SEPARATION BETWEEN MANAGEMENT AND

OWNERSHIP
Transparent ownership
Strict separation of ownership and the management.
Stockholders cannot legally vote by post or the internet and have to show up.

Informs stockholders of upcoming meetings sufficiently in advance to consider and execute their votes.
Maintains a comprehensive website and presents its financial statements according to multiple
accounting standards.

Discloses its financials and non-financials as if it were a US-incorporated, SEC-registered company.

Disclosure includes an exhaustive corporate governance review, financial reports in four languages and
reconciliation to eight accounting standards

INDIVIDUALS (PROMOTERS
&FAMILIES) PUBLIC
INSTITUTIONS
SHAREHOLDING PATTERN

Shareholding belonging to the category :

"Public and holding more than 1% of the Total No.of Shares"
Total
Shares as % of
No.
Name of the Shareholder
Shares
Total No. of
held
Shares
1

Life Ins urance Corporation of India

25,576,238

4.45

Abu Dhabi Inves tm ent Authority

14,795,873

2.58

Oppenheim er Developing Markets Fund

16,054,393

2.8

Governm ent of Singapore

11,655,818

2.03

HDFC Trus tee Com pany Ltd

8,607,543

1.5

ICICI Prudential Life Ins urance Com pany Ltd

8,504,094

1.48

Vanguard Em erging Markets Stock Index Fund

8,702,741

1.52

Franklin Tem pleton Inves tm ent Funds

6,869,279

1.2

Aberdeen Global Indian Equity (Mauritius ) Ltd

6,355,000

1.11

10

Stichting Pens ioen Fonds ABP

6,135,632

1.07

11

Europacific Growth Fund

6,074,000

1.06

Total

119,330,611

20.78

Shareholding belonging to the category :

"Promoter and Promoter Group"
Total Shares held
No.

As a % of

Name of the Shareholder

Number

grand total
(A) + (B) + (C)

Narayana Murthy

2,379,672

0.41

Sudha N Murty

7,314,660

1.27

Aks hata Murty

8,106,412

1.41

Rohan Murty

7,949,782

1.38

Nandan M Nilekani

8,345,870

1.45

Rohini Nilekani

7,501,174

1.31

Jahnavi Nilekani

1,665,791

0.29

Nihar Nilekani

1,665,810

0.29

S Gopalakris hnan

6,656,726

1.16

12,294,625

2.14

604,366

0.11

10

Sudha Gopalakris hnan

11

Meghana Gopalakris hnan

12

K Dines h

4,596,537

0.8

13

As ha Dines h

7,047,482

1.23

14

Divya Dines h

1,375,130

0.24

15

Deeks ha Dines h

1,375,130

0.24

16

S D Shibulal

2,469,711

0.43

17

Kum ari Shibulal

2,711,044

0.47

18

Shruti Shibulal

3,671,924

0.64

19

Shreyas Shibulal

3,676,232

0.64

91,408,078

15.92

Total

Total Shareholdings as a % of Total No. of Shares

80
70

66.36

70.49

71.62

67.96

Shareholding of Promoter
and Promoter Group

60
Public Shareholding

50

40
30
20

17.6
16.04

10

16.04
13.47

16.04
12.34

16.1
15.94

0
March'2011

March'2012

March'2013

March'2014

Shares held by Custodians

and against which Depository
Receipts have been issued

VOTING RIGHTS
At any general meeting, voting is by show of hands unless a poll is demanded by a shareholder or shareholders
present in person or by proxy holding at least 10% of the total shares entitled to vote on the resolution or by
those holding shares with an aggregate paid up capital of at least 50,000.
Upon a show of hands, every shareholder entitled to vote and present in person has one vote and, on a poll,
every shareholder entitled to vote and present in person or by proxy has voting rights in proportion to the paid up
capital held by such shareholders.
Ordinary resolutions may be passed by simple majority of those present and voting at any general meeting for
which the required period of notice has been given.
Special resolutions for matters such as amendments to the articles of association, commencement of a new line
of business, the waiver of preemptive rights for the issuance of any new shares and a reduction of share capital,
require that votes cast in favor of the resolution (whether by show of hands or on a poll) are not less than three
times the number of votes, if any, cast against the resolution by members so entitled and voting.
Holders of ADSs do not have the right to attend the shareholder meetings of Infosys. They may instruct the
Depositary to vote the Equity Shares underlying their ADSs.

CORPORATE GOVERNANCE
Corporate Social Responsibility
At Infosys, the distribution of wealth is as important as its legal and ethical creation.

Infosys Foundation
Established the Infosys Foundation in 1996 as a not-for-profit trust to support our social initiatives.
The Foundation supports programs and organizations devoted to the cause of the destitute, the rural
poor, the mentally challenged, and the economically disadvantaged sections of the society. The
Foundation also helps preserve certain cultural forms and dying arts of India.
Community service
Through Computers@Classrooms initiative launched in January 1999, it donated 2,567 computers to
various institutions across India.
Additionally, it has applied to the relevant authorities for permission to donate computers to
educational institutions on an ongoing basis in the future.
Infosys support to the endeavor of Microsoft Corporation continues to participate in this initiative by
donating relevant software.
Social commitment in education
Infosys' Education & Research group has the pride of anchoring the Infosys Extension Program (IEP),
which consists of the Infosys Fellowship Program, Rural Reach program, Catch Them Young and Train
the Trainer

CEO
Current CEO : Dr. VISHAL SIKKA
DATE of Appointment : JUNE 14,2014
Vishal Sikka up to $5.08 million in annual salary besides a stock
option of $2 million, he worked in SAP FOR 10 years before resiging
as CTO of the company.
Sikka will be paid an annual base salary of $900,000 and annual
variable pay of $4.18 million, total of $5.08million besides being
eligible to receive an annual stock option equal to $2 million in
value.

BOARD OF DIRECTORS- INTERNAL

DIRECTORS
N.R. Narayana Murthy Founder, Executive Chairman
S. Gopalakrishnan - Co-Founder,Executive Vice Chairman
S.D. Shibulal - Co-Founder, Member of the Board, CEO & MD
Srinath Batni-Member of the Board, Head of Delivery Excellence
Pravin Rao- President and Member of the Board (since 2014)
B.G. Srinivas- President and Member of the Board (since 2014)

BOARD OF DIRECTORS- INDEPENDENT

DIRECTORS
K. V. Kamath- Lead Independent Director, Infosys, Non Executive
Chairman, ICICI Bank
Ann M. Fudge (On the boards of GE, Novartis, Unilever)
Dr. Omkar Goswami Founder and Chairman, CERG limited
Jeffrey Sean Lehman Vice Chancellor , NYU Shangai
R Seshasayee Executive Vice chairman, Ashok leyland Kiran
Mazumdar Shaw Chairman and Managing Director , Biocon
Ravi Venkatesan Director, member of Board, AB Volvo (Former
Chairman , Microsoft India)

BOARD OF DIRECTORS

COMPENSATION

EXPECTED RETURN OF SHAREHOLDERS

The return on equity for 2013 = 27.2%.
The average return on equity for last 10 years = 35.35%
Since the company has zero debt the return on firm is same
as return on equity.

SHAREHOLDING PATTERN- MARGINAL INVEST

The marginal investor would be the FII as
they hold a major chunk of the shares.
It is assumed that the marginal investor
in
. case of an FII would be well diversified

Since the major returns given by the

company are in form of capital gains
majority of the investors holding this
stock would prefer a buyback over a
dividend. Also dividends are taxed at a
higher rate

IPO/ ISSUE OF BONUS SHARES

Infosys had an IPO in February 1993 at a
face value of Rs. 95 which was quoted at
Rs. 145 in the Market.
Since then Bonus Shares have been
issued 6 times.
Hence an investor who purchased a
share in 1993 would own 128 shares of
the company and his Capital Gain would
be approximately Rs. 4,86,400.
An investor who held a share for the last
5 years would earn Rs. 2637.4 by the way
of Capital gains and would have received
a Total Dividend of Rs. 207.5 during these
years.

INFOSYS STATS

Market Cap: Rs 217.8k Crores

FCFEs:
2013 Rs.79600 Cr
2012 Rs. 69810 Cr
Current cash balance = Rs. 21832 Cr

ADS PROGRAM
In March 1999, it issued 20,70,000 ADSs
(equivalent to 10,35,000 equity shares
of par value of Rs. 10 each) at US $34
per ADS under the American Depositary
Shares Program

LISTINGS AND CODES OF INFOSYS SHARES / AMERICAN

DEPOSITARY RECEIPTS (ADRS)
In India

The same were listed on the NASDAQ

National Market.

In the event of a matter submitted to

the holders of ordinary shares for a
vote, the ADS holders on record as on a
particular date will be allowed to
instruct the depositary bank to exercise
the vote in respect of the equity shares
representing the ADS held by them.
Otherwise normal shares have voting
rights.

Outside India

NSE

BSE

NYSE

Exchange code

INFY

INFY

INFY

Reuters code

INFY.NS

INFY.BO

INFY.K

Bloomberg code

INFO IS

INFO IB

INFY UN

INFOSYS DIVIDENDS PAYOUT AND RELATED

POLICY
Currently, Infosys pays dividends to its shareholders. The current
dividend policy is to distribute up to 40 percent of the PAT
(consolidated Indian GAAP) as dividend.
The Board of Directors reviews the dividend policy periodically and
on Apr 15, 2014 decided to hike the dividend policy to up to 40
percent of post-tax profits from up to 30 percent of post-tax profits
earlier.

ESOP PROGRAM
1993- Infosys introduced ESOP. It was the first Indian company to offer stock options to
employees the year it went public
68,600 shares reserved for allotment in preferential basis to employees of the company
and group company (only 10,3000 shares taken up).
Balance 13,07,200 shares along with 58,500 shares not taken up by employees were
issued to the public (all were taken up).
A total of 16,237 employees benefited until ESOPs were halted in July 2003.
Infosys pioneered the employee stock option programme (ESOP) in the country and famously made
thousands of its employees crorepatis and millionaires, has officially suspended its ESOP scheme.
Infosys's ESOP scheme was in the limelight because it made people ranging from company
chairman NR Narayana Murthy to his chauffeur and executive assistant millionaires many times
over.

EQUITY SHARES INFORMATION

Infosys initial public offer (IPO) ,Initial listing price and follow-on offering
Infosys made an initial public offer in February 1993 and its shares were listed on stock exchanges in India
in June 1993. Trading opened at Rs. 145 per share, compared to the IPO price of Rs. 95 per share. In
October 1994, Infosys made a private placement of 5,50,000 shares at Rs. 450 each to Foreign Institutional
Investors (FIIs), Financial Institutions (FIs) and body corporates.
In March 1999, it issued 20,70,000 ADSs (equivalent to 10,35,000 equity shares of par value of Rs. 10 each)
at US$34 per ADS under the American Depositary Shares Program and the same were listed on the
NASDAQ National Market.
During July 2003, June 2005 and November 2006, it made successful secondary ADR issues of US$294
million, US$1.07 billion and US$1.605 billion respectively.
In December 2012, Infosys transferred the listing of its American Depositary Shares (ADS) to the NYSE from
the NASDAQ. In February 2013, Infosys got listed in Euronext London and Paris markets.

MARKET REACTION TO
ACQUISITIONS
3 major acquisitions
McCamish-38 million
Lodestone-330 million
Portland(38.8 million) Recently, the day before Narayana Murthys
return, Infosys stocks went up by 3.32% though Sensex failed This is a
sign of people inside knowing well in advance of the move.

DIVIDEND DISTRIBUTION
Looking into the past data of 5 years, the company has
announced a minimum dividend payout of 200% and a
maximum of 800%
This shows that the company is quite cash rich and hence
going on dividend distribution spree.
Being an IT company (service based),

DIVIDEND COMPARISION AMONG

PEERS DIVIDENDS (RS CR)
Infosy
s
Wipro TCS

HC Tech
L
Mahindra

Mar-10

1,674

881

3,914

470

43

Mar-11

4,013

1,473

2,740

270

51

Mar-12

3,137

1,475

4,893

514

51

Mar-13

2,815

1,725

4,306

831

64

Mar-14

4,233

1,960

6,267

835

467

FCFF (Rs Cr)

FCFE ( Rs Cr)
OCF( Rs Cr)
Dividends (Cr)
Dividend per share (Rs)
DIV/FCFE
DIV/OCF

Mar-10
6,278
6,278
7,997
1674
25
0.27
0.21

Mar-11
7,480
7,480
5,907
4013
30
0.54
0.68

Mar-12
6,981
6,981
8,212
3137
37
0.45
0.38

Mar-13
7,960
7,960
9,478
2815
42
0.35
0.30

Mar-14
10,082
10,082
12,187
4233
63
0.42
0.35

Infosys pay highest dividend

among other top software firms

FCFE has increased in last 5 years which

shows company can afford to pay out as
dividend.

COST OF EXCESS CASH

The annual report mentions that the cash reserves have been invested in
safe & sophisticated financial instruments.
They earn a return of around 8%.
Now WACC = Re = 12.74%
Assuming that they have the same cash/BV as the industry average in 2013 =
7.17%
Excess cash as on march = (0.47- 0.0717)* (bv of assets) = 18.51 thousand
crores.
Assuming that 5 thousand crores are kept for exigencies excess cash = 13.51
thousand crores.
Therefore cost of excess cash = (12.74- 8) * (13.51 thousand crores) = 877.4
crores

BUYBACK
There has been no major buyback since the company went public
There have been rumours at different points of time and many analysts
have also suggested buyback as a good way to return to the
shareholders.
However it must be noted that the marginal investor in infosys are FIIs.
These are growth investors and if Infosys continues with giving high
dividends then these investors will start selling the stock. Giving high
dividends would signal lack of significant investment opportunities.
These investors would prefer the company to go for buyback.

RATIOS ANALYSIS
Infosys

Infosys
14,000

1.00

12,000

0.80

(Rs Cr)

10,000
8,000

FCFE

0.60

6,000

OCF

0.40

4,000

Dividends

DIV/FCFE

0.20

2,000

0.00

0
Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

The DIV/FCFE, DIV OCF ratio has increased over the last few years. It suggest that they are returning more to investors in form
of dividends as there will be less investing opportunity. the current cash balance for this firm$4331 million

REGRESSION MODEL FOR COMPARISON

WITH PEERS-Source- Bloomberg
Running a regression on the dividend(DPS) and EPS for the mentioned
competitors we got,DPS = 0.06* (EPS) + 5.14,
However the Rsquare value = 0.138, indicates that EPS is not the
main criteria for deciding dividend payment.
According to our model we found that the DPS for 2013 is 14.64
whereas Infosys paid 42.

INVESTMENT DONE HISTORICALLY

Opening new offices , most of them in Europe & USA ;
Acquiring new business

These investments have expanded its footprint globally and contributed to rapid increase in revenues .
These investments have provided a very high ROCE.
But demand has fallen in USA and Europe which are the main markets for Infosys . So the present investment
opportunities are less attractive .This can be seen from decreasing ROCE.
However demand is rising in China . So the pattern of investment may change in future.
Infosys has provided 25 % return on equity on average .
Infosys stock has a beta 0.64 . Considering risk free rate of 8% and market return of 15 % this implies a
required return of 12.5% on equity .
So Infosys as provided return far above that expected by investors. .

ROE & ROCE

45.00%

40.00%

35.00%

30.00%

25.00%
ROE
ROCE

20.00%

15.00%

10.00%

5.00%

0.00%
2006

2007

2008

2009

2010

2011

2012

2013

Infosys as amended its Articles of Association to

Increase the limit on foreign holding ;
Removed protection provided to chairmanship of Sri Narayana Murthy
These changes restrict the ability to resist takeover attempt .Infosys is large cap high value high growth firm.
Infosys has had a low effective tax rate in the past . The rate was ~13% in 2006
Infosys has managed to keep its tax rate low by :

Getting tax benefits of Software technology Parks

By utilising loss on exchange rate variation
How ever the tax rate is rising as the tax holiday period is getting over . As a result the tax rate as increased
continuously and is currently ~ 28% .
Eff Tax rate
35.00%
30.00%
25.00%
20.00%
Eff Tax rate

15.00%
10.00%
5.00%
0.00%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

FINANCIAL RATIOS
ASSET TURNOVER RATIO : Increasing from approx. 1 in 2010 to 1.13 at present
DAYS WORKING CAPITAL : Increasing from 123 to 170 . Very high for e.g.. Current value of TCS is 137
Days working cap
180.00

160.00
140.00
120.00
100.00
Days working cap

80.00
60.00
40.00
20.00
0.00
2006

2007

2008

2009

2010

2011

2012

2013

CONCLUSION
Infosys is having ample cash reserve.

It can be returned to the investors. The analysis shows that it

is paying a high cost for this cash.

The investors would prefer a buyback because Infosys is

essentially is a growth stock. They will to time the buyback
appropriately and a large buyback can also improve EPS.