)
Return on Capital Employed (ROCE) is used in finance as a measure of the return
that a company is realising from its capital employed.
Return on Capital Employed =
net profits
Capital employed
Mar-09 37.71
Mar-08 37.81
Mar-07 37.05
Mar-06 39.51
Mar-05 42.54
§
§
§
The Return on Equity (ROE) & Return on Equity (ROE) both has . It shows that the
company has utilize the shareholders funds less efficiently. This is unfavorabl
e for Company's image as it may result in decrease in the confidence in the inve
stor’s mind for company’s performance.
Asset Turnover
Asset turnover is a financial ratio that measures the efficiency of a company s
use of its assets in generating sales revenue or sales income to the company.
Mar-09 0.77
Mar-08 0.79
Mar-07 0.69
Mar-06 0.67
Mar-05 0.62
Working Capital/Sales
The Working Capital Productivity Ratio helps explain how well the company is usi
ng its working capital.
Working Capital Productivity Ratio = Revenue / (Current Assets – Current Liabiliti
es
Mar-09 0.61
Mar-08 0.54
Mar-07 0.54
Mar-06 0.42
Mar-05 0.35
• As it is a Service oriented company , it does not have any stock kept with it. S
o there is no amount blocked in stock. • So the investment required in working cap
ital is less.
•
• Gross Profit Amount approx 15% and Operating Net profit amount approx 18 %. This
means that Operating activities of Infosys is more efficient as compared to Sof
tware development activities(production activities) .
•
•
•
Operational & Financial Ratios
Earnings Per Share
• Earnings per Share are calculated to find out overall profitability of the organ
ization. • •€ • NPAT •Earnings per share = • Number of equity share •€
•
Mar-09 101.65
Mar-08 78.15
Mar-07 66.14
Mar-06 87.72
Mar-05 70.52
DIVIDEND PER SHARE
• DPS shows how much is paid as dividend to the shareholders on each share held.
•
• •
€
Dividend Paid to Ordinary Shareholders
•
Dividend per Share =
Number of equity share
• •
€
•
Mar-09 23.5
Mar-08 33.25
Mar-07 11.5
Mar-06 45
Mar-05 11.5
• The Company is currently paying approx 17% of its Current Earnings as Dividend (
D/P ratio is 16.93% ). From shareholders Long term point of view it is good tha
t company is retaining its approx 83% of its present earnings for its future gro
wth.
•
• Therefore (through Fixed Assets turnover ratio & D/P ratio) it seems that compan
y is retaining significant amount for its future . •
•
Book NAV/Share
• An€expression for net asset value that represents a fund s (mutual, exchange-trade
d, and closed-end)€or a company s value per share •€
• • •
€
Mar-09 311.35
Mar-08 235.84
Mar-07 195.14
Mar-06 249.89
Mar-05 194.15
Tax Rate
• An average tax rate is the ratio of the amount of taxes paid to the tax base (ta
xable income or spending). •€ •Let a be the average tax rate.
• • •
•Let t be the tax liability. •Let i be the taxable income.
€
Mar-09 13.33
Mar-08 12.35
Mar-07 8.51
Mar-06 11.12
Mar-05 14.58
Analysis of Financial Ratios
• Sales amount 19% but Cost of sales 22% (bcoz salaries paid to software developme
nt employees 26% ). This has resulted in a less proportionate in Gross profit (1
5%) • • Sales 19% but debtors - significant 35%. • It is due to the in Debtors collect
ion period from 64 to 72 days i.e. debtors are given more credit period. This ha
s resulted in
Contd….
• But if we see ,ultimately its Operating net profit ratio has still from 32.13 to
31.72. This is due to a significant increase in Cost of sales by 22%. Therefore
we analyze that its Cost of sales has so much material affect that it is reduci
ng both GP Ratio & operating profit ratio.
•
•
• As we will see further there is a healthy % increase in Net profit amount by app
rox 18% (as compared to • Gross Profit Amount by approx 15% ). This improvement in
its performance is majorly due to improvement in Extra-ordinary items like inte
rest received on deposits from banks ( by 257 % ).
• Funds available with the company has approx 21% . In 2007-08 company has not iss
ued any new equity or debt . Therefore the company has raised its funds only thr
ough its Reserves & Surplus which is approx 21%.
•
• Now the company has employed these funds in following ways: • 1) Acquired new fixe
d assets . This has resulted in more depreciation charged to profits in P & L a/
c. • This has ultimately the Operating profit ratio.
–
Contd….
•
•
2) used to finance the working capital requirements. 3) has also made some new I
nvestments in
the current year ( by 15 % )
•
• There is a in Fixed assets turnover ratio. • At first look it may appears that the
company has utilized its Fixed assets less efficiently. • However it has acquired
New Fixed assets worth • Rs 1050 crores in the year 2007-08 which
• Company has no Debt and Preference capital which means that there is no Capital
Gearing ratio, no Debt-Equity ratio and no Interest Coverage ratio • As Infosys is
a Debt Free company , it has certain Advantages and Disadvantages • ADVANTAGES : •
Not dependent on External Borrowers • No Interest burden , therefore higher profit
s. • No burden of Loan Repayment • Can Get Loans easily in Future • DISADVANTAGE: • Give
s lower E.P.S. for Shareholders.
•
•
SUGGESTIONS
1. 2.Company needs to reduce its cost of sales i.e. Software Development related
expenses, to increase its Gross Profit ratio and Operating net ratio. 3. 4.Comp
any needs to have stringent credit policy, to reduce the funds required for work
ing capital. •
Contd…. 3.Do efficient utilization of shareholders funds to improve its ROI & ROE
to maintain its goodwill in investors mind. 4. •4. May go for some Debt borrowing
to increase E.P.S. for shareholders. •
References
• www.infosys.com • http://finapps.forbes.com • www.moneycontrol.com • •
• •
Thank You.