Tcs v. Infosys

INFOSYS vs. TCSThe IT INDUSTRY

Members:Vishal Agarwal 01

Karan Mehta 15

Neeta Pai 18

Kavita Shetty 27

Kishori Sawant 38

Tata Consultancy Services formed Alliance with Infor Global Solutions (Feb 2012)Airtel selected Infosys Limited for its Mobile Wallet service (Feb 2012)

Industry Overview and Growth Forecasts

Global IT services spend increased from US$ 566 billion in 2009 to US$ 3.7 trillion in 2011.

Global Business Process Outsourcing (BPO) services spend has increased from US$ 152 billion in 2009 to US$ 158 billion in 2010.

IT services spend is expected to increase from US$ 566 billion in 2009 to US$ 684 billion by 2014 at a CAGR2 of 3.9%.

IT spend forecasts by global technology analyst firms like Gartner, Forrester, IDC and others indicate a growing market for IT and ITES for industry verticals, service

offerings and geographies of interest to the Company and excellent prospects for growth in the future.

Contribution of IT Industry-GDP

2005 2006 2007 2008 2009 2010 2011

GDP 3.6 4.1 4.7 5.2 5.2 6.1 6.4

0.5

1.5

2.5

3.5

4.5

5.5

6.5

% GDP

Con

trib

utio

n of

IT

Ind

usry

to G

DP

IT Industry - Economic Analysis

1.Political stability: Indian political structure is considered stable enough expect the fact that there is a fear of „hung parliament‟ (no clear majority). 2. U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit. 3. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. 4. Terrorist attack or war.

Political

Positve

Deep Negative

Positive

Negative

1. Global IT spending (demand) 2. Domestic IT Spending (Demand):Domestic market to grow by 20% and reach approx USD 78.9 billion in 2012 - NASSCOM 3. Currency Fluctuation 4. Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate. 6. ECOMONIC ATTRACTIVENESS due to cost advantage and other factors.

Economic

Negative

PositiveNegative

Mildly PositiveMildly Positve

IT Industry - Economic Analysis

1. Language spoken: English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population. 2. Education: A number of technical institutes and universities over the country offer IT education. 3. Working age population

Social

Highly Positve

Highly Positive

Positive

1. Telephony: a. India has the world‟s lowest call rates (1-2 US cents). b. Expected to have total subscriber base of about 500 million by 2010. c. ARPU for GSM is USD 6.6 per month. d. India has the second largest telephone network after china. e. Teledensity – 19.86 % f. Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. 2. Internet Backbone: Due to IT revolution of „90s, Indian cities and India is well connected with undersea optical cables. 3. New IT technologies: Technologies like SOA, Web 2.0, High-definition content, grid computing, etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry.

Technological

Highly Positve

Positive

Positive

IT Industry - Economic Analysis

1. IT SEZ requirement: IT companies can set up SEZ with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. 2. Contract / Bond requirements: Huge debates surrounding the bonds under which the employees are required to work, which is not legally required. 3. IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies to operate esp. related to security of data in transmission and storage, etc. 4. Companies operating in Software Technology Park (STPI) scheme will continue to get tax-benefit till 2010.

Legal

Positve

Negative

Positive

Mildly Positive

Energy Efficient processes and equipments: Companies are focusing on reducing the carbon footprints, energy utilization, water consumption, etc. Environment

Positive

Industry Analysis

2004 2005 2006 2007 2008

Domestic 3.8 4.8 6.7 8.2 11.7

Export 12.9 17.7 23.6 31.3 40.3

2.57.5

12.517.522.527.532.537.542.5

3.8 4.8 6.7 8.211.712.9

17.7

23.6

31.3

40.3

Market Size

in U

SD

bil

lio

n $

Market Share in %

More than 80% of revenues come from Exports and only 20% from domestic business

Industry Analysis

Revenue by Geography

OTHERS

AIRLINES & TRANSPORTATION

HEALTH CARE

CONSTRUCTION & UTILITIES

MEDIA ,PUBLISHING & ENTERTAINMENT

RETAIL

MANUFACTURING

TELECOM

BFSI

0 5 10 15 20 25 30 35 40 45

4.7

3.4

2.5

3.5

3.3

8

15

19.1

40.4

Indian IT industry Revenue Break-up by sector . Focus must shift from

BFSI sector to other sectors.

USA; 43.00%

EU-ROPE; 39.70%

APAC; 17.30%

USA

EUROPE

APAC

Company Level

Company Analysis

N . ChandrasekaranCEO and MD

S.GopalakrishnanCEO and MD

Particulars TCS INFOSYS Area Of Operations Application Development and

Maintenance Business Intelligence Enterprise Solutions Assurance Services Engineering and Industrial Services Infrastructure Services Consulting Asset Leveraged Solutions Business Process outsourcing

Global Consulting IT Services End to End Business Solutions Software consulting Software Design Software Development Software reengineering Software maintenance Systems integration Package evaluation and implementation and infrastructure management services Software products for Banking Industry and Business process management services

Year of Incorporation Date of incorporation is January 19, 1995. July 2004, it was listed on the NSE and BSE on August 25, 2004.

1981 as Infosys Consultants Private Limited Infosys Technologies Limited in June 1992 Infosys Limited in June 2011

Financial Year End 31st march 31st march

Credit rating Investment grade rating –A3 Foreign Currency Debt rating - Baa1 Corporate credit rating –BBB+ Dun Brad Street rating- 5A1

Corporate credit rating –BBB+ Dun Brad Street rating- 5A1

Stock Exchanges where listed NSE:TCS BSE:532540

NSE:INFY BSE:INFY NASDAQ:INFY

Outstanding Shares as of 31.12.2011

1,957,220,996-fully paid up 57,42,19,117 –fully paid up

No. of Offices Head Quartered in Mumbai 145 offices in 42 countries 106 delivery centres 20 countries

Head Quartered in Bangalore 68 global development centers - 32 are in India and 36 are outside India 64 sales offices around the world - 4 are in India and 60 are outside India

Particulars TCS INFOSYS Area Of Operations Application Development and

Maintenance Business Intelligence Enterprise Solutions Assurance Services Engineering and Industrial Services Infrastructure Services Consulting Asset Leveraged Solutions Business Process outsourcing

Global Consulting IT Services End to End Business Solutions Software consulting Software Design Software Development Software reengineering Software maintenance Systems integration Package evaluation and implementation and infrastructure management services Software products for Banking Industry and Business process management services

Year of Incorporation Date of incorporation is January 19, 1995. July 2004, it was listed on the NSE and BSE on August 25, 2004.

1981 as Infosys Consultants Private Limited Infosys Technologies Limited in June 1992 Infosys Limited in June 2011

Financial Year End 31st march 31st march

Credit rating Investment grade rating –A3 Foreign Currency Debt rating - Baa1 Corporate credit rating –BBB+ Dun Brad Street rating- 5A1

Corporate credit rating –BBB+ Dun Brad Street rating- 5A1

Stock Exchanges where listed NSE:TCS BSE:532540

NSE:INFY BSE:INFY NASDAQ:INFY

Outstanding Shares as of 31.12.2011

1,957,220,996-fully paid up 57,42,19,117 –fully paid up

No. of Offices Head Quartered in Mumbai 145 offices in 42 countries 106 delivery centres 20 countries

Head Quartered in Bangalore 68 global development centers - 32 are in India and 36 are outside India 64 sales offices around the world - 4 are in India and 60 are outside India

Performance trend-Profitability ratios

2007

2008

2009

2010

2011

25 25.5 26 26.5 27 27.5 28 28.5 29 29.5 30

28.79

27.11

26.8728.93

29.96

Operating Profit Margin

TCS Infosys

2007

2008

2009

2010

2011

29 30 31 32 33 34 35

31.61

31.3833.18

34.57

32.61

Operating Profit Margin

2007

2008

2009

2010

2011

22 23 24 25 26 27 28

27.1

26.8

26.48

26.49

23.84

Net Profit Margin

2007

2008

2009

2010

2011

05

1015

2025

22.41

21.78

18.69

23.07

23.93

Net Profit Margin

Performance trend-Profitability ratios

2007

2008

2009

2010

2011

0 10 20 30 40 50 60

51.35

43.91

42.44

45.04

44.77

Return on Capital Employed

TCS Infosys

2007

2008

2009

2010

2011

31 32 33 34 35 36 37 38 39 40 41

37.42

38.65

40.25

34.1

35.74

Return on Capital Employed

2007

2008

2009

2010

2011

0 5 10 15 20 25 30 35 40 45 50

47.59

41.19

33.65

38.02

37.11

Return on Net Worth

2007

2008

2009

2010

2011

0 5 10 15 20 25 30 35

34.26

33.77

32.8

27.18

26.31

Return on Net Worth

Performance trend-Profitability ratios

TCS Infosys

2007 2008 2009 2010 2011

SALES 15153 18974 21947 23225 29761

GP 11941 13104 14781 16570 21367

NP 3757 4509 4696 5619 7570

2500

12500

22500

32500

Company Performance in Cr. Rs..

2007 2008 2009 2010 2011

SALES 13528 16331 20766 22107 26532

GP 12128 14764 18924 20092 23896

NP 3783 4470 5819 5803 6443

25007500

12500175002250027500

Company Performance in Cr. Rs..

2007

2008

2009

2010

2011

0 2000 4000 6000 8000 10000 12000 14000 16000

5610

7689

10289

11297

15165

Cash Flow in Cr. Rs..

2007

2008

2009

2010

2011

0 1000 2000 3000 4000 5000 6000 7000 8000

557

528

2698

4718

7378

Cash Flow in Cr. Rs..

Performance trend-Leverage ratios

2007

2008

2009

2010

2011

0 0.5 1 1.5 2 2.5 3

2.14

2.19

2.22

1.89

2.89

Current Ratios

TCS Infosys

2007

2008

2009

2010

2011

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

4.47

3.13

4.34

4.19

4.81

Current Ratios

2007

2008

2009

2010

2011

0 0.01 0.02 0.03 0.04 0.05 0.06

Debt Equity Ratios

2007

2008

2009

2010

2011

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Debt Equity Ratios

Performance trend-Leverage ratios

2007

2008

2009

2010

2011

0 100 200 300 400 500 600

555.1

205.44

260.52

560.61

443.34

Financial Charges Coverage ratio

TCS Infosys

2007

2008

2009

2010

2011

0 1000 2000 3000 4000 5000 6000

4726

5931

2703.33

4383.5

5069.5

Financial Charges Coverage ratio

Valuation –Intrinsic Value and Stock Valuation

TCS Infosys

2007

2008

2009

2010

2011

2007 2008 2009 2010 2011

MCAP 115307 82362 75837 150110 186100

BV 195.41 235.84 310.9 384.01 426.729999999999

115307

82362

75837150110

186100

195.41

235.84310.9 384.01

426.729999999999

Market Capitalization & Net Worth Rs. in Cr.

2007

2008

2009

2010

2011

25000 75000 125000 175000 225000 275000

2007 2008 2009 2010 2011

MCAP 121000 79000 53000 157000 232000

BV 8850 12300 15700 18467 24505

121000

79000

53000

157000

232000

8850

12300

1570018467

24505

Market Capitalization & Net Worth Rs. in Cr.

Closing Share prices

4/2/

2007

5/28

/200

7

7/23

/200

7

9/17

/200

7

11/1

2/20

07

1/7/

2008

3/3/

2008

4/28

/200

8

6/23

/200

8

8/18

/200

8

10/1

3/20

08

12/8

/200

8

2/2/

2009

3/30

/200

9

5/25

/200

9

7/20

/200

9

9/14

/200

9

11/9

/200

9

1/4/

2010

3/1/

2010

4/26

/201

0

6/21

/201

0

8/16

/201

0

10/1

1/20

10

12/6

/201

0

1/31

/201

1

3/28

/201

1

5/23

/201

1

7/18

/201

1

9/12

/201

1

11/7

/201

1

1/2/

2012

2/27

/201

20

400

800

1200

TCS

Close

Mar

ket

pri

ce p

er S

har

e

2-Apr

-07

21-M

ay-0

7

9-Ju

l-07

27-A

ug-0

7

15-O

ct-0

7

3-Dec

-07

21-J

an-0

8

10-M

ar-0

8

28-A

pr-0

8

16-J

un-0

8

4-Aug

-08

22-S

ep-0

8

10-N

ov-0

8

29-D

ec-0

8

16-F

eb-0

9

6-Apr

-09

25-M

ay-0

9

13-J

ul-09

31-A

ug-0

9

19-O

ct-0

9

7-Dec

-09

25-J

an-1

0

15-M

ar-1

0

3-M

ay-1

0

21-J

un-1

0

9-Aug

-10

27-S

ep-1

0

15-N

ov-1

0

3-Ja

n-11

21-F

eb-1

1

11-A

pr-1

1

30-M

ay-1

1

18-J

ul-11

5-Sep

-11

24-O

ct-1

1

12-D

ec-1

1

30-J

an-1

2

19-M

ar-1

20

1000

2000

3000

4000

INFOSYS

Close Value

Continuous Componding Returns

4/2/

2007

5/21

/200

7

7/9/

2007

8/27

/200

7

10/1

5/20

07

12/3

/200

7

1/21

/200

8

3/10

/200

8

4/28

/200

8

6/16

/200

8

8/4/

2008

9/22

/200

8

11/1

0/20

08

12/2

9/20

08

2/16

/200

9

4/6/

2009

5/25

/200

9

7/13

/200

9

8/31

/200

9

10/1

9/20

09

12/7

/200

9

1/25

/201

0

3/15

/201

0

5/3/

2010

6/21

/201

0

8/9/

2010

9/27

/201

0

11/1

5/20

10

1/3/

2011

2/21

/201

1

4/11

/201

1

5/30

/201

1

7/18

/201

1

9/5/

2011

10/2

4/20

11

12/1

2/20

11

1/30

/201

2

3/19

/201

2

-0.8-0.7-0.6-0.5-0.4-0.3-0.2-0.1

00.10.2

TCS

Continuous Compounding Returns

D DD D D

DDD D DDD

400%

300%

300%

500%

300%

300%

500%

B

2-Apr

-07

21-M

ay-0

7

9-Ju

l-07

27-A

ug-0

7

15-O

ct-0

7

3-Dec

-07

21-J

an-0

8

10-M

ar-0

8

28-A

pr-0

8

16-J

un-0

8

4-Aug

-08

22-S

ep-0

8

10-N

ov-0

8

29-D

ec-0

8

16-F

eb-0

9

6-Apr

-09

25-M

ay-0

9

13-J

ul-09

31-A

ug-0

9

19-O

ct-0

9

7-Dec

-09

25-J

an-1

0

15-M

ar-1

0

3-M

ay-1

0

21-J

un-1

0

9-Aug

-10

27-S

ep-1

0

15-N

ov-1

0

3-Ja

n-11

21-F

eb-1

1

11-A

pr-1

1

30-M

ay-1

1

18-J

ul-11

5-Sep

-11

24-O

ct-1

1

12-D

ec-1

1

30-J

an-1

2

19-M

ar-1

2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

INFOSYSContinuous Compounding Returns

D D D D D D D

130%

120% 200

%

400%

545%

200% 270

%

Valuation –Intrinsic Value and Stock Valuation

2007

2008

2009

2010

2011

2.5 7.5 12.5 17.5 22.5 27.5 32.5 37.5 42.5 47.5

2007 2008 2009 2010 2011

Rs. 21.53 25.68 26.81 35.67 46.27

21.53

25.68

26.8135.67

46.27

Earning Per Share

TCS Infosys

2007

2008

2009

2010

2011

10 30 50 70 90 110

2007 2008 2009 2010 2011

Rs. 67.7 81.45 104.53 109.2 119.05

67.7

81.45

104.53

109.2

119.05

Earning Per Share

2007 2008 2009 2010 2011

Ra-tios

23.2351312090462

20.2833907948238

25.7188459771227

33.6018424124616

19.1222871019019

3

13

23

33

Cash Return on Invested Capital

2007 2008 2009 2010 2011

Ratios 16 18 22 23 12

2.5

7.5

12.5

17.5

22.5

Cash Return on Invested Capital

Valuation –Intrinsic Value and Stock Valuation

2007 2008 2009 2010 2011

Ratios 28.97 15.79 10.07 21.89 25.56

2.50

7.50

12.50

17.50

22.50

27.50

32.50

Price Earnings Ratio

2007 2008 2009 2010 2011

Ratios 29.76 18.4 13.02 21.9664006719865

29.6405677655678

2.507.50

12.5017.5022.5027.5032.50

Price Earnings Ratio

TCS Infosys

2007 2008 2009 2010 2011

Ratios 1813 2446 3975 5290 3118

500.00

1500.00

2500.00

3500.00

4500.00

5500.00

Owners Earnings Rs. in Cr.

2007 2008 2009 2010 2011

Ratios 2303 2557 3896 6357 4759

500.00

1500.00

2500.00

3500.00

4500.00

5500.00

6500.00

Owners Earnings Rs. in Cr.

Growth-Sales & Profitability & Annual Growth

TCS Infosys

2007

2008

2009

2010

2011

5.00 15.00 25.00 35.00 45.00 55.00 65.00 75.00

2007 2008 2009 2010 2011

DSO 67.46 72.77 59.74 52.05 59.10

67.46

72.77

59.74

52.05

59.10

Day Sales Outstanding in Cr. Rs.

2007

2008

2009

2010

2011

5.00 15.00 25.00 35.00 45.00 55.00 65.00 75.00

2007 2008 2009 2010 2011

DSO 66.69 75.85 65.23 59.50 65.99

66.69

75.85

65.23

59.50

65.99

Day Sales Outstanding in Cr. Rs.

2007 2008 2009 2010 2011

NP 190.94 233.63 284.2 153.43 190.7

EPS 21.53 25.68 26.81 35.67 46.27

2575

125175225275

Net Operating Profit and Earning per share

2007 2008 2009 2010 2011

NP 230.2 273.57 353.75 368.4 442.13

EPS 67.7 81.45 104.53 109.2 119.05

25.00

125.00

225.00

325.00

425.00

Net Operating Profit and Earning per share

Growth-Sales & Profitability & Annual Growth

2007

2008

2009

2010

2011

2500.00 7500.00 12500.00 17500.00

2007 2008 2009 2010 2011

Reserves 7961.00 10807.00 13248.00 14821.00 19284.00

7961.00

10807.00

13248.00

14821.00

19284.00

Retained Earnings in Cr. Rs.

TCS Infosys

2007

2008

2009

2010

2011

2500 7500 12500 17500 22500 27500

2007 2008 2009 2010 2011

Reserves 10969 13509 17968 22763 25690

10969

13509

17968

22763

25690

Retained Earnings in Cr. Rs.

2007 2008 2009 2010 2011

NPAT 3757 4509 4696 5619 7570

CFOP 3551 3828 4874 6265 5741

500.00

2500.00

4500.00

6500.00

Net Income & Cash from Operations in Cr. Rs.

2007 2008 2009 2010 2011

NPAT 3783 4470 5819 5803 6443

CFOP 4129 5100 6714 7472 8821

500

2500

4500

6500

8500

Net Income & Cash from Operations in Cr. Rs.

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues