Company Report | Q2FY12 Result Update

LONG TERM INVESTMENT CALL

12 October 2011 Industry CMP (INR) Target (INR) Upside / Downside 52 week High / Low (INR) Market Cap (INR bn) 3M Avg. Daily Volumes P / E (FY12 E) Shareholding Pattern (%)
Others 37% Promoters 16%

ACCUMULATE

IT / ITES 2680 3000 12% 3,494 / 2,169 1539 1633.17 18.4

Positive performance for Q2, with an increase in the forecasted revenue

Infosys Ltd. (Infosys) has kicked off the IT results with a good set of numbers for Q2FY12. The top line is slightly below our quarterly estimates but the bottom line is in-line with our estimates. In-Line Quarterly Performance: Infosys reported top-line numbers which are slightly below and bottom-line numbers which were in-line with our estimates. Revenue at INR 80.99 bn was up 16.6% and 8.2% on a YoY and a QoQ basis respectively. Operating profit for the quarter stood at INR 22.81 bn, up 9% from the same quarter in the previous year. The weakening of the INR increased the operating margin by ~150bps for this quarter.

DIIs 11%

FIIs 36%

New clients added this quarter, boost top line: Infosys added 45 new clients in Q2FY12 which a significant increase from the past quarters. Of the new clients 19 have been added in areas of manufacturing and retail where the company has recently shifted its focus. The total client base of the company stood at 647. The onsite - offshore revenue mix was roughly 50:50 while onsite offshore employee effort stood around 25:75. The company added 8,262 employees (net) in this quarter, on 30th September 2011 the total number of employees stood at 1, 41,822. Improvement in FY12 Guidance: Infosys beat its Q2FY12 guidance both on the revenue and the EPS front. For Q3FY12, the company expects

1 Year Stock Chart

140 130 120 110 100 90 80 70 60 Dec Aug Jul Nov Mar Apr May Sep Jan Oct Feb Jun Infosys Nifty

revenue to be in the range of INR 88.26 bn 90.12 bn and EPS in the range of INR 38.51 39.20. The EPS guidance reflects an increase of 23.6 5.8% growth YoY. For the entire FY12, revenue guidance has been increased and now stands at INR 335.01 bn 340.88 bn. The EPS guidance

Stock Performance 1 Month 13.9% 0.6% 3 Months -14.3% -11.4% 1 Year -18.6% -18.3%

for FY12 has also been sharply improved to INR 143.02 INR 145.26, indicating a YoY growth in the range of 19.7 21.6%. Infosys plans to hire 8000 people next quarter and has made 23,000 new campus recruitment offers for next year.

Infosys Nifty

(INR in mn)

Particulars Total Income EBITDA Reported PAT

Actual 80,990 22,810 19,060

Estimates 87,263 24,238 20,070

Focus on high quality growth, along with inorganic growth: Infosys will focus on high quality growth and does not believe in compromising on its operating margins so as to increase its market share. They are also actively looking for avenues for acquisitions in the Products, Platforms and Solutions, Life Sciences and Healthcare space.

* Source: Bloomberg, Unicon Research

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in

Outlook & Valuation

We believe that moving forward, the economic environment in the US and Europe will have a significant impact on the revenue. The volume growth should remain stable and weakness in the INR should have a positive impact on the Q3FY12 margins by ~1.6%. The company is developing other verticals which will substantiate revenue moving forward. For FY12 the company has marginally increased its EPS guidelines in USD terms to USD 3.02-USD 3.06, which is a positive. At CMP the stock is trading at 18.4x its FY12E earnings. Based on the strong quarterly performance and improved guidance, we are increasing the target price to INR 3000

Consolidated Financials
(INR in mn)

Particulars Revenue Cost of Sales Gross Profit % Margin Operating Expenses Selling and Marketing Expenses Administration Expenses Total Operating Expenses Operating Profit % Margin Other Income, net Profit Before Tax (PBT) % Margin Income tax expense Net Profit % Margin Earning per equity share (EPS) Basic EPS (INR) Diluted EPS (INR)

Q2 FY12 80,990.0 47,440.0 33,550.0 41.4 4,560.0 6,180.0 10,740.0 22,810.0 28.2 3870.0 26,680.00 32.94 7,620.0 19,060.0 23.5 33.36 33.36

Q2 FY11 69,470.0 39,710.0 29,760.0 42.8 3,800.0 4,980.0 8,780.0 20,980.0 30.2 2670.0 23,650.00 34.04 6,280.0 17,370.0 25.0 30.41 30.40

Y-o-Y 17% 19% 13% -141 bps 20% 24% 22% 9% -204 bps 45% 13% -110 bps 21% 10% -147 bps 10% 10%

Q1 FY12 74,850.0 45,770.0 29,080.0 38.9 3,980.0 5,580.0 9,560.0 19,520.0 26.1 4430.0 23,950.00 32.00 6,730.0 17,220.0 23.0 30.14 30.14

Q-o-Q 8% 4% 15% 257 bps 15% 11% 12% 17% 209 bps -13% 11% 95 bps 13% 11% 53 bps 11% 11%

Geographical Segment Revenue

Particulars (in %) North America Europe India Rest of the World Total Q2 FY12 65.3 20.5 2.2 12.0 100 Q2 FY11 65.8 21.8 2.1 10.3 100 Y-o-Y -50 bps -130 bps 10 bps 170 bps Q1 FY12 64.2 21.3 2.6 11.9 100 Q-o-Q 110 bps -80 bps -40 bps 10 bps

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in

Service Offering Revenue

Particulars (in %) Business Operations Application Development Application Maintenance Infrastructure Management Services Testing Services Business Process Management Others Consulting & Systems Integration Consulting & Package Implementation Systems Integration Others Products, Platforms and Solutions Products Product Engineering Services Others Total Q2 FY12 60.9 17.1 21.6 5.8 8.2 5.4 2.8 31.2 24.7 6.0 0.5 7.9 4.2 3.4 0.3 100.0 Q2 FY11 61.3 15.6 23.5 6.2 7.6 5.6 2.8 31.7 25.8 5.7 0.2 7.0 4.2 2.5 0.3 100.0 Y-o-Y -40 bps 150 bps -190 bps -40 bps 60 bps -20 bps 0 bps -50 bps -110 bps 30 bps 30 bps 90 bps 0 bps 90 bps 0 bps Q1 FY12 60 16.1 22.3 5.9 7.5 5.4 2.8 31.7 25.2 6.3 0.2 8.3 4.8 3.2 0.3 100.0 Q-o-Q 90 bps 100 bps -70 bps -10 bps 70 bps 0 bps 0 bps -50 bps -50 bps -30 bps 30 bps -40 bps -60 bps 20 bps 0 bps

Industry-wise Revenue
Particulars FSI (Financial Services and Insurance) Banking & financial services Insurance Manufacturing RCL (Retail, Logistics, CPG and Life Sciences) Retail & CPG Transport & Logistics Life Sciences Healthcare ECS (Energy & Utilities, Communications and Services) Energy & Utilities Telecom Others Total Q2 FY12 35.3 28.2 7.1 20.2 22.9 15.6 1.7 3.8 1.8 21.6 5.7 10.4 5.5 100 Q2 FY11 35.4 26.9 8.5 18.9 20.2 14.4 1.8 3.1 0.9 25.5 6.3 13.3 5.9 100 Y-o-Y -10 bps 130 bps -140 bps 130 bps 270 bps 120 bps -10 bps 70 bps 90 bps -390 bps -60 bps -290 bps -40 bps Q1 FY12 35.4 28.1 7.3 20.3 22.7 16.1 1.8 3.7 1.1 21.6 5.7 10.6 5.3 100 Q-o-Q -10 bps 10 bps -20 bps -10 bps 20 bps -50 bps -10 bps 10 bps 70 bps 0 bps 0 bps -20 bps 20 bps

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in

Unicon Investment Ranking Methodology

Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@unicon.in