A PROJECT REPORT on Equity Analysis IT Sector

A PROJECT REPORT

ON

EQUITY RESEARCH AND ANALYSIS OF IT SECTOR

Project Submitted in fulfillment of

MMS

Submitted by:

ROBIN ANIL AWATHARE

Roll No. M1001

Batch 2010-2012

Under the guidance of

Mrs. MAHALAKSHMI SUBRAMANIAN

(Professor)

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Declaration

I, Robin Anil Awathare solemnly declare that the project work entitled “Equity research and analysis of IT sector ”, is my original work, it is

neither copied from any earlier submitted work elsewhere or not merely copied, this is specifically prepared as a part of MMS curriculum, to be

conducted in Year 2011.

Signature of the student: ________________________

Name of the Student: Robin Anil Awathare

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ACKNOWLEDGEMENT

A summer project is a golden opportunity for learning and self-development. I

consider myself very lucky and honored to have wonderful people lead me through in

this project.

My grateful thanks to Mr.Shasank Ajoy, manager who in spite of being

extraordinarily busy with his duties took time out to hear, guide and keep me on the

correct path. I do not know where I should have been without him. A humble thank

you madam Ms. Smita Narker, HR department monitored my progress and arranged

all facilities to make life easier. I chose this moment to acknowledge her contribution

gratefully. Prof Mrs. Mahalakshmi Subramanian whose patience I have probably

tested to the limit. She was always so involved in the entire process, shared her

knowledge, and encouraged me to think. Thank you madam. I would also like to

thank Ms. Tanaj and Mr. Abhijeet of placement department for their effort and help

provided to me to get such an excellent opportunity.

Last but not the least I will also like to thank the staff of Anand Rathi who shared

valuable information that helped in the successful completion of this project.

Robin Awathare

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Certificate of Completion

Robin Anil Awathare

has successfully completed the summer project at Anand Rathi kandiwali branch

for a period of two months from 16/05/2011 to 16/07/2011.

He has conducted a study entitled Equity research on IT sector

___________________ ______________

Name & Designation Department

Date:________________

Place:_______________

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CERTIFICATE

This is to certify that the project titled “Equity research and analysis of it

sector from investor’s point of view”” has been successfully and satisfactorily

completed and submitted by “Mr. Robin Anil Awathare”Mr. Robin Anil Awathare” bearing a roll number,

M1001 as a student of Chanakya Institute of Management Studies & Research as

Prescribed by AICTE in fulfillment of the requirement for MMS during the year 2011

– 12.

Internal Guide Director

Mrs. Mahalakshmi Subramanian Mr. Biswa B. Das

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INDEX

Sr. no. TOPIC Page no.

1 Executive summary 7

2 Company profile/company background 8

3 Introduction 13

4 Objective/scope of study 14

5 Definations 15

6 Research methodology 35

7 Data collection 36

8 Analysis 37

9 Conclusion 64

10 Recommendation 65

11 Limitation 66

12 Bibliography 67

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EXECUTIVE SUMMARY

The field of equity research is very vast and one has to look into various aspects of the

functioning of the company to get to any conclusion about the possible performance

of the company in the market. Investors like warren buffet made a fortune out of

investments in the stock market, which is quiet impossible without proper research

about the companies. The field of equity research is full of challenges. It is your door

to fame, fortune and, above all, professional challenge. In a world that is shrinking in

size due to information technology and blurring boundaries between nations, the stock

market (or the equities market), which is considered to be in its infant stage, is all set

to grow in size.

The project on “Equity Analysis of IT sector” was carried out in Anand Rathi

Securities Pvt Ltd., Mumbai, a very well known company in the field of stock broking

and capital market services sector. The duration of the project was two months. These

two months were not only limited to learning and devoting time towards equity

research but it also provided an insight on what various services such broking houses

provide and what efforts are required to manage such organizations.

The reason behind choosing this project is that it provides hands on experience with

what goes on in the stock market on a day-to-day basis. Some value investors only

look at present assets/earnings and don't place any value on future growth. Other

value investors base strategies completely around the estimation of future growth and

cash flows. Despite the different methodologies, it all comes back to trying to buy

something for less than its worth.

The project initiated with understanding the mannerisms of the stock market trading

followed by the dynamics of the telecom sector. Some of the major players in

Telecom sector were then chosen for further analysis. These companies were further

studied in detail with respect to their financials and the management’s future plans

regarding the functioning of the company, their expansion plans, and various news

about these companies and their global forays.

Based on the complete study of the companies, TCS INFOSYS & WIPRO looked

promising and with a view to derive maximum value from the investment

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COMPANY PROFILE

AnandRathi is a leading full service investment bank, founded in 1994 offering a

wide range of financial services and wealth management solutions to institutions,

corporations, high–net worth individuals and families. The firm has rapidly expanded

its footprint to over 350 locations across India with international presence in Hong

Kong, Dubai & London. Founded by Mr. Anand Rathi and Mr. Pradeep Gupta, the

group today employs over 2,500 professionals through out India and its international

offices.

The firm’s philosophy is entirely client centric, with a clear focus on providing long

term value addition to clients, while maintaining the highest standards of excellence,

ethics and professionalism. The entire firm activities are divided across distinct client

groups: Individuals, Private Clients, Corporate and Institutions. Asia-money in their

Fifth Annual Private Banking Poll 2009 has named AnandRathi The Best Domestic

Private Bank in India. The firm has emerged a winner across all key segments in

Asia-money’s largest survey of high net worth individuals in India.

In year 2007 Citigroup Venture Capital International joined the group as a financial

partner.

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Board of Directors

Anand Rathi, Founder & Chairman

Pradeep Gupta, Co- founder & Vice chairman

Amit Rathi, Managing Director

Board of Directors – Independent

P G Kakodkar, Director

Dr. S A Dave, Director

C D Arha, Director

Ajit Bhushan, Director

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COMPANY BACKGROUND

Set up in 1994,19.9% stake held by Citigroup Venture Capital International (CVC)

Milestones:

Wealth Management

Investment Banking

Brokerage & Distribution

AREAS OF EXPERTIES

Institutions

Private Clients

Priority Clients

Non-Resident Clients

Equity Capital Market – IPOs / FPO / QIB

Private Equity / Advisory

M&A

Debt Raising, Syndication and Restructuring

Equities

Derivatives

Bonds

Mutual Funds

Commodities

Insurance

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1994: Started activities in consulting and Institutional equity sales with staff of 15

1995: Set up a research desk and empanelled with major institutional investors

1997: Introduced investment banking businesses. Retail brokerage services launched

1999: Lead managed first IPO and executed first M & A deal

2001: Initiated Wealth Management Services

2002: Retail business expansion recommences with ownership model

2003: Wealth Management assets cross Rs1500 crores; Insurance broking launched;

Launch of Wealth Management services in Dubai; Retail Branch network exceeds 50

2004: Commodities brokerage and real estate services introduced; Wealth

Management assets cross Rs3000crores; Institutional equities business re launched

and senior research team put in place; Retail Branch network expands across 100

locations within India

2005: Real Estate Private Equity Fund launched; Retail branch network expands to

200 locations within India

2006: AR Middle East, WOS acquires membership of Dubai Gold & Commodity

Exchange (DGCX);

Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money

2006 poll; Ranked 6th in FY2006 for All India Broker Performance in equity

distribution in the High Net worth Individuals (HNI) Category

Ranked 9th in the Retail Category having more than 5% market share; Completes its

presence in all States across the country with offices at 300+ locations within India

2007: Citigroup Venture Capital International picks up 19.9% equity stake; Retail

customer base crosses 200 thousand; Establishes presence in over 450 locations

2009: Ranked #1 Private Domestic Asia Money polls 2009.

2010:AnandRathi Private Wealth adjudged Best Domestic Private Bank (India) by

Asia Money Polls 2010 for the second consecutive year

2011:AnandRathi for the third time in a row has been voted as the 'Best Domestic

Private Wealth Management Firm' by Asia money Polls 2011.

Key behind Anand Rathi success:

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INVEST CORRECTLY (RIGHT ASSET CLASS)+INVEST REGULARLY

=WEALTH CREATION

Client-centric philosophy, with focus on providing long term value addition to clients,

maintaining highest standards of excellence, ethics and professionalism

They always strive to develop strong relationships with there clients nurtured by

personal attention of senior management

They approach their clients holistically with the goal of balancing their strategic and

financial objectives

Proficiency in rendering consistent high quality value added services

A senior product team of retail specialists who provide hands on support to Personal

Investment Advisors for all products

Research:

Dedicated fundamental Research team for corporate guidance.

Publish variety of quality research reports

1. Sector specific

2. Macro Economic trends

3. Fundamental Reports – Daily, Weekly.

4. Technical Reports

Our excellent relationship with major market players gives us an edge over our

competitors in information collation

Regular Sector wise surveys enable us to have first hand information from

ground level

Success ratio of our positional calls is 70%

INTRODUCTION

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Indian information technology (IT) industry has played a key role in putting India on

the global map. In addition to fuelling India’s economy, this industry is also positively

influencing the lives of its people through an active direct and indirect contribution to

various socio-economic parameters such as employment, standard of living and

diversity. The industry has played a significant role in transforming India’s image

from a slow moving bureaucratic economy to a land of innovative entrepreneurs and a

global player in providing world-class technology solutions and business services,

according to National Association of Software and Service Companies (NASSCOM).

The sector is estimated to have grown by 19 per cent in the FY2011, clocking revenue

of almost US$ 76 billion. India’s outsourcing industry has witnessed a rebound and

registered better than expected growth according to NASSCOM.

The export revenues are estimated to have aggregated to US$ 59 billion in FY2011

and contributed 26 per cent as its share in total Indian exports (merchandise plus

services), according to a research report ‘IT-BPO Sector in India: Strategic Review

2011’, published by NASSCOM. The workforce in Indian IT industry will touch 30

million by 2020 and this sunrise industry is expected to continue its mammoth

growth, expect various industry experts.

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OBJECTIVE

As IT sector is the fastest growing sector in India due to heavy demand of IT

services in western countries. There are huge investment opportunities as there

is high rate of return.

To exploit this opportunity and earn profit by means of investment in this sector

To help analyze the company by understanding simple terms to invest correctly

and effectively

SCOPE OF THE STUDY

The scope of this project is limited to only one sector i.e. IT sector. This project

is concerned with only one sector of companies in the stock market. The

project does not extend its scope to any other sector of companies.

Also, the project is concerned with only 3 companies from among the major

players in the IT sector i.e. TCS, INFOSYS and WIPRO.

DEFINATIONS

Equity/Share

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Total equity capital of a company is divided into equal units of small

Denominations, each called a share. For example, in a company the total

Equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10

Each. Each such unit of Rs 10 is called a Share. Thus, the company

Then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such

shares are members of the company and have voting rights.

Debt Instrument

Debt instrument represents a contract whereby one party lends money to another on

pre-determined terms with regards to rate and periodicity of interest, repayment of

principal amount by the borrower to the lender.

In Indian securities markets, the term ‘bond’ is used for debt instruments issued by the

Central and State governments and public sector organizations and the term

‘debenture’ is used for instruments issued by private corporate sector.

Derivative?

Derivative is a product whose value is derived from the value of one or more basic

variables, called underlying. The underlying asset can be equity, index, foreign

exchange (forex), commodity or any other asset.

Derivative products initially emerged, as hedging devices against fluctuations in

commodity prices and commodity-linked derivatives remained the sole form of such

products for almost three hundred years. The financial derivatives came into spotlight

in post-1970 period due to growing instability in the financial markets. However,

since their emergence, these products have become very popular and by 1990s, they

accounted for about two- thirds of total transactions in derivative products.

Mutual Fund?

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board

of India) that pools money from individuals/corporate investors and invests the same

in a variety of different financial instruments or securities such as equity shares,

Government securities, Bonds, debentures etc. Mutual funds can thus be considered as

financial intermediaries in the investment business that collect funds from the public

and invest on behalf of the investors. Mutual funds issue units to the investors. The

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appreciation of the portfolio or securities in which the mutual fund has invested the

money leads to an appreciation in the value of the units held by investors.

binding on the Mutual Fund scheme. The investment objectives specify the class of

securities a Mutual Fund can invest in. Mutual Funds invest in The investment

objectives outlined by a Mutual Fund in its prospectus are

12various asset classes like equity, bonds, debentures, commercial paper and

government securities. The schemes offered by mutual funds vary from fund to fund.

Some are pure equity schemes; others are a mix of equity and bonds. Investors are

also given the option of getting dividends, which are declared periodically by the

mutual fund, or to participate only in the capital appreciation of the scheme.

Index

It is a basket of securities and the average price movement of the basket of securities

indicates the index movement, whether upwards or downwards.

Depository

A depository is like a bank wherein the deposits are securities (viz. shares, debentures,

bonds, government securities, units etc.) in electronic form.

Dematerialization

Dematerialization is the process by which physical certificates of an investor are

converted to an equivalent number of securities in electronic form and credited

An Index shows how a specified portfolio of share prices is moving in order

to the investor’s account with his Depository Participant (DP).

SEBI’s role

The Securities and Exchange Board of India (SEBI) is the regulatory authority in

India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for

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establishment of Securities and Exchange Board of India (SEBI) with statutory

powers for (a) protecting the interests of investors in securities (b) promoting the

development of the securities market and (c) regulating the securities market. Its

regulatory jurisdiction extends over corporate in the issuance of capital and transfer of

securities, in addition to all intermediaries and persons associated with securities

market. SEBI has been obligated to perform the aforesaid functions by such measures

as it thinks fit. In particular, it has powers for:

Regulating the business in stock exchanges and any other securities markets

Registering and regulating the working of stockbrokers, sub–brokers etc.

Promoting and regulating self-regulatory organizations

Prohibiting fraudulent and unfair trade practices

Calling for information from, undertaking inspection, conducting

Inquiries and audits of the stock exchanges, with the securities market.

Market Segments

Securities markets provide a channel for allocation of savings to those who have a

productive need for them. The securities market has two interdependent and

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inseparable segments: (i) primary market and (ii) secondary market.

Primary Market

Primary market provides an opportunity to the issuers of securities, both Government

and corporations, to raise resources to meet their requirements of investment.

Securities, in the form of equity or debt, can be issued in domestic /international

markets at face value, discount or premium.

The primary market issuance is done either through public issues or private

placement. Under Companies Act, 1956, an issue is referred as public if it results in

allotment of securities to 50 investors or more. However, when the issuer makes an

issue of securities to a select group of persons not exceeding 49 and which is neither a

rights issue nor a public issue it is called a private placement.

Secondary Market

Secondary market refers to a market where securities are traded after being offered to

the public in the primary market or listed on the Stock Exchange. Secondary market

comprises of equity, derivatives and the debt markets. The secondary market is

operated through two mediums, namely, the Over-the-Counter (OTC) market and the

Exchange-Traded market. OTC markets are informal markets where trades are

negotiated.

PRIMARY MARKET

Role of the ‘Primary Market’

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The primary market provides the channel for sale of new securities. Primary market

provides opportunity to issuers of securities; Government as well as corporates, to

raise resources to meet their requirements of investment and/or discharge some

obligation.

They may issue the securities at face value, or at a discount/premium and these

securities may take a variety of forms such as equity, debt etc. They may issue the

securities in domestic market and/or international market.

Face Value of a share/debenture

The nominal or stated amount (in Rs.) assigned to a security by the issuer. For shares,

it is the original cost of the stock shown on the certificate; for bonds, it is the amount

paid to the holder at maturity. Also known as par value or simply par. For an equity

share, the face value is usually a very small amount (Rs. 5, Rs. 10) and does not have

much bearing on the price of the share, which may quote higher in the market, at Rs.

100 or Rs.1000 or any other price. For a debt security, face value is the amount repaid

to the investor when the bond matures (usually, Government securities and corporate

bonds have a face value of Rs. 100). The price at which the security trades depends on

the fluctuations in the interest rates in the economy.

Premium and Discount in a Security Market

Securities are generally issued in denominations of 5, 10 or 100. This is known as the

Face Value or Par Value of the security as discussed earlier. When a security is sold

above its face value, it is said to be issued at a Premium and if it is sold at less than its

face value, then it is said

to be issued at a Discount.

Why do companies need to issue shares to the public?

Most companies are usually started privately by their promoter(s). However, the

promoters’ capital and the borrowings from banks and financial institutions may not

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be sufficient for setting up or running the business over a long term. So companies

invite the public to contribute towards the equity and issue shares to individual

investors. The way to invite share capital from the public is through a ‘Public Issue’.

Simply stated, a public issue is an offer to the public to subscribe to the share capital

of a company. Once this is done, the company allots shares to the applicants as per the

prescribed rules and regulations laid down by SEBI.

The different kinds of issues

Primarily, issues can be classified as a Public, Rights or Preferential issues (also

known as private placements). While public and rights issues involve a detailed

procedure, private placements or preferential issues are relatively simpler. The

classification of issues is illustrated below:

Initial Public Offering (IPO) is when an unlisted company makes either a fresh issue

of securities or an offer for sale of its existing securities or both for the first time to

the public. This paves way for listing and trading of the issuer’s securities.

A follow on public offering (Further Issue) is when an already listed company

makes either a fresh issue of securities to the public or an offer for sale to the public,

through an offer document.

Rights Issue is when a listed company which proposes to issue fresh securities to its

existing shareholders as on a record date. The rights are normally offered in a

particular ratio to the number of securities held prior to the issue. This route is best

suited for companies who would like to raise capital without diluting stake of its

existing shareholders.

A Preferential issue is an issue of shares or of convertible securities by listed

companies to a select group of persons under Section 81 of the Companies Act, 1956

which is neither a rights issue nor a public issue. This is a faster way for a company to

raise equity capital. The issuer company has to comply with the Companies Act and

the requirements contained

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SECONDARY MARKET

Introduction to Secondary market

Secondary market refers to a market where securities are traded after being initially

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offered to the public in the primary market and/or listed on the Stock Exchange.

Majority of the trading is done in the secondary market. Secondary market comprises

of equity markets and the debt markets.

Role of the Secondary Market

For the general investor, the secondary market provides an efficient platform for

trading of his securities. For the management of the company, Secondary equity

markets serve as a monitoring and control conduit—by facilitating value-enhancing

control activities, enabling implementation of incentive-based management contracts,

and aggregating information (via price discovery) that guides management decisions.

Market Capitalization mean

The market value of a quoted company, which is calculated by multiplying its current

share price (market price) by the number of shares in issue is called as market

capitalization. E.g. Company A has 120 million shares in issue. The current market

price is Rs. 100. The market capitalization of company A is Rs. 12000 million.

Products and Participants

Products

Financial markets facilitate reallocation of savings from savers to entrepreneurs.

Savings are linked to investments by a variety of intermediaries through a range of

complex financial products called “securities”. Under the Securities Contracts

(Regulation) Act [SC(R)A], 1956, “securities” include (i) shares, bonds, scrips, stocks

or other marketable securities of like nature in or of any incorporate company or body

corporate, (ii) government securities, (iii) derivatives of securities, (iv) units of

collective investment scheme, (v) interest and rights in securities, and security receipt

or any other instruments so declared by the central government. Broadly, securities

can be of three types - equities, debt securities and derivatives.

Participants

The securities market has essentially three categories of participants (i) the investors,

(ii) the issuers, (iii) the intermediaries (Figure 1.1). The Securities and Exchange

Board of India (SEBI), Reserve Bank of India (RBI), Ministry of Corporate Affairs

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(MCA) and the Department of Economic Affairs (DEA) of the Ministry of Finance

regulate these participants.

Market Segments and their Products

The Exchange (NSE) provides trading in four different segments - Wholesale Debt

Market, Capital Market, Futures and Options and Currency Derivatives Segment as

depicted in the figure 1.2 below.

(i) Wholesale Debt Market (WDM) Segment: This segment at NSE commenced

its operations in June 1994. It provides the trading platform for wide range of debt

securities which includes State and Central Government securities, T-Bills, PSU

Bonds, Corporate debentures, Commercial Papers, Certificate of Deposits etc.

(ii) Capital Market (CM) Segment: This segment at NSE commenced its operations

in November 1994. It offers a fully automated screen based trading system, known as

the National Exchange for Automated Trading (NEAT) system. Various types of

securities e.g. equity shares, warrants, debentures etc. are traded on this system.

(iii)Futures & Options (F&O) Segment: This segment provides trading in

derivatives instruments like index futures, index options, stock options, and stock

futures, and commenced its operations at NSE in June 2000.

(iv)Currency Derivatives Segment (CDS) Segment: This segment at NSE

commenced its operations on August 29, 2008, with the launch of currency futures

trading in US Dollar-Indian Rupee (USD-INR). Trading in other currency pairs like

Euro-INR, Pound Sterling-INR and Japanese Yen-INR was further made available for

trading in February 2010. ‘Interest rate futures’ was another product made available

for trading on this segment with effect from August 31, 2009.

Equity Investment

why should one invest in equities in particular?

When a person buy a share of a company you become a shareholder in that company.

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Shares are also known. Equities have the potential to increase in value over time.

Research studies have proved that the equity returns have outperformed the returns of

most other forms of investments in the long term. Investors buy equity shares or

equity based mutual funds because: -

- Equities are considered the most rewarding, when compared to other investment

options if held over a long duration.

- Research studies have proved that investments in some shares with a longer tenure

of investment have yielded far superior returns than any other investment.

The average annual return of the stock market over the period of last fifteen years, if

one takes the Nifty index, as the benchmark to compute the returns, has been around

16%.

However, this does not mean all equity investments would guarantee similar high

returns. Equities are high-risk investments. Though higher the risk, higher the

potential returns, high risk also indicates that the investor stands to lose some or all

his investment amount if prices move unfavorably. One need to study equity markets

and stocks in which investments are being made carefully, before investing.

Return on Equities in India

If we take the Nifty index returns for the past fifteen years, Indian stock market has

returned about 16% to investors on an average in terms of increase in share prices or

capital. Besides that on average stocks have paid 1.5% dividend annually. Dividend is

a percentage of the face value of a share that a company returns to its shareholders

from its annual profits. Compared to most other forms of investments, investing in

equity shares offers the highest rate of return, if invested over a longer duration.

Factors that influence the price of a stock

Broadly there are two factors: (1) stock specific and (2) market specific. The stock-

specific factor is related to people’s expectations about the company, its future

earnings capacity, financial health and management, level of technology and

marketing skills.

The market specific factor is influenced by the investor’s sentiment towards the stock

market as a whole. This factor depends on the environment rather than the

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performance of any particular company. Events favorable to an economy, political or

regulatory environment like high economic growth, friendly budget, stable

government etc. can fuel euphoria in the investors, resulting in a boom in the market.

On the other hand, unfavorable events like war, economic crisis, communal riots,

minority government etc. depress the market irrespective of certain companies

performing well. However, the effect of market-specific factor is generally short-term.

Despite ups and downs, price of a stock in the long run gets stabilized based on the

stock- specific factors. Therefore, a prudent advice to all investors is to analyze and

invest and not speculate in shares.

Fundamental analysis

Fundamental analysis is the process of looking at a business at the basic or

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fundamental financial level. This type of analysis examines key ratios of a business to

determine its financial health and gives you an idea of the value its stock.Many

investors use fundamental analysis alone or in combination with other tools to

evaluate stocks for investment purposes. The goal is to determine the current worth

and, more importantly, how the market values the stock.

Fundamental Analysis Tools

These are the most popular tools of fundamental analysis. They focus on earnings,

growth, and value in the market. They can be studied with ratios.

• Earnings per Share – EPS

• Price to Earnings Ratio – P/E

• Projected Earning Growth – PEG

• Price to Sales – P/S

• Price to Book – P/B

• Dividend Payout Ratio

• Dividend Yield

• Book Value

• Return on Equity

Earnings per Share – EPS

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It makes more sense to look at earnings per share (EPS) for use as a comparison tool.

You calculate earnings per share by taking the net earnings and divide by the

outstanding shares.

EPS = Net Earnings / Outstanding Shares

The EPS is helpful in comparing one company to another, assuming they are in the

same industry, but it doesn’t tell you whether it’s a good stock to buy or what the

market thinks of it. For that information, we need to look at some ratios. Before we

move on, you should note that there are three types of EPS numbers:

Trailing EPS – last year’s numbers and the only actual EPS

Current EPS – this year’s numbers, which are still projections

Forward EPS – future numbers, which are obviously projections

Price to Earnings Ratio – P/E

The P/E is one of those numbers that investors throw around with great authority as if

it told the whole story.The P/E looks at the relationship between the stock price and

the company’s earnings. The P/E is the most popular metric of stock analysis,

although it is far from the only one you should consider.

You calculate the P/E by taking the share price and dividing it by the company’s EPS.

P/E = Stock Price / EPS

The P/E gives you an idea of what the market is willing to pay for the company’s

earnings. The higher the P/E the more the market is willing to pay for the company’s

earnings. Some investors read a high P/E as an overpriced stock and that may be the

case, however it can also indicate the market has high hopes for this stock’s future and

has bid up the price.The P/E is the most popular way to compare the relative value of

stocks based on earnings because you calculate it by taking the current price of the

stock and divide it by the Earnings Per Share (EPS). This tells you whether a stock’s

price is high or low relative to its earnings.

Projected Earning Growth – PEG

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Investors may consider a company with a high P/E overpriced and they may be

correct. A high P/E may be a signal that traders have pushed a stock’s price beyond

the point where any reasonable near term growth is probable.However, a high P/E

may also be a strong vote of confidence that the company still has strong growth

prospects in the future, which should mean an even higher stock price.

Because the market is usually more concerned about the future than the present, it is

always looking for some way to project out. Another ratio you can use will help you

look at future earnings growth is called the PEG ratio. The PEG factors in projected

earnings growth rates to the P/E for another number to remember.

You calculate the PEG by taking the P/E and dividing it by the projected growth in

earnings.

PEG = P/E / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next year of 15%

would have a PEG of 2 (30 / 15 = 2).

What does the “2” mean? Like all ratios, it simply shows you a relationship. In this

case, the lower the number the less you pay for each unit of future earnings growth.

So even a stock with a high P/E, but high projected earning growth may be a good

value.

Price to Sales – P/S

We have a number of tools available to us when it comes to evaluating companies

with earnings. We can add the two others on dividends and the one on return on

equity to the list as specific to companies that are or have made money in the past.

Does that mean companies that don’t have any earnings are bad investments? Not

necessarily, but you should approach companies with no history of actually making

money with caution.

The Internet boom of the late 1990s was a classic example of hundreds of companies

coming to the market with no history of earning – some of them didn’t even have

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products yet. Fortunately, that’s behind us.However, we still have the problem of

needing some measure of young companies with no earnings, yet worthy of

consideration. After all, Microsoft had no earnings at one point in its corporate life.

One ratio we can use is Price to Sales or P/S ratio. This metric looks at the current

stock price relative to the total sales per share. You calculate the P/S by dividing the

market capof the stock by the total revenues of the company.

We can also calculate the P/S by dividing the current stock price by the sales per

share.

P/S = Market Cap / Revenues

or

P/S = Stock Price / Sales Price Per Share

When dealing with a young company, there are many questions to answer and the P/S

supplies just one answer.Investors looking for hot stocks aren’t the only ones trolling

the markets. A quiet group of folks called value investors go about their business

looking for companies that the market has passed by.

Some of these investors become quite wealthy finding sleepers, holding on to them

for the long term as the companies go about their business without much attention

from the market, until one day they pop up on the screen, and some analyst

“discovers” them and bids up the stock. Meanwhile, the value investor pockets a hefty

profit.

Price to Book – P/B

Value investors look for some other indicators besides earnings growth and so on.

One of the metrics they look for is the Price to Book ratio or P/B. This measurement

looks at the value the market places on the book value of the company.

You calculate the P/B by taking the current price per share and dividing by the book

value per share.

29

P/B = Share Price / Book Value Per Share

Like the P/E, the lower the P/B, the better the value. Value investors would use a low

P/B is stock screens, for instance, to identify potential candidates.

Dividend Payout Ratio

The Dividend Payout Ratio (DPR) is one of those numbers. It almost seems like a

measurement invented because it looked like it was important, but nobody can really

agree on why.

The DPR (it usually doesn’t even warrant a capitalized abbreviation) measures what a

company’s pays out to investors in the form of dividends.

You calculate the DPR by dividing the annual dividends per share by the Earnings Per

Share.

DPR = Dividends Per Share / EPS

For example, if a company paid out $1 per share in annual dividends and had $3 in

EPS, the DPR would be 33%. ($1 / $3 = 33%)

The real question is whether 33% is good or bad and that is subject to interpretation.

Growing companies will typically retain more profits to fund growth and pay lower or

no dividends.

Companies that pay higher dividends may be in mature industries where there is little

room for growth and paying higher dividends is the best use of profits (utilities used

to fall into this group, although in recent years many of them have been diversifying)

Dividend Yield

if we are value investor or looking for dividend income then there are a couple of

measurements that are specific for us. For dividend investors, one of the telling

metrics is Dividend Yield.

This measurement tells you what percentage return a company pays out to

shareholders in the form of dividends. Older, well-established companies tend to

payout a higher percentage then do younger companies and their dividend history can

30

be more consistent.

You calculate the Dividend Yield by taking the annual dividend per share and divide

by the stock’s price.

Dividend Yield = annual dividend per share / stock's price per share

For example, if a company’s annual dividend is $1.50 and the stock trades at $25, the

Dividend Yield is 6%. ($1.50 / $25 = 0.06)

Book Value

Another way to determine a company’s value is to go to the balance statement and

look at the Book Value. The Book Value is simply the company’s assets minus its

liabilities.

Book Value = Assets - Liabilities

In other words, if you wanted to close the doors, how much would be left after you

settled all the outstanding obligations and sold off all the assets.A company that is a

viable growing business will always be worth more than its book value for its ability

to generate earnings and growth.

Book value appeals more to value investors who look at the relationship to the stock's

price by using the Price to Book ratio.

To compare companies, you should convert to book value per share, which is simply

the book value divided by outstanding shares.

Return on Equity

Return on Equity (ROE) is one measure of how efficiently a company uses its assets

to produce earnings. You calculate ROE by dividing Net Income by Book Value. A

healthy company may produce an ROE in the 13% to 15% range. Like all metrics,

compare companies in the same industry to get a better picture.

While ROE is a useful measure, it does have some flaws that can give you a false

picture, so never rely on it alone. For example, if a company carries a large debt and

31

raises funds through borrowing rather than issuing stock it will reduce its book value.

A lower book value means you’re dividing by a smaller number so the ROE is

artificially higher. There are other situations such as taking write-downs, stock buy

backs, or any other accounting slight of hand that reduces book value, which will

produce a higher ROE without improving profits.

It may also be more meaningful to look at the ROE over a period of the past five

years, rather than one year to average out any abnormal numbers.

Given that you must look at the total picture, ROE is a useful tool in identifying

companies with a competitive advantage. All other things roughly equal, the company

that can consistently squeeze out more profits with their assets, will be a better

investment in the long run.

32

Technical analysis

Technical analysis takes a completely different approach; it doesn't care one bit about

the "value" of a company or a commodity. Technicians (sometimes called chartist) are

only interested in the price movements in the market.

Despite all the fancy and exotic tools it employs, technical analysis really just studies

supply and Demand in a market in an attempt to determine what direction, or trend,

will continue in the future. In other words, technical analysis attempts to understand

the emotions in the market by studying the market itself, as opposed to its

components. If you understand the benefits and limitations of technical analysis, it can

give you a new set of tools or skills that will enable you to be a better trader or

investor

The field of technical analysis is based on three assumptions:

1. The market discounts everything.

2. Price moves in trends.

3. History tends to repeat itself.

The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement,

ignoring the fundamental factors of the company. However, technical analysis

assumes that, at any given time, a stock's price reflects everything that has or could

affect the company - including fundamental factors. Technical analysts believe that

the company's fundamentals, along with broader economic factors and market

psychology, are all priced into the stock, removing the need to actually consider

these factors separately. This only leaves the analysis of price movement, which

33

technical theory views as a product of the supply and demand for a particular stock

in the market.

Price Moves in Trends

In technical analysis, price movements are believed to follow trends. This means that

after a trend has been established, the future price movement is more likely to be in

the same direction as the trend than to be against it. Most technical trading strategies

are based on this assumption.

History Tends To Repeat Itself Another important idea in technical analysis is that

history tends to repeat itself, mainly in terms of price movement. The repetitive nature

of price movements is attributed to market psychology; in other words, market

participants tend to provide a consistent reaction to similar market stimuli over time.

Technical analysis uses chart patterns to analyze market movements and understand

trends. Although many of these charts have been used for more than 100 years, they

are still believed to be relevant because they illustrate patterns in price movements

that often repeat themselves.

Fundamental vs. Technical Analysis

Technical analysis and fundamental analysis are the two main schools of thought in

the financial markets. As we've mentioned, technical analysis looks at the price

movement of a security and uses this data to predict its future price movements.

Fundamental analysis, on the other hand, looks at economic factors, known as

fundamentals. Let's get into the details of how these two approaches differ, the

criticisms against technical analysis and how technical and fundamental analysis can

be used together to analyze securities.

The Differences Charts vs. Financial Statements At the most basic level, a technical

analyst approaches a security from the charts, while a fundamental analyst starts

with the financial statements.

34

RESEARCH METHOLOGY

Research is often described as an active, diligent and systematic process of inquiry

aimed at discovering, interpreting and revising facts. This intellectual investigation

produces a greater understanding of events, behavior or theories and makes practical

applications through laws and theories. The term research is also used to describe a

collection of information about a particular subject, and is usually associated with

science and scientific method.

BASIC RESEARCH:

Basic research is also called as fundamental or pure research. Its primary objective is

the advancement of knowledge and the theoretical understanding of the relations

among the variables. It is exploratory and often driven by researcher’s curiosity or

interest. It is conducted without any practical end in mind. Basic research often lays

down the foundation for further applied research.

APPLIED RESEARCH:

Applied research is done to solve specific, practical questions. Its primary objective is

not to gain knowledge for its own sake. It is usually descriptive in nature. It is almost

always done on the basis of basic research.

As far as equity research is concerned there are two types of research methods that are

followed:

• Fundamental analysis

• Technical analysis

Financial statement analysis is the biggest part of Fundamental analysis also known as

quantitative analysis, it involves looking at historical performance data to estimate the

future performance of stocks whereas Technical analysis does not care one bit about

the value of the company, it is only interested in the price movements of the company

s share in the market.

[15]This project deals with the fundamental analysis aspect of the equity research.

The researcher in this project has tried to look into the details of the financial

statements of the companies, the environment surrounding the telecom sector, the

latest developments in this regard, the management discussions on the part of every

company and the government policies concerned with the telecom sector.

35

DATA COLLECTION:

• Primary data for a project is the first hand information regarding the project

being studied. In this regard the primary data for this project would be getting the

necessary information from the company management by an interview, telephonic

conversation or direct mail.

• Secondary data for a project would be the collection of information that has a

bearing on the outcome of the project from secondary sources like news, press

releases, internet etc.

The data collected for this project was from a secondary source. The data was

complied with the help of sources like News articles, Internet, Capitaline software. In

this research, primary data could not be gathered as the company officials could not

be contacted for a one to one interview or a telephonic interview.

Research objective: to do analysis IT companies for the purpose of investment in equity

Type of research design: conclusive

Data collection method:

Primary data: unavailable

Secondary data: the company site and various financial news sites

Research design: it is based on historical performance data.

36

ANALYSIS

Macroeconomic analysis

Analysis of IT industry: PEST analysis

IT INDUSTRY IN INDIA

The Indian information technology sector has been instrumental in driving the nation's

economy onto the rapid growth curve. According to the Nasscom-Deloitte study, the

IT/ITES industry's contribution to the country's GDP has increased to a share of 5.2

per cent in 2007, as against 1.2 per cent in 1998. Further, the IT and BPO industries

are poised to clock revenues worth US$ 64 billion by the end of fiscal year 2008,

registering a growth of 33 per cent with exports expected to cross US$ 40 billion and

the domestic market estimated to clock over US$ 23 billion, according to a study.

Simultaneously, the Indian IT services market is estimated to remain the fastest

growing in the Asia Pacific region with a CAGR of 18.6 per cent, as per a study by

Springboard Research. India's IT growth in the world is primarily dominated by IT

software and services such as Custom Application Development and Maintenance

(CADM), System Integration, IT Consulting, Application Management, Infrastructure

Management Services, Software testing, Service-oriented architecture and Web

services. A report by the Electronics and Software Export Promotion Council (ESC)

estimates software exports to register a 33 per cent growth in the current financial

year with export figures during FY 2008 expected to reach US$ 45 billion. The

country's IT exports have, in fact, come quite far, starting from a few million dollars

in the early 1990s. The Government expects the exports turnover to touch US$ 80

billion by 2011, growing at an annual rate of 30 per cent per annum.

POLITICAL FACTORS:-

This is a political factor, which affects a business, which can be government rules and

regulation toward that particular business environment. For IT industry the Indian

political structure is stable, but there are fears of hung parliament due to a lack of

clear majority in parliament creating fear of wrong investing in the minds of investor

thereby reducing capital. U.S government has declared that U.S firm that outsource IT

works outside the U.S will not get tax benefits, this has caused reduction in U.S BPO

contract from the U.S in the last fiscal year thereby reducing revenue from the U.S.

37

Indian government has decided to contract IT job to Indian IT companies creating

more opportunities for the company and the industry at large. In software

development different countries are configuration rules and regulations are considered

since client demand differs because of different system requirement. NASSCOM and

DELIOTTE study (impacting economy and society 2007/2008), states that Indian

government has strengthened the IT act, 2000 to provide a sound legal environment

for companies to operate related to security of data in transmission and storage etc this

has served as a positive factor. Infosys has to put Indian relationship with different

countries of business into consideration before investing. Other factors to be

considered are customer protection law, competitive regulations, and terrorist attacks.

POLITICAL STABILITY: _

India suffered political instability for a few years due to the failure of any party to win

an absolute majority in Parliament. However, political stability has returned since the

previous general elections in 1999. However, political instability did not change

India's economic course though it delayed certain decisions relating to the economy.

The political divide in India is not one of policy, but essentially of personalities.

Economic liberalization (which is what foreign investors are interested in) has been

accepted as a necessity by all parties including the Communist Party of India

(Marxist).

Thus, political instability in India, in practical terms, posed no risk to foreign direct

investors because any successive government has reversed no policy framed by a past

government so far. You can find a comparison in Italy, which has had some 45

governments in 50 years yet, overall economic policy remains unchanged. Even if

political instability is to return in the future, chances of a reversal in economic policy

are next to nil.

As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for

Kashmir in the north and parts of the northeast, terrorist activity is either non- existent

or too weak to be of any significance. It would take an extreme stretching of the

imagination to visualize a Bangladesh-type state-disrupting revolution in India or a

Kuwait-type annexation of India by a foreign power.

Hence, political risk in India is practically non-existent.

Likewise the IT sector does not have any influence of political stability on

industry. And if the govt. changes there is little effect on the industry of that

38

political step.

ECONOMICAL FACTORS

These include factors affecting IT industry ranging from rising working pay, global

recession, competition, contract availability and fee. Domestic IT spending grew by

20% and reached $20 billion in 2009. Currency fluctuations caused by the devaluation

of the dollar has affected the industry during the last global recession. Real estate

prices decline resulted in rental expenditure forcing customer to leave luxuries goods

such as electronic and computers that need software to work. Recession cause low

attribute rate due to job layouts and job cuts. India economic attraction has helped in

convincing investors due to low cost advantage. With India’s global IT spending yet

to decline due to entry of new IS companies and the cause of the recession. With

clients industry faced with reduction of work force due to job layoffs and unsuitable

balance sheet most companies have decided not to make much expenditure in

purchase, but make optimum use of existing facilities to make

profits. Most debtors with financial crisis have been granted more time to pay up

causing large debt deficit. With the decline of banking and financial sectors, the

revenue from there is expected to decline, hurting the bottom line of IT majors

DOMESTIC IT SPENDING:-

India's domestic IT market will grow around 14% this year, showing a minor decline

as compared to last year's growth of 16-18%. Hence, it is expected that the country

will see a minor decline in IT budget coming from its domestic market. "Compared to

other countries, India is in a better position. Its domestic market is expected to grow

around 14% this year. We also expect that IT spend in India will see a minor decline

as compared to last year. There could be some 2-3% decline as compared to last year's

budget," commented Arup Roy, senior research analyst at Gartner.

GLOBAL IT SPENDING:-

Indian enterprises spending on information communications and technology (ICT) in

2005 are expected to grow at more than twice the rate in the Asia Pacific region.

Enterprise spending in the Asia Pacific (APAC) on hardware next year will rise 6.3

per cent to $36.9bn, with software increasing 12.4 per cent to $5.6bn while telecom

will grow 7.5 per cent to $132.5bn and IT services will gain 8.4 per cent to $33.6bn.

39

In India, of the $22.88bn spend in 2005 on enterprise ICT, $3.34bn is the projected

spend on hardware, an increase of 21.1 per cent over 2004; $0.52bn (16.4 per cent

increase) on software; $16.7bn (15.5 per cent increase) on telecom and $2.32bn (18.3

per cent increase) on IT services. India will remain the highest growth market for

telecommunications with around 35 million new subscribers in 2005, an 18 per cent

increase from 2004, with the growth occurring in selected technologies mainly

mobile. This accounts for almost one fourth of the new subscribers forecasted in Asia

Pacific. Consumer segment is rapidly gaining importance, driven by adoption of

mobile services. This is reflected in their increased contribution towards spending for

telecommunication services, from 35 per cent in 2002 to 43 per cent in 2005. By 2008

the consumer segment will account for more than half of telecommunications

spending, the report said. Gartner also said that open source and offshore IT services

will continue to grow, while it warned global IT vendors to take emerging

competition from China seriously with at least three Chinese IT companies becoming

significant global competitors by 2010. The growth in offshore BPO services outpaces

the growth in global sourcing of IT services. Offshore component of global BPO

services spend is expected to grow from $3 billion (2.4 per cent of total markets spend

of $124 billion in 2004) to $24 billion (15 per cent of the total markets spend of $161

billion in 2007).

REAL STATES PRICES: -

Decline in real estate prices has resulted reducing the rental expenditure thus the

industry will grow if the real estate price goes down.

ATTRITION:-\

Almost every sector in India is facing high rates of attrition these days. A recent

study revealed that employees leave either because of compensation reasons or due to

better growth opportunities. According to NASSCOM, Indian IT-ITES industry

recorded US$ 39.6 billion in revenues in 2006-07. The revenue of US$ 49-50 billion

has been projected in 2007-08 at a growth rate of 24-27 per cent. The IT industry's

contribution to GDP was 4.8 per cent in 2005-06

Though the IT/ITES sector is booming, it is constantly facing high attrition rates of

25% - 30%. Even the big brands are also facing the same problem. Below are the

details of attrition rates of various players

in IT sector. According to the survey conducted by BES and Data Quest, Sierra

40

Atlantic recorded highest attrition rate (29%) followed by Kanbay with 25% and

Accel Frontline with 20 per cent.

ECONOMIC ATTRACTION:-

There is a lot of economic attraction towards IT sector due to low cost advantage

and other factors. India, with its low cost advantage and emergence of several

private players, represents the fastest growing market. Further the geographical

location of India serves it the advantage of being exactly halfway round the world

from the US west coast, which is another reason why India is preferred destination of

many big brands. India’s development and contribution in world’s information

technology sector is of highest reputation. Cities like Bangalore have become the

favorite(most preferred) destinations of all the big banners like HSBC, Dell,

Microsoft, GE, Hewlett Packard, and several Indian multi national firms like Infosys

Technologies, Wipro, and Micro land who have set up their offices in the city. It is

because the city offers good infrastructure, with large floor space and great telecom

facilities. This can be judged on the basis of the high growth statistics of India and the

changing outlook of the companies towards India.

It is because of this growth many popular brands that have not yet build up there rigid

offices in the country are making it fast to have a destination in India too. For

example, Sun Microsystems, a global IT major, announced in Bangalore to double the

present workforce of the company's Sun India Engineering Center (IEC) from the

present 1000 to 2000 in the next two years time. IEC, which is the largest R&D center

for Sun outside the US, would also focus on developing products in India to suit the

needs of the Indian market, which would be benchmarked globally.

Also, the presence of a large number of Indians, especially engineers, in the US gave

India an easy entry into the US software market.

SOCIAL FACTORS

These are social factors affecting IT industry, which ranges from employee right,

language barriers, race nationality of company or other issues. English language being

widely spoken in India has help in fostering the industry’s relationship and interaction

in India and on the global stage. India is one of the few countries to have an

increasing share of working population; since there is great availability of both skilled

and unskilled labor force. Great number of institute and universities offer IT

41

Course creating room for availability of IT professional at lower cost since there is job

competition. India has to produces great numbers of IT professional each year to meet

its demand. India continue to produce IT professionals each year, this has help

industry for IT professionals inwards. Industries have to consider the type of services

the software is meant for, age difference of users, life style of the different countries

of supply. It should be noted that there will always be difference in client behaviours

which is supported by the fact that different customers have different taste.

SOCIAL ISSUES;-

Should Industry be concern with the issue of global warming? Yes it is affected by

many government laws regarding it like in china, where company with great amount

of carbon emission are charge great amount of tax. Likewise being a major player in

the global IT market Infosys has introduces measure to help in the reduction of carbon

emission by trying to reduce its water consumption, electricity utilization, carbon

emission and partnering with other companies in troubleshooting this global dilemma

EDUCATION:-

There are large number of universities and institutes in India offering IT education.

And there are large numbers of students which ever year passed these courses and join

the IT industry. The Indian labor is not only cheap but is technically skilled too to the

world-class level. It is due to the Indian Education System that includes in its course

curriculum the practical knowledge of the latest technology that is developed in world

along with the fluency in English Language that imparts compatibility in an Indian

technician to communicate and work throughout the world.

CAREER PROSPECTS

In the year 2006-07, the industry hired approximately 3, 80,000 people. Out of these,

the ITeS sector hired 2, 00,000 people and the rest were taken by IT sector. The

recruitment trends of some IT giants are given below: TCS- 35,000 Infosys- 30,000

Wipro-28,000 Satyam-20,000 Some of the areas of specialization in the IT Industry

are-

Designing Research and Development in Peripheral Integration Product Quality

Control and Reliability Testing Computer Manufacturing Maintenance Service

System Developing /Programming /Software Engineering Networking Application

42

Programming EDP/ E- Commerce Enterprise Resource Planning (ERP) Database

Warehousing and Management

Operating jobs, Computer operators, Data Entry WORKING AGE POPULATION:-

Working age population also affects the industry a lot because every person has

different value, lifestyle, attitude, and also the satisfaction level.

TECHNOLOGICAL FACTORS;-

TELEPHONY

Cellular mobile telephony tariffs in India are the lowest in the world. A

comparison of Indian cellular tariffs vis-à-vis the tariffs prevailing in comparative

emerging economies in South America & Asia-Pacific region, clearly brings out the

affordability of Indian cellular mobile telephone services.

NEW IT TECHNOLOGY:-

With the evolution of SOA and semantic web services, enterprise solution heeds to

the limitations of conventional enterprise systems by providing data convergence and

concept reutilization with intelligence. Web2.O represents the next transition in the

evolution of web applications; they promise to restore the richness, interactivity and

usability lacking in many web applications.

CAD:-

Computer-aided design (CAD) is the use of a wide range of computer-based tools that

assist engineers, architects and other design professionals in their design activities. It

is the main geometry authoring tool within the Product Lifecycle Management

process and involves both software and sometimes special-purpose hardware. Current

packages range from 2D vector based drafting systems to 3D solid and surface

modellers.

LEGAL ASPECTS AND POLICIES

This speedy growth of IT Sector is undoubtedly due to the efforts of Indian

government and the other developments that took in the other parts of the globe.

IT Act 2000:

India became the 12th nation in the world to adopt a cyber law during 2000.

• From the perspective of e-commerce in India, the IT Act 2000 and its provisions

Contain many positive aspects. Firstly, the implications of these provisions for the e-

businesses would be that email would now be a valid and legal form of

communication in our country that can be duly produced and approved in a court of

43

law.

• Companies shall now be able to carry out electronic commerce using the legal

infrastructure provided by the Act.

• Digital signatures have been given legal validity and sanction in the Act.

• The Act throws open the doors for the entry of corporate companies in the business

of being Certifying Authorities for issuing Digital Signatures Certificates.

• The Act now allows Government to issue notification on the web thus heralding e-

governance.

• The Act enables the companies to file any form, application or any other document

with any office, authority, body or agency owned or controlled by the appropriate

Government in electronic form by means of such electronic form as may be

prescribed by the appropriate Government.

• The IT Act also addresses the important issues of security, which are so critical to

the success of electronic transactions. The Act has given a legal definition to the

concept of secure digital signatures that would be required to have been passed

through a system of a security procedure, as stipulated by the Government at a later

date.

• Under the IT Act, 2000, it shall now be possible for corporate to have a statutory

remedy in case if anyone breaks into their computer systems or network and causes

damages or copies data. The remedy provided by the Act is in the form of monetary

damages, not exceeding Rs. 1 crore.

Indian Copyright Act:

The copyright of computer software is protected under the provisions of Indian

Copyright Act 1957. Major changes to Indian Copyright Law were introduced in 1994

and came into effect from 10 May 1995. Copyright Act clearly explained:

• The rights of a copyright holder

• Position on rentals of software

• The rights of the user to make backup copies

• Most importantly the amendments imposed heavy punishment and fines for

infringement of copyright of software.

Income Tax

Deduction under sections 10A/ 10B of Income tax Act, 1961 (“IT Act”) in respect of

profits derived from export of computer software. Following undertakings are eligible

44

to claim deduction in respect of profits derived from export of computer software

under the provisions of sections 10A/ 10B of the IT Act:

• Existing units which commenced operations prior to April 1, 2000 and claimed

deduction under the provisions of erstwhile sections 10A/ 10B, can continue to claim

such deduction under the provisions of newly substituted sections 10A/ 10B for the

unexpired period of ten consecutive assessment years. Deduction would continue to

be available in case of corporate re-organizations by way of amalgamation or

demerger.

Depreciation on computers and computer software at 60 percent As per the provisions

of the IT Act, annual depreciation on computers and computer software can be

claimed at the rate of 60 percent of written down value at the beginning of the

relevant financial year for income tax purposes. Therefore, under the written down

value method, 84 percent of cost of computers and software can be depreciated in first

2 years.

45

THE GROWTH STORY

India is a preferred destination for companies looking to offshore there IT and back-

office functions. It also retains its low-cost advantage and is a financially attractive

location when viewed in combination with the business environment it offers and the

availability of skilled people.

India's top technology firms like TCS, Infosys, Wipro and HCL are readying plans to

gain a bigger share of their largest market, US, by aggressively chasing contracts

being served by multinational rivals. Analysts expect the top IT firms to grow

between 23-27 per cent in the FY2012 on the back of more number of discretionary

projects, improved pricing, and robust business volumes.

INVESTMENTS

Between April 2000 and February 2011, the computer software and hardware sector

received cumulative foreign direct investment (FDI) of US$ 10,705 million, according

to the Department of Industrial Policy and Promotion. The total investments of EMC

Corporation, a leading global player of information infrastructure solutions in India,

will touch US$ 2 billion (over US$ 2.01 billion) by 2014.

Russian IT security software provider, Kaspersky Lab, will be investing US$ 2

million in its India operations at Hyderabad during2011.

On the back of 40 per cent revenue growth, Cognizant will invest more than US$ 500

million till 2014 to expand its campuses to add over 8 million square feet to house

over 55,000 employees.

Chennai-based Polaris Software Lab has announced that it is buying an 85 per cent

stake in San Francisco-based digital identity authentication services provider Iden-

Trust for US$ 20 million. The acquisition will mark Polaris' entry into the cloud

computing space for financial technology solutions, the company said in a filing to the

Bombay Stock Exchange.

MARKET TRENDS:

The Information Technology (IT) sector in India is amongst the fastest growing in the

country and the world. It is expected that by the year 2008, IT software and services

46

industry will account for 7 per cent of India’s GDP and 35 per cent of total exports.

The Indian domestic IT market grew by 29% in the financial year 2007-08 to report

revenues of Rs 288, 810 crore.

The revenue of the information technology sector has grown from 1.2 per cent of the

gross domestic product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2008.

The net value added by this sector, to the economy, is estimated to be 3.3 to 3.9 per

cent for FY 2008.

Contribution of it sector to the economy

FOREIGN DIRECT INVESTMENT (FDI) POLICY:

100% FDI is permitted in the Electronic hardware sector and the Software

development sector under the automatic approval route.

Industrial Licensing has been virtually abolished in the Electronics and Information

Technology sector except for manufacturing electronic aerospace and defense

equipment.

IT / ITES EXPORT TRENDS:

47

2007 2008 2009 2010 2011 2012 CAGR

07-12

Domestic

IT/ ITeS

Market

90,014 110,177 133,100 158,053 182,991 209,698 18.4%

IT/ ITeS

Exports

Revenue

156,594 186,142 218,107 250,087 284,666 320,278 15.4%

India IT/

ITeS

Industry

Size

246,609 296,319 351,207 408,139 467,657 529,976 16.5%

The Software exports are projected to grow by $9 billion to $50 billion in fiscal 2008-

09 from $41 billion in fiscal 2007-08 and $32 billion in fiscal 2006-07.

Exports contribute nearly 65% of the Indian IT sector revenue.

The United States and Britain are the biggest markets for India's booming software

exports, accounting for about 80 percent of the country's $12-billion- exports per year.

Key Players:

The following are India’s Tier 1 companies in the IT sector:

•Tata Consultancy Services Ltd.

•Wipro Technologies Ltd.

•Infosys Technologies Ltd.

The other key players include the following:

• IBM

• HCL

• Patni

• Polaris

• Cisco

•KPIT Cummins

• Kanbay

•i-Flex Solutions

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In order to find out which company among the selected are good choice of investment

we have to perform two type of analysis that is fundamental analysis and technical

analysis.

First we will be performing fundamental analysis on the profit and loss statement of

the company for last four year.

The companies we have chosen are the IT giants of Indian IT industry; they are TCS,

INFOSYS & WIPRO. We will be analyzing this company on their profit and loss

statements and various investors’ ratios.

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TCS COMPANY profile

Tata Consultancy Services started in 1968. Mr.F.C Kohli who is presently the Deputy

Chairman was entrusted with the job of steering TCS. The early days marked TCS

responsibility in managing the punch card operations of Tisco. The company, which

was into management consultancy from day one, soon felt the need to provide

solutions to its clients as well. TCS was the first Indian company to make forays into

the US market with clients ranging from IBM, American Express, Sega etc. TCS is

presently the top software services firm in Asia.

During the Y2K buildup, TCS had setup a Y2Kfactory in Chennai as a short-term

strategy. Now, with E-business being the buzzword, the factory is developing

solutions for the dotcom industries. Today, about 90 percent of TCS' revenue comes

from consulting, while the rest from products. TCS has great training facilities. In

addition to training around 5 percent of the revenue is spent upon its R&D centre like

the Tata Research Design and Development Centre at Pune, along with a host of other

centre at Mumbai and Hyderabad.

It benchmarked its quality standing, invested heavily in software engineering

practices and built intellectual property-in terms of patents, code and branded

products. At the same time, it expanded its relationships with technology partners

and organizations, increased linkages with academic institutions and incubated

technologies and ideas of people within TCS and outside. TCS has already patented

12 E-Commerce solution product packages and has filed six more applications for

patent licenses.

Over $25 million were spent on enhancing hardware and software infrastructure. The

company now has 72 offices worldwide. As many as seven centre were assessed at

SEI CMM Level 5 last year(3.4 mistakes in a million opportunities).These include

Chennai, Mumbai, Bangalore, Calcutta, Hyderabad and Lucknow.Several business

and R&D relationship with global firms like IBM, General Electric, Unigraphics

Solutions have been made.

The present CEO of the company is Mr.S.Ramadorai. The companies’ strength is

about 14,000.

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Balance sheet of TCSMar '11 Mar '10 Mar '09 Mar '08

12 mths 12 mths 12 mths 12 mthsSources Of FundsTotal Share Capital 295.72 295.72 197.86 197.86Equity Share Capital 195.72 195.72 97.86 97.86Share Application Money 0.00 0.00 0.00 0.00Preference Share Capital 100.00 100.00 100.00 100.00Reserves 19,283.77 14,820.90 13,248.39 10,806.95Revaluation Reserves 0.00 0.00 0.00 0.00Networth 19,579.49 15,116.62 13,446.25 11,004.81Secured Loans 35.87 29.25 32.63 9.27Unsecured Loans 5.25 6.49 7.74 8.98Total Debt 41.12 35.74 40.37 18.25Total Liabilities 19,620.61 15,152.36 13,486.62 11,023.06

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 6,030.16 4,871.21 4,359.24 3,240.64Less: Accum. Depreciation 2,607.98 2,110.69 1,690.16 1,300.11Net Block 3,422.18 2,760.52 2,669.08 1,940.53Capital Work in Progress 1,345.37 940.72 685.13 889.74Investments 5,795.49 7,893.39 5,936.03 4,509.33Inventories 5.37 6.78 16.95 17.19Sundry Debtors 4,806.67 3,332.30 3,717.73 3,747.01Cash and Bank Balance 224.77 212.31 479.93 402.24Total Current Assets 5,036.81 3,551.39 4,214.61 4,166.44Loans and Advances 5,063.51 4,101.84 3,910.85 3,104.74Fixed Deposits 5,379.75 3,183.85 1,125.33 125.28Total CA, Loans & Advances 15,480.07 10,837.08 9,250.79 7,396.46Deferred Credit 0.00 0.00 0.00 0.00Current Liabilities 3,932.39 3,352.74 3,604.18 2,525.56Provisions 2,490.11 3,926.61 1,450.23 1,187.44Total CL & Provisions 6,422.50 7,279.35 5,054.41 3,713.00Net Current Assets 9,057.57 3,557.73 4,196.38 3,683.46Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 19,620.61 15,152.36 13,486.62 11,023.06Contingent Liabilities 3,938.76 3,292.50 2,924.33 2,726.11Book Value (Rs) 99.53 76.72 136.38 111.43

Profit and loss of TCS Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 29,275.41 23,044.84 22,404.00 18,536.55Excise Duty 0.00 0.39 2.08 2.83

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Net Sales 29,275.41 23,044.45 22,401.92 18,533.72Other Income 486.44 182.10 -456.24 440.45Stock Adjustments -0.87 -1.38 1.73 -0.04Total Income 29,760.98 23,225.17 21,947.41 18,974.13ExpenditureRaw Materials 17.75 23.75 53.67 45.81Power & Fuel Cost 240.00 183.62 164.34 135.57Employee Cost 10,190.31 7,882.43 7,370.09 6,015.19Other Manufacturing Expenses 8,135.57 6,446.99 6,947.60 5,687.82Selling and Admin Expenses 1,097.52 1,268.03 1,218.41 991.43Miscellaneous Expenses 821.57 571.08 628.71 632.25Preoperative Exp Capitalised 0.00 0.00 0.00 0.00Total Expenses 20,502.72 16,375.90 16,382.82 13,508.07

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Operating Profit 8,771.82 6,667.17 6,020.83 5,025.61PBDIT 9,258.26 6,849.27 5,564.59 5,466.06Interest 20.01 9.54 7.44 3.42PBDT 9,238.25 6,839.73 5,557.15 5,462.64Depreciation 537.82 469.35 417.46 458.78Other Written Off 0.00 0.00 0.00 0.00Profit Before Tax 8,700.43 6,370.38 5,139.69 5,003.86Extra-ordinary items 0.00 -13.98 -103.11 -37.52PBT (Post Extra-ord Items) 8,700.43 6,356.40 5,036.58 4,966.34Tax 1,130.44 737.89 340.37 457.58Reported Net Profit 7,569.99 5,618.51 4,696.21 4,508.76Total Value Addition 20,484.97 16,352.15 16,329.15 13,462.26Preference Dividend 11.00 17.00 7.00 0.08Equity Dividend 2,740.10 3,914.43 1,370.05 1,370.05Corporate Dividend Tax 450.82 657.51 234.02 232.85Per share data (annualised)Shares in issue (lakhs) 19,572.21 19,572.21 9,786.10 9,786.10Earning Per Share (Rs) 38.62 28.62 47.92 46.07Equity Dividend (%) 1,400.00 2,000.00 1,400.00 1,400.00Book Value (Rs) 99.53 76.72 136.38 111.43

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Key financial ratios Mar '11 Mar '10 Mar '09 Mar '08Investment Valuation RatiosFace Value 1.00 1.00 1.00 1.00Dividend Per Share 14.00 20.00 14.00 14.00Operating Profit Per Share (Rs) 44.82 34.06 61.52 51.35Net Operating Profit Per Share (Rs) 149.58 117.74 228.92 189.39Free Reserves Per Share (Rs) 97.95 75.24 134.37 110.22Bonus in Equity Capital 79.65 79.65 59.30 59.30Profitability RatiosOperating Profit Margin(%) 29.96 28.93 26.87 27.11Profit Before Interest And Tax Margin(%)

27.67 26.62 24.75 24.42

Gross Profit Margin(%) 28.12 26.89 25.01 24.64Cash Profit Margin(%) 27.21 26.44 26.09 25.29Adjusted Cash Margin(%) 27.21 26.44 26.09 25.29Net Profit Margin(%) 25.44 24.13 20.74 24.11Adjusted Net Profit Margin(%) 25.44 24.13 20.74 24.11Return On Capital Employed(%) 44.38 42.46 43.27 42.92Return On Net Worth(%) 38.80 37.30 35.13 41.34Adjusted Return on Net Worth(%) 38.74 37.75 41.06 39.16Return on Assets Excluding Revaluations

99.53 76.72 136.38 111.43

Return on Assets Including Revaluations

99.53 76.72 136.38 111.43

Return on Long Term Funds(%) 44.38 42.46 43.27 42.96Liquidity And Solvency RatiosCurrent Ratio 2.41 1.49 1.83 1.98Quick Ratio 2.40 1.48 1.83 1.97Debt Equity Ratio 0.01 0.01 0.01 0.01Long Term Debt Equity Ratio 0.01 0.01 0.01 0.01Debt Coverage RatiosInterest Cover 435.25 674.43 784.41 1,383.58Total Debt to Owners Fund 0.01 0.01 0.01 0.01Financial Charges Coverage Ratio 462.13 723.63 840.52 1,517.73Financial Charges Coverage Ratio Post Tax

406.19 639.14 688.32 1,453.50

Management Efficiency RatiosInventory Turnover Ratio 5,451.66 3,398.94 1,321.77 1,137.21Debtors Turnover Ratio 7.19 6.54 6.00 5.66Investments Turnover Ratio 5,451.66 3,398.94 1,321.77 1,137.21Fixed Assets Turnover Ratio 4.91 4.74 5.15 5.74Total Assets Turnover Ratio 1.50 1.52 1.66 1.68

Asset Turnover Ratio 4.91 4.74 5.15 5.74

Average Raw Material Holding 92.90 72.97 93.98 98.28Average Finished Goods Held 0.01 0.04 0.07 0.03Number of Days In Working Capital 111.38 55.58 67.44 71.55Profit & Loss Account RatiosMaterial Cost Composition 0.06 0.10 0.23 0.24Imported Composition of Raw Materials Consumed

80.35 78.67 79.74 80.43

Selling Distribution Cost Composition 0.05 0.03 0.09 0.14Expenses as Composition of Total Sales 91.08 92.38 93.01 90.51Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 42.21 81.61 34.20 35.55Dividend Payout Ratio Cash Profit 39.40 75.30 31.41 32.26Earning Retention Ratio 57.73 19.37 70.74 62.47Cash Earning Retention Ratio 60.54 25.53 72.81 66.11Adjusted Cash Flow Times 0.01 0.01 0.01 0.00

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Earning Per Share (Rs)

Earning Per Share (Rs)

the earning per share has decreased due todecrease in the no of share but theere is increase in the value of share hence the earning is increasing after a dip.

12340

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Dividend Payout Ratio Net Profit

Dividend Payout Ratio Net Profit

This ratio tells about the how much dividend is increased per share. Where we can see that company did not have increase in dividend for two years then they increased in one year again that felled off in next year because they were retaining that cash for further implementation in business in order to secure future investments.

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Trend analysis

The chart of price to volume of TCS stock shows the growing rate of share due to growth in the off shore business hence the stock price show appositive trend till April 2011 then due to debt crises of US cause the market price of IT stock to fall due to withdrawal of money by FII’s and increase in inflation.

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INFOSYS COMPANY Profile

Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people

with US$ 250. Today, we are a global leader in the “next generation” of IT and

consulting with revenues of over US$ 4 billion.

Infosys defines, designs and delivers technology-enabled business solutions that help

Global 2000 companies win in a Flat World. Infosys also provides a complete range

of services by leveraging our domain and business expertise and strategic alliances

with leading technology providers.

Our offerings span business and technology consulting, application services, systems

integration, product engineering, custom software development, maintenance, re-

engineering, independent testing and validation services, IT infrastructure services

and business process outsourcing.

Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive

force in the industry leading to the rise of offshore outsourcing. The GDM is based on

the principle of taking work to the location where the best talent is available, where it

makes the best economic sense, with the least amount of acceptable risk.

Infosys has a global footprint with over 50 offices and development centers in India,

China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys and

its subsidiaries have 105,453 employees as on September 30, 2009

Infosys takes pride in building strategic long-term client relationships. Over 97% of

our revenues come from existing customers.

Infosys

Balance sheet Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Sources Of FundsTotal Share Capital 287.00 287.00 286.00 286.00Equity Share Capital 287.00 287.00 286.00 286.00Share Application Money 0.00 0.00 0.00 0.00

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Preference Share Capital 0.00 0.00 0.00 0.00Reserves 24,214.00 21,749.00 17,523.00 13,204.00Revaluation Reserves 0.00 0.00 0.00 0.00Networth 24,501.00 22,036.00 17,809.00 13,490.00Secured Loans 0.00 0.00 0.00 0.00Unsecured Loans 0.00 0.00 0.00 0.00Total Debt 0.00 0.00 0.00 0.00Total Liabilities 24,501.00 22,036.00 17,809.00 13,490.00

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 6,934.00 6,357.00 5,986.00 4,508.00Less: Accum. Depreciation 2,878.00 2,578.00 2,187.00 1,837.00Net Block 4,056.00 3,779.00 3,799.00 2,671.00Capital Work in Progress 499.00 409.00 615.00 1,260.00Investments 1,325.00 4,636.00 1,005.00 964.00Inventories 0.00 0.00 0.00 0.00Sundry Debtors 4,212.00 3,244.00 3,390.00 3,093.00Cash and Bank Balance 641.00 929.00 805.00 657.00Total Current Assets 4,853.00 4,173.00 4,195.00 3,750.00Loans and Advances 5,273.00 4,201.00 3,303.00 2,804.00Fixed Deposits 13,024.00 8,868.00 8,234.00 5,772.00Total CA, Loans & Advances 23,150.00 17,242.00 15,732.00 12,326.00Deffered Credit 0.00 0.00 0.00 0.00Current Liabilities 2,056.00 1,995.00 1,544.00 1,483.00Provisions 2,473.00 2,035.00 1,798.00 2,248.00Total CL & Provisions 4,529.00 4,030.00 3,342.00 3,731.00Net Current Assets 18,621.00 13,212.00 12,390.00 8,595.00Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 24,501.00 22,036.00 17,809.00 13,490.00Contingent Liabilities 1,013.00 295.00 347.00 603.00Book Value (Rs) 426.73 384.02 310.90 235.84

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Profit and loss statement of infosys Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 25,385.00 21,140.00 20,264.00 15,648.00Excise Duty 0.00 0.00 0.00 0.00Net Sales 25,385.00 21,140.00 20,264.00 15,648.00Other Income 1,147.00 967.00 502.00 683.00Stock Adjustments 0.00 0.00 0.00 0.00Total Income 26,532.00 22,107.00 20,766.00 16,331.00ExpenditureRaw Materials 23.00 22.00 20.00 18.00Power & Fuel Cost 0.00 0.00 125.00 106.00Employee Cost 12,464.00 10,356.00 9,975.00 7,771.00Other Manufacturing Expenses 2,613.00 1,993.00 1,697.00 1,443.00Selling and Admin Expenses 1,834.00 992.00 1,367.00 1,214.00Miscellaneous Expenses 36.00 415.00 172.00 132.00Preoperative Exp Capitalised 0.00 0.00 0.00 0.00Total Expenses 16,970.00 13,778.00 13,356.00 10,684.00

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Operating Profit 8,415.00 7,362.00 6,908.00 4,964.00PBDIT 9,562.00 8,329.00 7,410.00 5,647.00Interest 1.00 2.00 2.00 1.00PBDT 9,561.00 8,327.00 7,408.00 5,646.00Depreciation 740.00 807.00 694.00 546.00Other Written Off 0.00 0.00 0.00 0.00Profit Before Tax 8,821.00 7,520.00 6,714.00 5,100.00Extra-ordinary items 0.00 0.00 -1.00 0.00PBT (Post Extra-ord Items) 8,821.00 7,520.00 6,713.00 5,100.00Tax 2,378.00 1,717.00 895.00 630.00Reported Net Profit 6,443.00 5,803.00 5,819.00 4,470.00Total Value Addition 16,947.00 13,756.00 13,336.00 10,666.00Preference Dividend 0.00 0.00 0.00 0.00Equity Dividend 3,445.00 1,434.00 1,345.00 1,902.00Corporate Dividend Tax 568.00 240.00 228.00 323.00Per share data (annualised)Shares in issue (lakhs) 5,741.52 5,738.25 5,728.30 5,719.96Earning Per Share (Rs) 112.22 101.13 101.58 78.15Equity Dividend (%) 1,200.00 500.00 470.00 665.00Book Value (Rs) 426.73 384.02 310.90 235.84

Key financial ratios of infosys Mar '11 Mar '10 Mar '09 Mar '08Investment Valuation RatiosFace Value 5.00 5.00 5.00 5.00Dividend Per Share 60.00 25.00 23.50 33.25Operating Profit Per Share (Rs) 146.56 128.30 120.59 86.78Net Operating Profit Per Share (Rs) 442.13 368.40 353.75 273.57Free Reserves Per Share (Rs) 420.79 378.08 305.80 230.74Bonus in Equity Capital 93.26 93.26 93.58 93.58Profitability RatiosOperating Profit Margin(%) -- -- -- --Profit Before Interest And Tax Margin(%)

-- -- -- --

Gross Profit Margin(%) -- -- -- --Cash Profit Margin(%) -- -- -- --Adjusted Cash Margin(%) 26.96 29.59 32.57 30.69Net Profit Margin(%) 24.31 26.36 27.52 27.37Adjusted Net Profit Margin(%) -- -- -- --Return On Capital Employed(%) -- -- -- --Return On Net Worth(%) -- -- -- --Adjusted Return on Net Worth(%) 26.13 25.89 34.76 33.09Return on Assets Excluding Revaluations

426.73 384.02 310.90 235.84

Return on Assets Including Revaluations

426.73 384.02 310.90 235.84

Return on Long Term Funds(%) 35.84 33.69 39.80 37.77Liquidity And Solvency RatiosCurrent Ratio 5.11 4.28 4.71 3.30Quick Ratio 5.02 4.20 4.67 3.28Debt Equity Ratio -- -- -- --Long Term Debt Equity Ratio -- -- -- --Debt Coverage RatiosInterest Cover -- -- -- --Total Debt to Owners Fund -- -- -- --Financial Charges Coverage Ratio 9,523.00 4,116.50 3,891.00 5,642.00Financial Charges Coverage Ratio Post Tax

7,184.00 3,306.00 3,257.50 5,017.00

Management Efficiency RatiosInventory Turnover Ratio -- -- -- --Debtors Turnover Ratio 6.81 6.37 6.25 5.81Investments Turnover Ratio -- -- -- --Fixed Assets Turnover Ratio -- -- -- --Total Assets Turnover Ratio -- -- -- --Asset Turnover Ratio 3.67 3.33 3.39 3.47

Average Raw Material Holding -- -- -- --Average Finished Goods Held -- -- -- --Number of Days In Working Capital 264.08 224.99 220.11 197.74

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Profit & Loss Account RatiosMaterial Cost Composition 0.09 0.10 0.09 0.11Imported Composition of Raw Materials Consumed

-- -- -- --

Selling Distribution Cost Composition 0.12 0.41 0.40 0.56Expenses as Composition of Total Sales 94.38 99.69 97.88 92.59Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 62.28 28.84 27.03 49.77Dividend Payout Ratio Cash Profit 55.86 25.32 24.15 44.35Earning Retention Ratio 37.34 70.67 74.60 50.17Cash Earning Retention Ratio 43.83 74.31 77.16 55.60AdjustedCash Flow Times -- -- -- --

Mar '11 Mar '10 Mar '09 Mar '08Earnings Per Share 112.22 101.13 101.58 78.15Book Value 426.73 384.02 310.90 235.84

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Earning Per Share (Rs)

Earning Per Share (Rs)

In Infosys the earning per share is increasing every year with a steady trend this in order to lure more investors to invest in the shares of the company, and generate more and more financing through equity.

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Dividend Payout Ratio Net Profit

Dividend Payout Ratio Net Profit

initially Infosys increased its DPR by retaining less and giving out more, for next 2 years they retained the earnings in order to attract more investors and then in next year they increased the DPR to retain the intrest of investors in order to get more finance from equity.

Trend analysis

There is not very steady growth in the market price of Infosys shares, there are many up’s and down’s but there is growth after every trough which makes this type of investment as investors choice. Person holding the stocks of this type of company can

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get unexpected return on favorable market condition. For this the patient investor is required.

WIPRO COMPANY PROFILE

Wipro Technologies is the No.1 provider of integrated business, technology and

process solutions on a global delivery platform.

Wipro Technologies is a global services provider delivering technology-driven

business solutions that meet the strategic objectives of our clients. Wipro has 40+

‘Centers of Excellence’ that create solutions around specific needs of industries.

Wipro delivers unmatched business value to customers through a combination of

process excellence, quality frameworks and service delivery innovation. Wipro is the

World's first CMMi Level 5 certified software services company and the first outside

USA to receive the IEEE Software Process Award.

Wipro’s complete range of IT Services addresses the needs of both technology and

business requirements to help organizations leverage leading-edge technologies for

business improvement.

Wipro takes charge of the IT needs of the entire enterprise. The gamut of services

extends from Enterprise Application Services (CRM, ERP, e-Procurement and SCM),

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to e-Business solutions. Wipro’s enterprise solutions have served and continue to

serve clients from a range of industries including Energy and Utilities, Finance,

Telecom, and Media and Entertainment.

Wipro’s TIS is the largest Indian IT infrastructure service provider

Wipro’s Technology Infrastructure Services (TIS) is the largest Indian IT

infrastructure service provider in terms of revenue, people and customers with more

than 200 customers in US, Europe, Japan and over 650 customers in India. It is

powered by the expert skills of over 6,500 technical specialists and state-of-the-art BS

15000 certified infrastructure for operations support.

A phased approach towards process standardization, process optimization and process

re-engineering.

Wipro BPO provides a broad range of services from customer relationship

management, back office transaction processing to industry-specific solutions. The

key element of services delivery is an integrated approach towards providing

increasing value over the entire course of our client relationships. This involves a

phased approach towards process standardization, process optimization and process

re-engineering

True value from technology requires an in-depth understanding of business strategy.

Today’s businesses need partners who can talk about strategy and technology in the

same conversation. At Wipro, we believe true value from technology requires an in-

depth understanding of business strategy. Our cross-industry consulting services help

you craft a vision for your organization and then provide a specific, practical business

and technology framework that will make that vision a reality. Our consulting

competencies spread across business, process, quality and technology consulting.

We've developed a model called "Extended Engineering” that leverages synergies

across the value chain

As product manufacturers and platform vendors across the world strive to make better

products with shorter development cycles and reduced total cost of ownership, we at

Wipro Technologies partner with them to provide comprehensive solutions in product

lifecycle management and product realization. At Wipro, we've developed a model

called "Extended engineering" that allows you to leverage synergies across the value

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chain and progress swiftly from concept to market. We are now the world's largest

contract R&D house for telecom, auto and electronics

Wipro

Balance sheet of wipro Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Sources Of FundsTotal Share Capital 490.80 293.60 293.00 292.30Equity Share Capital 490.80 293.60 293.00 292.30Share Application Money 0.70 1.80 1.50 58.00Preference Share Capital 0.00 0.00 0.00 0.00Reserves 20,829.40 17,396.80 12,220.50 11,260.40Revaluation Reserves 0.00 0.00 0.00 0.00Networth 21,320.90 17,692.20 12,515.00 11,610.70Secured Loans 0.00 0.00 0.00 4.00Unsecured Loans 4,744.10 5,530.20 5,013.90 3,818.40Total Debt 4,744.10 5,530.20 5,013.90 3,822.40Total Liabilities 26,065.00 23,222.40 17,528.90 15,433.10

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Application Of FundsGross Block 7,779.30 6,761.30 5,743.30 2,282.20Less: Accum. Depreciation 3,542.30 3,105.00 2,563.70 0.00

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Net Block 4,237.00 3,656.30 3,179.60 2,282.20Capital Work in Progress 603.10 991.10 1,311.80 1,335.00Investments 10,813.40 8,966.50 6,895.30 4,500.10Inventories 724.90 606.90 459.60 448.10Sundry Debtors 5,781.30 5,016.40 4,446.40 3,646.60Cash and Bank Balance 2,334.20 1,938.30 1,902.10 3,732.10Total Current Assets 8,840.40 7,561.60 6,808.10 7,826.80Loans and Advances 6,756.80 5,425.90 4,202.00 4,231.30Fixed Deposits 2,869.10 3,726.00 2,507.10 0.00Total CA, Loans & Advances 18,466.30 16,713.50 13,517.20 12,058.10Deffered Credit 0.00 0.00 0.00 0.00Current Liabilities 5,290.00 4,874.20 5,564.30 3,361.60Provisions 2,764.80 2,230.80 1,810.70 1,380.70Total CL & Provisions 8,054.80 7,105.00 7,375.00 4,742.30Net Current Assets 10,411.50 9,608.50 6,142.20 7,315.80Miscellaneous Expenses 0.00 0.00 0.00 0.00Total Assets 26,065.00 23,222.40 17,528.90 15,433.10Contingent Liabilities 707.30 778.00 1,045.40 749.90Book Value (Rs) 86.86 120.49 85.42 79.05

Profit and loss of wipro Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

IncomeSales Turnover 26,401.20 23,006.30 21,612.80 17,658.10Excise Duty 100.70 84.30 105.50 165.50Net Sales 26,300.50 22,922.00 21,507.30 17,492.60Other Income 603.30 866.70 -480.40 326.90Stock Adjustments 31.60 111.00 -3.80 187.00Total Income 26,935.40 23,899.70 21,023.10 18,006.50ExpenditureRaw Materials 3,805.60 3,768.80 3,438.80 3,139.30Power & Fuel Cost 199.70 141.40 154.00 0.00Employee Cost 10,937.40 9,062.80 9,249.80 7,409.10Other Manufacturing Expenses 2,780.20 2,145.30 1,687.80 299.80Selling and Admin Expenses 1,703.30 1,491.40 1,523.00 557.80Miscellaneous Expenses 1,145.00 921.80 691.40 2,558.00Preoperative Exp Capitalised 0.00 0.00 0.00 0.00Total Expenses 20,571.20 17,531.50 16,744.80 13,964.00

Mar '11 Mar '10 Mar '09 Mar '0812 mths 12 mths 12 mths 12 mths

Operating Profit 5,760.90 5,501.50 4,758.70 3,715.60PBDIT 6,364.20 6,368.20 4,278.30 4,042.50Interest 58.60 99.80 196.80 116.80PBDT 6,305.60 6,268.40 4,081.50 3,925.70Depreciation 600.10 579.60 533.60 456.00Other Written Off 0.00 0.00 0.00 0.00Profit Before Tax 5,705.50 5,688.80 3,547.90 3,469.70Extra-ordinary items 0.00 0.00 0.00 0.00PBT (Post Extra-ord Items) 5,705.50 5,688.80 3,547.90 3,469.70

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Tax 861.80 790.80 574.10 406.40Reported Net Profit 4,843.70 4,898.00 2,973.80 3,063.30Total Value Addition 16,765.60 13,762.70 13,306.00 10,824.70Preference Dividend 490.80 0.00 0.00 0.00Equity Dividend 981.80 880.90 586.00 876.50Corporate Dividend Tax 220.40 128.30 99.60 148.90Per share data (annualised)Shares in issue (lakhs) 24,544.09 14,682.11 14,649.81 14,615.00Earning Per Share (Rs) 17.74 33.36 20.30 20.96Equity Dividend (%) 200.00 300.00 200.00 300.00Book Value (Rs) 86.86 120.49 85.42 79.05

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Mar '11 Mar '10 Mar '09 Mar '08Investment Valuation RatiosFace Value 2.00 2.00 2.00 2.00Dividend Per Share 4.00 6.00 4.00 6.00Operating Profit Per Share (Rs) 23.47 37.47 32.48 25.42Net Operating Profit Per Share (Rs) 107.16 156.12 146.81 119.69Free Reserves Per Share (Rs) 84.28 116.54 81.06 --Bonus in Equity Capital 96.94 95.32 95.51 95.68Profitability RatiosOperating Profit Margin(%) 21.90 24.00 22.12 21.24Profit Before Interest And Tax Margin(%)

19.14 21.07 19.22 18.29

Gross Profit Margin(%) 19.62 21.47 19.64 18.63Cash Profit Margin(%) 20.40 21.60 20.27 19.74Adjusted Cash Margin(%) 20.40 21.60 20.27 19.74Net Profit Margin(%) 17.96 20.97 13.53 17.19Adjusted Net Profit Margin(%) 17.96 20.97 13.53 17.19Return On Capital Employed(%) 22.34 23.06 26.77 23.23Return On Net Worth(%) 20.41 27.68 23.76 26.51Adjusted Return on Net Worth(%) 20.69 25.24 31.34 26.51Return on Assets Excluding Revaluations

86.86 120.49 85.42 79.05

Return on Assets Including Revaluations

86.86 120.49 85.42 79.05

Return on Long Term Funds(%) 27.20 30.12 37.17 23.32Liquidity And Solvency RatiosCurrent Ratio 1.45 1.33 1.10 2.54Quick Ratio 2.20 2.26 1.76 2.44Debt Equity Ratio 0.22 0.31 0.40 0.33Long Term Debt Equity Ratio -- 0.01 0.01 0.33Debt Coverage RatiosInterest Cover 99.37 53.67 23.85 30.71Total Debt to Owners Fund 0.22 0.31 0.40 0.33Financial Charges Coverage Ratio 109.61 59.48 26.56 34.61Financial Charges Coverage Ratio Post Tax

93.90 55.89 18.82 31.13

Management Efficiency RatiosInventory Turnover Ratio 43.12 45.40 56.15 39.41Debtors Turnover Ratio 4.87 4.84 5.32 5.62Investments Turnover Ratio 43.12 45.40 56.15 39.41Fixed Assets Turnover Ratio 3.45 3.47 3.85 7.81Total Assets Turnover Ratio 1.02 0.99 1.24 1.14Asset Turnover Ratio 3.45 3.47 3.85 7.81

Average Raw Material Holding 73.15 53.39 66.55 --Average Finished Goods Held 5.34 6.20 4.13 --Number of Days In Working Capital 142.51 150.91 102.81 150.56Profit & Loss Account RatiosMaterial Cost Composition 14.46 16.44 15.98 17.94Imported Composition of Raw Materials Consumed

35.34 36.83 45.00 --

Selling Distribution Cost Composition 1.56 1.64 1.43 3.04Expenses as Composition of Total Sales 69.87 73.26 77.28 73.66Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 27.61 20.60 23.05 33.47Dividend Payout Ratio Cash Profit 24.27 18.42 19.54 29.13Earning Retention Ratio 72.76 77.41 82.53 66.53Cash Earning Retention Ratio 76.02 80.00 84.62 70.87

AdjustedCash Flow Times 0.86 1.10 1.131.09

Important ratios of wiproMar '11 Mar '10 Mar '09 Mar '08

12340

5

10

15

20

25

30

35

40

Earning Per Share (Rs)

Earning Per Share (Rs)

In case of Wipro earning per share is declining due to high retention of earnings to write off the debt on the cost of dividend paid to share holders due to which the earning per share is decreasing. Which is not an investor will want.

12340

5

10

15

20

25

30

35

40

Dividend Payout Ratio Net Profit

Dividend Payout Ratio Net Profit

In Wipro due to high earning retention and less dividend policy they give less percentage of profit to equity share holders and retain that profit as reserve and surplus for business activity.

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12340

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

Debt Equity Ratio

Debt Equity Ratio

By lucking at the year on decrease in debt to equity ratio it is understood that the company wants to reduce the equity capital and raise money more by debt, long term loans and saved earnings.

Trend analysis

Here you can see there is growth in the price of shares but not steady there are many trough and crests in the trend of market price which indicates a stagnant growth in the

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value of stock i.e. the company has reached at the maturity level and the stock value will only fluctuate there.

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CONCLUSION

From the above three companies analysis we can conclude that all the three

companies are choice of investment of different investors

TCS is a stable and sturdy growth company, which mostly rely on equity

capital hence they will perform on a regular basis to provide good return to

investors. Hence people who dose not want to worry about his investment he

has a choice to invest in TCS.

INFOSYS is a value driven company who are known by the innovative

methods business hence they try to keep the investors happy by giving good

returns but with a risk .a person dose not worry about the risk and aim for

high returns is ideal choice of investor.

WIPRO is also a top company in regards of investment but they does not give

much consideration to investors of equity shares. They are very careful while

using there resources in order to. Safeguard there future

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RECOMMENDATION

As from trend of TCS we can see that the there is sturdy up trend but there is

no substantial crest so the investor does not have choice to bye shares at low

market price and if the market crash then the old investor would not suffer

much losses, but an early investor will suffer heavy losses. Hence

recommended that investor should wait for the right opportunity for

investment i.e. wait for prices to fall.

As from the trend analysis of INFOSYS we conclude that the right choice for

the investor to in vest in this company is at the time of drop in market price

and retain till the period of substantial time as company provides good

dividend to its share holders.

From the trend of market price of WIPRO it is conclusive that the company

does not stress heard on market trends but they stress on profit making with

much consideration of equity share holders so this company is a choice of

people who like to hold the stocks for a larger lime then compared to the other

two companies which stress on increasing the market value. Hence long term

investors choice is this company

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LIMITATIONS

Limitations of this study are

Future changes are largely unpredictable; more so when the economic and

business environment is buffeted by frequent winds of change. In an

environment characterized by discontinuities, the past record proves to be a

poor guide to future performance.

The market behavior if irrational may give rise to – under-valuations for

extended periods; over-valuations from unjustified optimism and misplaced

enthusiasm for unreasonable lengths of time. The slow correction of under or

over valuation poses a threat to the analysis.

While conducting the research I was unable to collect data from primary source,

which I feel would have had a bearing on the outcome of the research. Through

interviews with the concerned authorities I could have got first hand information

about the company and this could have certainly given me a broader perspective

on the company’s future plans.

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BIBLIOGRAPHY

WEBSITES:www.rathi.com

www.investopedia.com

www.bseindia.com

www.nseindia.com

www.moneycontrol.com

www.indiastudychannel.com

BOOKS:Investment Analysis and Portfolio Management- Prasanna Chandra.

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