Valuation Pulse IT and ITeS industry

©2021 Grant Thornton Bharat LLP. All rights reserved.

Q1 FY 22

Valuation Pulse –

IT and ITeS industry


Foreword

2

Manish Saxena Partner

Grant Thornton Bharat LLP

E: [email protected]

Note: Market data has been updated till 30 July 2021 and the earnings release of majority of the companies used for our analysis is up to 30 June 2021

We are pleased to present Valuation Pulse for the first quarter ending Financial Year 2022 (Q1 FY 22).

Indian IT and ITeS companies witnessed a sequential revenue growth and healthy deal wins, driven by broad-

based demand of IT services across sectors, primarily in cloud-led digital transformation, data analytics and

artificial intelligence (AI). Technology has become a necessity for organisations to survive post the pandemic.

Majority of the IT spends have now become a survival investment for efficient operations of businesses.

Companies that were primarily operating in an old economy are now focusing on modernising their core

operations, which has accelerated initial phases of strong technology upcycle in both Indian and global IT

sectors.

With accelerated demand and liquidity in the markets, the valuations of global tech and Indian IT and ITeS

companies have surged to highest levels in last five years. The industry has outperformed the overall market

indices, with NIFTY IT up by 17.9% since 31 March 2021, while NIFTY 50 is up by only 7.3%. Within the Indian

IT sector, the valuations of small and mid-cap IT companies and engineering services have seen the biggest

upside in Q1.

Key trends observed in the industry during Q1:

• Strong growth in revenue, primarily led by BFSI, retail and trade, life sciences and health-care verticals.

• Deal wins, supported by accelerated hiring to meet the demand, have continued to remain strong in this

quarter for all the IT companies, which provides a good visibility of revenue in the near-term

• Strong demand in areas of digital engineering, electric autonomous and connected vehicle (EACV), 5G and

medical technology has supported revenue growth in the engineering IT sector

• Margins were impacted by wage hikes, higher hiring costs to backfill attrition and fulfill strong order book,

increased sub-contracting and visa costs, offset partly by increase in offshore mix and operating leverage

On the transactions front [mergers and acquisitions (M&A) and funding], the sector witnessed a record

transaction activity in Q1 FY 22, both in value and volume in the last three years. IT companies focused on

acquiring technologies (such as cyber-security platforms) and IT consultancy companies are offering digital

transformation, data and business analytics and business process management solutions. Further, funding by

private equity (PE)/venture capital (VC) saw good activity, predominantly in the area of digital payments and

analytics/AI.

We hope you will find this publication insightful and informative.


Executive summary – Market indices

3

*Closing prices have been presented till 30 July 2021, in order to capture the results of Q1 FY 22.

#Refer Appendix 1 to 3 for the list of IT companies considered for our analysis in each of the segments

Market index31 Mar 2021 to 30 July

2021

S&P 500 10.6%

S&P 500 IT 15.6%

NIFTY 50 7.3%

NIFTY IT 17.9%

% change in market indices

Segments# 31 Mar 2021 to 30 July

2021

Global IT Services 12.0%

Global Tech 20.7%

Large-cap IT Services 9.4%

Mid-cap IT Services 31.2%

Small-cap IT Services 76.5%

IT Engineering 43.3%

Software 35.5%

% change in market cap of segments

S&P 500* S&P 500 IT*

NIFTY 50* NIFTY IT*

2000

2500

3000

3500

4000

4500

800

1200

1600

2000

2400

2800

7000

9000

11000

13000

15000

17000

10000

14000

18000

22000

26000

30000

34000


Executive summary – Large, mid and small-cap

IT services

4

EV/Revenue* EV/EBITDA*#

Median - EV/revenuesEV/revenues

• Multiples have been presented till 30 July 2021 in order to capture the results of Q1 FY 22

• # EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation.

La

rge

-ca

pM

id-c

ap

Sm

all

-ca

p

Median - EV/EBITDAEV/EBITDAHighLow Fair

2.4

-

1.0

2.0

3.0

4.0

5.0

11.0

6.5 8.5

10.5 12.5 14.5 16.5 18.5 20.5

2.2

1.0

2.0

3.0

4.0

5.0

1.0

-

0.5

1.0

1.5

2.0

2.5

6.8

1.0

6.0

11.0

13.4

6.0

11.0

16.0

21.0

26.0

31.0


Executive summary – Global IT services and global

technology**

5

EV/revenue* EV/EBITDA* HighLow Fair

Median - EV/revenuesEV/revenues

Glo

ba

l IT

se

rvic

es

Median - EV/EBITDAEV/EBITDA

Glo

ba

l te

ch

co

mp

an

ies

*Multiples have been presented till 30 July 2021 in order to capture the results of Q1 FY 22.

**Please refer Appendix 3 for the list of companies considered

31.3

18.0

22.0

26.0

30.0

34.0

38.0

42.0

46.0

50.0

1.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

12.6

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

16.0

7.7

4.0

6.0

8.0

10.0

12.0


Executive summary – Transactions

6

• On sequential basis, overall transaction values [Mergers and Acquisitions (M&A) and Private Equity (PE)] have increased from USD 2,369

million in Q4 FY 21 to USD 3,736 million in Q1 FY 22 with volumes increasing from 32 to 40 transactions during the same period.

• On year-on-year (y-o-y) basis, overall transaction values (M&A and PE) have increased from USD 420 million in Q1 FY 21 to USD 3,736

million in Q1 FY 22 with increase in volume from 19 to 40 transactions during the same period.

• During the quarter, PE transaction values was primarily led by the transfer of holding stake in Mphasis Ltd. by Blackstone from its existing

fund to two new funds.

• In Q1 FY 22, IT companies focused on acquiring technologies such as cyber-security platforms and IT consultancy companies focused on

offering digital transformation, data and business analytics and business process management solutions. Further, funding by PE/VC saw

good activity, predominantly in the area of digital payments and analytics/artificial intelligence (AI).

Quarterly deal values and volumes for Q1 FY 21 to

Q1 FY 22

Yearly deal values and volumes for FY 18 - FY 22 YTD

4201135

574

2369

37361923

31 32

40

0

5

10

15

20

25

30

35

40

45

0

500

1000

1500

2000

2500

3000

3500

4000

Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22

Values USD Million Volumes

3417

5511

37534498

3736

120106 121

105

40

0

20

40

60

80

100

120

140

0

1000

2000

3000

4000

5000

6000

FY 18 FY 19 FY 20 FY 21 FY 22 YTD


* Represents deal values and volumes for Quarter 1 FY 22


Executive summary – Other IT and ITeS segments

7

EV/revenue* EV/EBITDA*

HighLow FairMedian - EV/revenuesEV/revenues

* Multiples have been presented till 30 July 2021 in order to capture the results of Q1 FY 22.

En

gin

ee

rin

g s

erv

ice

sS

oft

wa

re p

rod

uc

ts

Median - EV/EBITDAEV/EBITDA

2.9

1.0

3.0

5.0

7.0

9.0

16.4

7.0

12.0

17.0

22.0

27.0

32.0

37.0

5.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

11.6

3.0

9.0

15.0

21.0

27.0


Large-cap – Revenue and EBITDA margin trend

8

• On a sequential basis, revenues increased from INR 1,158.4 billion (USD 15.6 billion) in Q4 FY 21 to INR 1,219.0 billion (USD 16.4 billion)

in Q1 FY 22 at a rate of 5.2%. Further, the EBITDA margins decreased from 25.3% to 23.8% during the same period.

• On y-o-y basis, the revenues increased from INR 1,037.1 billion (USD 13.9 billion) in Q1 FY 21 to INR 1,219.0 billion (USD 16.4 billion) in

Q1 FY 22 at a growth rate of 17.5%. Further, the EBITDA margins increased from 22.9% to 23.8% during the same period.

• All large-cap IT companies have shown growth in revenue on account of robust demand for transformational and digital projects, along

with strong deals in pipeline during the quarter. The growth was a function of outperformance primarily in BFSI, retail and life sciences

sector.

• Cost rationalisation has been the common theme for the last couple of quarters. However, during the quarter, return of discretionary cost,

increase in subcontracting expenses and employee cost have led to a slight decline in margins.

• IT companies saw some margins improvement because of favorable currency movements.

Q-o-q revenue (INR billion) Q-o-q EBITDA margins (%)

950.0

1,000.0

1,050.0

1,100.0

1,150.0

1,200.0

1,250.0

1,300.0

Revenue

23.2%

20.0%

22.5%

25.0%

27.5%

EBITDA Margins Median EBITDA Margins


Large-cap – Historical multiples**

9

The valuation multiples of large-cap IT companies have reached an

all time high on account of pent-up demands and new opportunities

due to positive impact by the COVID-19 pandemic.

IT spends have increased and are expected to grow as clients

across all sectors continue to invest aggressively in their digital

transformation journey.

IT sector is expected to witness strong growth as organisations tend

to modernise their core operations, migrate to cloud and move

towards adoption of technology (such as data analytics, AI, etc.)

EV/Revenue* EV/EBITDA*

Market cap (INR billion)*

* Market cap and multiples have been presented till 30 July 2021 in order to capture the reported results of Q1 FY 22.

** Please refer Appendix 1 for the list of companies considered.

2.4

1.3 1.8 2.3 2.8 3.3 3.8 4.3 4.8

EV/ Rev Median-EV/Rev

11.0

6.5 8.5

10.5 12.5 14.5 16.5 18.5 20.5

EV/ EBITDA Median-EV/EBITDA

7,500.0 9,500.0

11,500.0 13,500.0 15,500.0 17,500.0 19,500.0 21,500.0 23,500.0 25,500.0 27,500.0


Mid-cap – Revenue and EBITDA margin trend

10

• On sequential basis, the revenues increased from INR 121.5 billion (USD 1.63 billion) in Q4 FY 21 to INR 129.7 billion (USD 1.74 billion) in

Q1 FY 22 at a rate of 6.7%. However, the EBITDA margins decreased from 19.3% to 18.4% in the same period.

• On y-o-y basis, the revenues increased from INR 110.4 billion (USD 1.5 billion) in Q1 FY 21 to INR 129.7 billion (USD 1.74 billion) in Q1 FY

22 at a growth rate of 17.5%. Further, the EBITDA margins increased from 17.2% to 18.4% for the same period.

• It has been a positive quarter for the mid-cap segment. Growth in revenue is driven by demand for digital transformation and public/private

cloud adoption, along with strong deals in pipeline. The growth was a function of outperformance, primarily in BFSI, Hi-Tech and Media,

Retail and Lifesciences sector.

• Margins have declined slightly during the quarter because of wage hike and drop in utilisation due to a lag between hiring and deployment.


60.0

80.0

100.0

120.0

140.0

Revenue

17.6%

14.0%

16.0%

18.0%

20.0%

22.0%



Mid-cap – Historical multiples**

11

• Like large-cap companies, mid-cap companies have also seen

an upside on the multiples on account of demand for

public/private cloud adoption, data modernisation and the

creation of digital platforms.

• Companies in mid-cap vertical have healthy order book in hand

and strong deal pipeline, which indicates a positive future

outlook.


Market-cap (INR billion)*

** Market cap and multiples have been presented till 30 July 2021 in order to capture the results of Q1 FY 22.

** Please refer Appendix 1 for the list of companies considered.

400.0 600.0 800.0

1,000.0 1,200.0 1,400.0 1,600.0 1,800.0 2,000.0 2,200.0 2,400.0 2,600.0

2.2

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0


13.4

6.0 8.0

10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 28.0

EV/ EBITDA


Small-cap – Revenue and EBITDA margin and

multiples trends**

12




*Market cap and multiples have been presented till 30 July 2021 in order to capture the financial results of Q1 FY 22.

**Please refer Appendix 1 for the list of companies considered

1.0

-

0.5

1.0

1.5

2.0

2.5


6.8

1.0

3.0

5.0

7.0

9.0

11.0

13.0

15.0

EV/ EBITDA Median-EV/EBITDA

70.0 120.0 170.0 220.0 270.0 320.0 370.0 420.0 470.0

25.0

35.0

45.0

55.0

65.0

75.0

Revenue

13.2%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%


After lagging behind

large/mid-cap companies,

small-cap companies have

rallied during the current

quarter on the back of the

ongoing economic recovery

and the surge of liquidity

flowing around equity

markets.


IT engineering – Revenue and EBITDA

margin trend

13

• On sequential basis, revenues increased from INR 30.5 billion (USD 0.41 billion) in Q4 FY 21 to INR 31.3 billion (USD 0.42 billion) in Q1 FY 22 at a rate of

2.7%. However, during the same period, EBITDA margins decreased from 21.2% to 20.9%.

• On an annual basis, revenues increased from INR 26.9 billion (USD 0.36 billion) in Q1 FY 21 to INR 31.3 billion (USD 0.42 billion) in Q1 FY 22 at a rate of

16.7%. During the same period, EBITDA margins increased from 14.8% to 20.9%.

• IT engineering companies have witnessed growth in revenue in verticals, such as media and communication, industrial products/design and transportation,

which are offset by a flat growth/decline in revenue on account of slow recovery of aerospace vertical and revenue impact on manpower supply due to the

second wave of COVID-19 in India.

• The accelerated deployment of the 5G network and an increase in demand for OTT platforms, connected devices, automation, AI and analytics led to a

growth in the media and communication vertical .The transportation vertical has seen growth on account of shift of major auto players towards shared,

autonomous and electrical vehicles. Further, engineering companies are witnessing an increased demand for electrification and platform development

across auto, trucks and off-highway vehicles. The medical device and healthcare vertical showed growth, led by digital engineering demand in products,

platform and optimisation of manufacturing processes.

• However, the aerospace vertical continued to struggle with commercial aviation still showing uncertainty as only 65% of the domestic travel and 40% of the

international travel has resumed, as compared to the pre-pandemic period. A U-shaped recovery (and not a V-shaped recovery) is expected in this

segment.

• The Q1 FY 22 EBITDA margins were positively impacted on account of operational efficiencies, cost optimisation, productivity improvements and portfolio

shift towards higher margin segments, which was, however, offset due to wage hikes, higher subcontracting expenses and one time special bonus.


20.0

25.0

30.0

35.0

Revenue

18.0%

12.0%14.0%16.0%18.0%20.0%22.0%24.0%



IT engineering – Historical multiples**

14

Like IT services companies, IT engineering companies have also

shown an increase in valuation multiples based on the expected

positive outlook, primarily in the media and communications and

medical and healthcare devices. These companies, primarily Tata

Elxsi, has shown a huge increase in the market-cap, supported by

healthy revenue growth and margin improvements.



*Multiples represent weighted average multiples calculated based on the market capitalization weights. Therefore, the multiples are affected by the large players in this segment and may not be used for valuation of

smaller companies.


**Please refer Appendix 2 for the list of companies considered.

2.9

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

EV/rev Median EV/Rev

16.4

7.0

12.0

17.0

22.0

27.0

32.0

37.0

EV/EBITDA Median EV/EBITDA

100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0


Software products – Revenue and EBITDA margin and

multiples trend**

15


EV/Revenue* EV/EBITDA*


*Majority of the software companies have not released their Q1 FY 22 results. Therefore, we have provided Q-o-q revenue and EBITDA margins till 31 March 2021. However, multiples have been considered till 30 July

2021 based on LTM financial metrics as of 31 March 2021.

*Multiples represent weighted average multiples, calculated based on the market capitalisation weights. Therefore, the multiples are affected by large players in this segment and may not be used for valuation of

smaller companies.


**Please refer Appendix 2 for the list of companies considered.

41.3%

32.0%

36.0%

40.0%

44.0%

48.0%


5.0

1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0

EV/rev Median EV/Rev

11.6 3.0

9.0

15.0

21.0

27.0

EV/EBITDA Median EV/EBITDA

150.0

200.0

250.0

300.0

350.0

400.0

450.0

14.0

15.5

17.0

18.5

20.0

Revenue


** Represents deal values and volumes for Quarter 1 FY 22

Deals – IT and ITeS industry (quarterly trends)

16

Year Domestic Merger and

internal

restructuring

Inbound Outbound PE/VC

Q1 FY 21 0.04 - 0.1 0.1 0.2

Q2 FY 21 0.01 - 0.2 0.2 0.7

Q3 FY 21 0.03 - 0.02 0.3 0.3

Q4 FY 21 0.2 - 0.3 1.6 0.4

Q1 FY 22 0.1 - 0.01 0.4 3.3

Year Domestic Merger and

internal

restructuring

Inbound Outbound PE/VC

Q1 FY 21 3 - 2 6 8

Q2 FY 21 3 - 1 9 10

Q3 FY 21 5 - 4 9 13

Q4 FY 21 8 - 5 9 10

Q1 FY 22 10 - 2 10 18

Quarterly deal values and volumes for Q1 FY 21 to Q1 FY 22

*The above data covers deals which have happened in all sub-segments of the IT and ITeS industry, such as IT solutions, product development, analytics and business intelligence.

Break-up of the above deal values and deal volumes Q1 FY 21 – Q1 FY 22

Deal values (USD billion) Deal volumes

Yearly deal values and volumes for FY 18 - FY 22 YTD

3417

5511

37534498

3736

120 106 121

105

40

0

20

40

60

80

100

120

140

0

1000

2000

3000

4000

5000

6000

FY 18 FY 19 FY 20 FY 21 FY 22 YTD


4201135

574

2369

373619

23

31 32

40

0

10

20

30

40

50

0

1000

2000

3000

4000

Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Q1 FY22



IT and ITeS industry transactions: An overview

17

• On sequential basis, overall transaction values (M&A and PE) have increased from USD 2,369 million in Q4 FY

21 to USD 3,736 million in Q1 FY 22 with volumes increase from 32 to 40 transactions during the same period.

• On y-o-y basis, overall transaction values (M&A and PE) have increased from USD 420 million in Q1 FY 21 to

USD 3,736 million in Q1 FY 22 with increase in volumes from 19 to 40 transactions during the same period.

• M&A transaction values were higher at USD 2,016 million in Q4 FY 21 primarily led by the big-ticket acquisition

of Capco by Wipro Limited for USD 1,450 million. The transaction value in Q1 FY 22 was USD 477 million.

• PE transaction values increased from USD 353 million in Q4 FY 21 to USD 3,259 million in Q1 FY 22, primarily

led by the transfer of holding stake in Mphasis Ltd. by Blackstone from its existing fund to two new funds.

• In Q1 FY 22, IT companies focused on acquiring technologies, such as cyber-security platform and IT

consultancy companies offering digital transformation, data and business analytics and business process

management solutions. Further, funding by PE/VC saw good activity, predominantly in the area of digital

payments and Analytics/AI.


Top transactions: Q1 FY 22

18

*NA: Not applicable

Transaction

month

Acquirer Country

(Acquirer)

Target Country

(Target)

Segment Transaction

type

Transaction

value

(USD million)

Apr-21 Multiple Funds NA* Mphasis Ltd India IT consultancyPE

investment2,084.5

May-21 Multiple Funds NA* Pine Labs Pvt. Ltd India Digital paymentsPE

investment285.0

Apr-21 Multiple Funds NA* Uniphore Software Systems Pvt Ltd India Predictive analytics/AIPE

investment210.0

Jun-21 Multiple Funds NA* Browserstack Software Pvt Ltd India SaaS/PaaS/VaaSPE

investment200.0

Apr-21 Multiple Funds NA* Razorpay Software Pvt Ltd India Digital paymentsPE

investment160.0

Apr-21 Multiple Funds NA* Druva Software Pvt Ltd India Data management PE

investment147.0

Apr-21 Coforge Limited India SLK Global Solutions Pvt Ltd India IT consultancyControlling

stake125.8

Apr-21Tech Mahindra

LtdIndia DigitalOnUs, Inc US Others Acquisition 120.0

May-21 Multiple Funds NA* RoboticWares Pvt. Ltd- FarEye India SaaS/PaaS/VaaSPE

investment100.0

Apr-21Pine Labs Pvt.

LtdIndia Fave Asia Technologies Sdn. Bhd Malaysia SaaS/PaaS/VaaS Acquisition 45.0


Company-specific analysis of large-cap

companies

19

Company Two-year CAGR (%)Two-year median

margins (%)

TCS 9.1% 27.5%

Infosys 14.1% 22.7%

Wipro 11.4% 17.3%

HCL 11.4% 24.7%

Tech Mahindra 8.6% 16.5%

Q-o-q revenue growth (%) Quarter wise EBITDA margins (%)

Wipro recorded the highest revenue growth in Q1

FY 22 (in reported rupee terms) followed by Infosys

and TCS.

-10.0%

-7.0%

-4.0%

-1.0%

2.0%

5.0%

8.0%

11.0%

Revenue Growth -TCS Revenue Growth-Infy

Revenue Growth-Wipro Revenue Growth-HCL

Revenue Growth-Tech Mah

10.0%

14.0%

18.0%

22.0%

26.0%

30.0%

EBITDA Margin -TCS EBITDA Margin -Infy

EBITDA Margin -Wipro EBITDA Margin -HCL

EBITDA Margin -Tech Mah



companies

20

* Multiples have been presented till 30th July 2021 in order to capture the results of Q1 FY22.

EV/Revenue EV/EBITDA

0.0

5.0

10.0

15.0

20.0

25.0

30.0

EV/EBITDA-TCS EV/EBITDA-Infy

EV/EBITDA-Wipro EV/EBITDA-HCL

EV/EBITDA-Tech Mah EV/EBITDA-Industry

Five-year

median EV/

revenue

Premium/

discount

on 2.4x

EV/LTM

revenue

Premium/

(discount) on

LTM

multiple(4.6x)

EV/one-year

forward

revenue

EV/Two-year

forward

revenue

Five-year

median

EV/EBIT

DA

Premium/Di

scount on

10.9x

EV/LTM

EBITDA

Premium/Disco

unt on LTM

Multiple(20.2x)

EV/one-

year

forward

EBITDA

EV/two-

year

forward

EBITDA

Large-cap

companies 2.40 4.63 10.95 20.16

TCS 4.94 106.08% 6.64 43.33% 5.74 5.17 18.91 72.77% 23.85 18.32% 20.30 18.51

Infosys 3.43 42.83% 6.18 33.44% 5.30 4.72 13.37 22.17% 22.66 12.42% 20.05 17.83

HCL 2.43 1.22% 3.46 -25.30% 3.08 2.77 10.71 -2.12% 13.64 -32.33% 12.38 11.21

Wipro 2.13 -11.29% 4.63 0.00% 3.77 3.41 10.82 -1.16% 20.16 0.00% 16.95 15.32

Tech Mahindra 1.56 -34.78% 2.49 -46.24% 2.16 1.94 9.83 -10.16% 14.04 -30.35% 11.52 10.45

0.0

2.0

4.0

6.0

8.0

EV/Revenue-TCS EV/Revenue-Infy

EV/Revenue-Wipro EV/Revenue-HCL

EV/Revenue-Tech Mah EV/Revenue-Industry



companies

21

Company Contract value won in Q1 FY 21 Contract value won in Q4 FY 21 Contract value won in Q1 FY 22

TCS USD 6.9 billion USD 9.2 billion USD 8.1 billion

Infosys USD 1.7 billion USD 2.1 billion USD 2.6 billion

HCL11 transformational deals signed in Q1

FY21**

USD 3.1 billion USD 1.7 billion

Wipro -* USD 1.4 billion USD 0.7 billion

Tech Mahindra USD 0.3 billion USD 1 billion USD 0.8 billion

Quarter-wise EBITDA margins (%)

* Amount not disclosed by the company in the earnings call.

26% 26% 26%

21%

14%

29%28%

26% 25%

20%

28%27%

24% 24%

18%

0%

5%

10%

15%

20%

25%

30%

35%

TCS Infosys HCL Wipro Tech Mahindra

Q1 FY21 Q4 FY21 Q1 FY22


Forward estimates of large-cap companies

22

LTM and forward EV/revenue LTM and forward EV/EBITDA

EV/revenue and EV/EBITDA are estimated on the following information:

• Enterprise value as on 30 July 2021

• Last 12-month (LTM) revenue and EBITDA as on 30 July 2021 (reported currency)

• One-year and two-year forward estimates of revenue and EBITDA as on 30 July 2021

6.6 6.2

4.6

3.5

2.5

5.7 5.3

3.8

3.1

2.2

5.2 4.7

3.4

2.8

1.9

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

TCS Infosys Wipro HCL Tech Mahindra

EV/ LTM Rev EV/ 1 Yr Fwd Rev EV/ 2Yr Fwd Rev

23.9 22.7

20.2

13.6 14.0

20.3 20.1

16.9

12.4 11.5

18.5 17.8

15.3

11.2 10.4

-

5.0

10.0

15.0

20.0

25.0

30.0

TCS Infosys Wipro HCL TechMahindra

EV/ LTM EBITDA EV/ 1 Yr Fwd EBITDA EV/ 2 Yr Fwd EBITDA


Revenue contribution and growth (reported USD

currency) in verticals for Q1 FY 22

23

Revenue contribution in verticals for Q1 FY 22

Segments: i) BFSI, ii) Communications, iii) M&T = manufacturing and technology, iv) Retail, v) E&U= energy and utilities, vi) Life sciences, vii) Others

Revenue growth in verticals for Q1 FY 22 (Q-o-q%)

32.5%

6.4%

18.4%14.8%

10.2%

17.7%

BFSI Communications M & T Retail LifeSciences Others

3.7%1.2%

5.0% 4.9%8.1%

-4.8%

BFSI Communications M & T Retail LifeSciences Others

33.0%

12.2%18.0% 15.0% 12.1%

6.8% 2.9%

4.7% 6.4% 6.5% 6.1%

3.0%

4.7%

-10.7%

29.7%

10.6%

21.7%13.8%

6.5% 9.6% 8.2%

6.4%4.2% 2.9%

6.0%3.2%

5.4%

-4.6%

BFSI Communications M & T Retail E & U LifeSciences Others

A

Large-cap

B

TCS

C

Infosys


22.1%

7.9%

34.5%

10.0% 10.8%14.7%

BFSI Communications M & T Retail E & U LifeSciences

3.2%

-1.6%-0.3% -0.1%

-2.7%

5.2%


33.4%

5.1%

19.2% 17.3%13.1% 11.9%


21.1%

12.8%

-0.3%

12.5%9.7%

1.2%


16.4%

40.0%

25.3%

7.7%10.6%

BFSI Communications M & T Retail Others

3.4%

5.1%

2.8%

6.8%

2.1%

BFSI Communications M & T Retail Others

Revenue contribution and growth (reported USD

currency) in verticals for Q1 FY 22

24

D

HCL Tech

Revenue contribution in verticals for Q1 FY 22

Segments: i) BFSI, ii) Communications, iii) M&T = manufacturing and technology, iv) Retail, v) E&U = energy and utilities, vi) Life sciences, vii) Others

Revenue growth in verticals for Q1 FY 22 (Q-o-q%)

E

Wipro

F

Tech

Mahindra


Appendix 1 – IT services companies

25

• We have analysed the valuation multiples of IT services companies and have segregated the companies into large, mid

and small-cap categories based on their current market capitalisation.

Large-cap companies Mid-cap companies Small-cap companies

• Tata Consultancy Services (TCS)

• Infosys

• Wipro

• HCL Technologies

• Tech Mahindra

• Mphasis

• WNS (holdings)

• Mindtree

• Zensar Technologies Limited

• L&T Infotech Limited

• Persistent Systems

• eClerx Services

• Sonata Software

• Firstsource Solutions

• Hinduja Global Solutions

• NIIT

• Mastek

• Genesys International Corporation

• Datamatics Global Services

• Cigniti Technologies

• Kellton Tech Solutions

• Expleo Solutions

• R Systems International

• For our analysis, we have considered only those companies that were listed five years before Q1 FY 22. Further, we have removed certain

outlier companies based on various parameters.

• We have carried out the analysis based on the financial numbers of these companies in reported rupee currency. Further, for comparison

purposes, we have presented the corresponding dollar numbers that are converted based on the 30 June 2021 exchange rate. These do

not represent reported dollar financial numbers.

• Kindly note that from Q1 FY 20, all companies accounted for leases in accordance with the transition guidelines of the relevant new

accounting standard Ind AS 116/IFRS 16. This adjustment had a marginal impact on the EBITDA margins of all quarters from Q1 FY 20

onwards. However, the same adjustments are not reflected in the previous years’ margins.


Appendix 2 – IT engineering and software

product companies

26

We have analysed the valuation multiples of listed engineering and software companies in India over the last five years.

IT engineering companies* Software product companies*/**

• Tata Elxsi Limited

• Cyient Limited

• L&T Technology Services Limited

• ABM Knowledgeware Limited

• AurionPro Solutions Limited

• Nucleus Software Exports Limited

• Oracle Financial Services Software Limited

• Ramco Systems Limited

* For our analysis, we have considered only those companies which were listed five years before Q1 FY 22. Further, we have

removed certain outlier companies based on various parameters.

* We have carried out the analysis based on the financial numbers of these companies in reported rupee currency. Further, for

comparison purposes, we have presented the corresponding dollar numbers, which are converted based on the 30 June 2021

exchange rate and do not represent reported dollar financial numbers.

* Kindly note that from Q1 FY 20, all companies are accounted for leases in accordance with the transition guidelines of the relevant

new accounting standard Ind AS 116/IFRS 16. This adjustment had a marginal impact on the EBITDA margins of all quarters from

Q1 FY 20 onwards. However, the same adjustments are not reflected in the previous years’ margins.

** Companies primarily into developing software products.


Appendix 3 – Global IT services and technology

companies

27

• We have analysed the valuation multiples of the following global IT services companies over the last five years:

• Capgemini SE

• EPAM Systems Incorporated

• CACI International Corporation

• Amdocs Limited

• Booz Allen Hamilton Holding Corporation

• Leidos Holding Incorporated

• Accenture plc

• Cognizant Technology Solutions Corporation

• DXC Technology Company

• International Business Machines (IBM) Corporation

• We have analysed the valuation multiples of the following global technology companies over the last five years:

• Microsoft Corporation

• Adobe Incorporated

• Oracle Corporation

• Salesforce Incorporated

• VMware Incorporated

• Synopsys Incorporated

• ANSYS Incorporated

• Fortinet Incorporated

• Paycom Software Incorporated

• SS&C Technologies Holdings Incorporated


References

28

• S&P Capital IQ database

• Annual fillings of IT services companies

• Earnings call transcripts of IT services companies

• Dealtracker published by Grant Thornton Bharat


About Grant Thornton Bharat

29

Grant Thornton Bharat is a member of Grant Thornton International Ltd. It has 5,600+ people across 14 offices around the

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providing robust compliance services to dynamic Indian global companies, and to help them navigate the challenges of growth

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Acknowledgements

30

Authors

Manish Saxena

Kaushik Paul

Sanjana Khandelwal

Vishal Satidasani

Madhav Kejriwal

Vaishnavi Talreja

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