Result Update

July 18, 2016

Rating matrix
Rating : Buy Infosys (INFTEC) | 1073
Target : | 1290
Target Period : 12 months
Potential Upside : 20%
Large deal win, client matrix improves…
What’s Changed? • Infosys reported weak Q1FY17 results as dollar revenue growth was
Target Changed from | 1,400 to | 1,290 below our estimates. US$ revenues grew 2.2% QoQ to $2,501
EPS FY17E Changed from | 67.0 to | 64.7
million, below our 4.0% growth and $2,543.8 million estimate. In
EPS FY18E Changed from | 74.0 to | 71.8
constant currency, revenue growth was 1.7% QoQ, significantly
Rating Unchanged
lower than our estimate of 3.8%
Quarterly Performance • EBIT margins at 24.1% declined ~140 bps QoQ and were above our
Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) estimate of 23.5% as wage hike and currency headwind were offset
Revenue 16,782 14,354 16.9 16,550 1.4 by better operating efficiency
EBIT 4,047 3,447 17.4 4,220 (4.1) • Reported PAT of | 3,436 crore was above our | 3,418 crore estimate
EBIT (%) 24.1 24.0 10 bps 25.5 -138 bps Revenue miss on account of slower spending in consulting, PI
PAT 3,437 3,030 13.4 3,597 (4.4)
Infosys reported subdued revenue growth of 2.2% sequentially in dollar
terms and 1.7% sequentially in constant currency. The revenue growth
Key Financials was well below our expectation of 4% sequential growth in dollar terms.
| Crore FY15 FY16 FY17E FY18E
The subdued revenue growth was on account of a slowdown in
Net Sales 53,319 62,441 70,022 78,825
discretionary spending in Consulting and Packing Implementation (PI) and
EBITDA 14,901 17,078 19,241 21,336
Net Profit 12,329 13,491 14,793 16,402
slower-than-expected ramp up in a few of the deals won previously.
EPS (|) 53.9 59.0 64.7 71.8 Revises guidance downward following weak Q1FY17 results…
Following weak Q1FY17 results, Infosys revised its guidance for FY17E
Valuation summary downward. The company has lowered its constant currency revenue
FY15 FY16 FY17E FY18E growth guidance downward to 10.5-12.5% from 11.5-13.5%.The constant
P/E 19.9 18.2 16.6 14.9 currency guidance implies CQGR of 3-3.2% over the remaining three
Target P/E 23.9 21.9 19.9 18.0 quarters. The above constant currency growth also translates into dollar
EV / EBITDA 14.3 12.2 10.5 9.2 term revenue growth of 10-11.5% in FY17E. We highlight that Q2FY17E
P/BV 4.5 4.0 3.6 3.2 would be crucial for Infosys to meet its guidance as H2FY17E is
RoNW (%) 22.5 21.9 21.4 21.3
seasonally weak for revenues.
RoCE (%) 31.4 30.3 30.1 29.9
EBIT margin performance beats our expectation…
Stock data Infosys’ Q1FY17 EBIT margins declined 140 bps QoQ to 24.1% in Q1FY17.
Particular Amount
We highlight that Infosys beat our EBIT margin estimates of 23.5% as the
Market Capitalization (| Crore) 245,144.3 company managed to partly offset the impact of salary increase (down
Total Debt | 0 crore 140 bps) and visa cost (down 80 bps) through improvement in utilisation
Cash and Investments 34,468.0 and lower subcontracting cost (up 80 bps). With better operational
EV (| Crore) 210,676.3 efficiency lever, Infosys is well on track to manage its EBIT margin band at
52 week H/L 1278 / 987 24-26% in the medium term.
Equity capital | 1144 crore
Improvement in large deal win & client matrix lends comfort…
Face value |5
We highlight that Infosys continues to witness an improvement in large
deal win and Client matrix. After witnessing large deal wins worth US$2.8
Price performance (%)
billion in FY16, Infosys maintained strong traction by securing large deal
1M 3M 6M 12M
wins with TCV of US$809 million (mn) in Q1FY17. Secondly, the company
TCS 0.6 9.1 7.4 (3.5)
added three clients taking the count to 17 in the $100 million+ category.
Infosys (2.5) 7.6 18.5 18.1
Wipro (2.5) 0.9 (1.5) (2.6)
These factors lend us comfort that Q1FY17 results could be a quarterly
HCL Tech (10.5) (11.2) (11.4) (23.9) blip and its revenue growth is expected to improve, going ahead.
Maintain BUY with target price of | 1290…
Research Analysts Though Infosys’ reported a weak set of Q1FY17 results, the improvement
Deepak Purswani, CFA in large deals and client matrix lends us comfort that it could be a
[email protected] quarterly blip and revenue growth may improve, going ahead. We
anticipate Infosys’ revenues to grow at a CAGR of 12.4% with average
Tushar Wavhal EBIT margin of 25.1% in FY16-18E. Furthermore, a weak Q1FY17 is
[email protected] already reflected in its share price. Hence, we maintain our BUY
recommendation on Infosys with a revised target price of | 1290 (18x
FY18E EPS). We have lowered our target multiple to 18x (19x earlier) to
reflect uncertain demand environment post Brexit.

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q1FY17 Q1FY17E Q1FY16 YoY (%) Q4FY16 QoQ (%) Comments

Infosys' $ revenue growth of 2.2% sequentially was well below our expectation of
Revenue 16,782 17,011 14,354 16.9 16,550 1.4 4% on account of a slowdown in Consulting & Packaging Implementation
Employee expenses 10,281 10,429 8,810 16.7 9,843 4.4

Gross Profit 6,501 6,581 5,544 17.3 6,707 -3.1

Gross margin (%) 38.7 38.7 38.6 11 bps 40.5 -179 bps
Selling & marketing costs 920 971 820 12.2 909 1.2
G&A expenses 1,134 1,174 964 17.6 1,159 -2.2
EBITDA 4,447 4,436 3,760 18.3 4,639 -4.1
EBITDA Margin (%) 26.5 26.1 26.2 30 bps 28.0 -153 bps
Depreciation 400 269 313 27.8 419 -4.5
EBIT 4,047 4,168 3,447 17.4 4,220 -4.1
The EBIT margin performance was better than expectation due to a better
EBIT Margin (%) 24.1 24.5 24.0 10 bps 25.5 -138 bps utilisation rate, lower subcontracting expenses and variable pay
Other income 753 898 758 -0.7 772 -2.5
PBT 4,799 5,066 4,205 14.1 4,992 -3.9
Tax paid 1,362 1,648 1,175 15.9 1,394 -2.3
PAT 3,437 3,418 3,030 13.4 3,597 -4.4 The bottomline was largely in line with our expectation

Key Metrics
Closing employees 197,050 190,000 179,523 9.8 194,044 1.5
LTM attrition-standalone (%) 15.8 14.0 16.7 -93 bps 13.6 223 bps
Utilisation - IT Services (%) 80.5 81.0 80.2 30 bps 80.1 40 bps
Average $/| 67.1 66.9 63.6 5.5 67.7 -0.9

Source: Company, ICICIdirect.com Research

Change in estimates
FY17E FY18E
(| Crore) Old New % Change Old New % Change Comments
Revenue 70,290 70,022 -0.4 79,730 78,825 -1.1
EBIT 17,947 17,735 -1.2 20,310 19,601 -3.5
EBIT Margin (%) 25.5 25.3 -22 bps 25.5 24.9 -68 bps
PAT 15,306 14,793 -3.4 16,905 16,402 -3.0
EPS (|) 67.0 64.7 -3.4 74.0 71.8 -3.0 We have fine-tuned our estimates to reflect weak Q1FY17 results

Source: Company, ICICIdirect.com Research

Assumptions
Current Earlier Comments
FY15 FY16 FY17E FY18E FY17E FY18E
Closing employees 176,187 194,044 210,818 225,628 210,818 225,628
We believe an improvement in utilisation rate will act as a key layer for managing
Utilisation - IT Services (% 76.4 80.9 83.1 84.3 83.1 84.3 the EBIT margin of 24-26% in the medium-term
Average $/| 54.5 65.7 67.0 67.5 66.0 67.0

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Company Analysis
Downgrades revenue guidance to 10.5-12% (in CC) in FY17E…
In constant currency terms, Infosys lowered its guidance to 10.5-12.0%
growth for FY17E (vs. earlier guidance of 11.5-13.5%) while dollar
revenues could grow at 10.0-11.5%. The guidance still implies reasonably
good implied CQGR of 3.0-3.2% on account of large deal wins in the last
few years. We highlight that Infosys won deals with TCS of US$2.8 billion,
~45% YoY. In Q1FY17, the company’s large deal wins stood at US$810
mn. Further, Infosys aims to achieve a quarterly run rate of $1 billion in
TCV signings in the next couple of quarters. We expect FY17E dollar
revenues to grow at a CAGR of 10.9% to US$11.7 billion in FY16-18E led
by healthy deal wins, improved win rates, better execution and top
account mining.

Exhibit 1: Dollar revenues may grow at 10.9% CAGR in FY16-18E vs. 9.5% CAGR in FY11-16

14000 30.0
25.8
12000 25.0
10000
20.0
8000 15.8
$ billion

13.3 11.7 15.0

6000 11.5
8.7 8.5 9.1 10.9 10.0
5.6 10.0
4000 5.8
3.0 7.1 6.5 5.6 3.2 5.8
5.0

10451
11678
2000
4804
6041
6994
7398
8249
2133
2201
2218
2159
8711
2256
2392
2407
2446
9501
2501
0 0.0
FY10
FY11
FY12
FY13
FY14
Q1
Q2
Q3
Q4
FY15
Q1
Q2
Q3
Q4
FY16E
Q1
FY17E
FY18E
Dollar revenue Growth, YoY

Source: Company, ICICIdirect.com Research

Exhibit 2: Though Infosys has grown slower than industry average in past six of previous seven
years, FY17E could be different

35

25.8
27
20.0
18.7 19.0
19 16.0 17.0 15.8 16.5 13.0 12.5
11.6 13.0
11.5
10.2 10.0 11.0
%

11 9.0 8.0
5.8 7.0
5.5 5.6
3.0
3

-5 -4.9
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY17E

Growth, YoY Company guidance (mid-point) NASSCOM guidance (mid-point)

Source: Company, ICICIdirect.com Research

Client metric continues to be steady…

Client additions and order bookings continue to be healthy as Infosys
added 95 clients during the quarter taking the active client base to 1,126
compared to 1092, 950, in FY16, FY15 end, respectively. Across bands,
three clients each transitioned to $100-200 million bucket and $10-25
million bucket. Overall, $1 million+ customers increased by 16 to 574 vs.
558 in Q4. Revenue per FTE (full time equivalent) for consolidated

ICICI Securities Ltd | Retail Equity Research Page 3

 business increased 0.4% QoQ to $50,900 vs. $50,700 in Q4 but declined
1.6% YoY. The aspirational target of the management is to achieve
revenue per FTE of $80,000 by 2020. Quarterly revenue per customer
declined to $2.24 million vs. $2.30 million in Q3 and $2.37 million, $2.29
million, $2.27 million, $2.38 million in Q2FY16, Q1FY16, Q4FY15, Q3FY15,
respectively. Large deal signings continue to be healthy as Infosys signed
six deals worth $757 million in total contract value (TCV) during the
quarter leading to order bookings of ~$2.8 billion in TCV in the last 12
months.

Exhibit 3: Client contribution $1 million+ increases by 16 to 574 in Q1FY17

700
555 558 558 574
600 520 526 532 529 529 535 542
448 466
500
399
366
400
x

300
200
100
0
FY11 FY12 FY13 Q1 Q1 Q2 Q3 Q4 FY15 Q1 Q2 Q3 Q4 FY16E Q1

Clients contributing $1 million+

Source: Company, ICICIdirect.com Research

Margin to remain in its target band of 24-26%…

Q1FY17 EBIT margins declined ~140 bps QoQ to 24.1% and were above
our 23.5% estimate. We highlight that Infosys beat our EBIT margin
estimates of 23.5% as the company managed to partly offset the impact
of salary increase (down 140bps) and visa cost (down 80 bps) through an
improvement in utilisation and lower subcontracting cost (up 80 bps).
With better operational efficiency lever, Infosys is well on track to manage
its EBIT margin band of 24-26% in the medium term.

Exhibit 4: We expect FY17E margins to increase 50 bps YoY to 25.5%

35

32 30.4
29.5 29.0
29
26.7
25.8 26.1 25.7 25.9
%

25.1 25.5 25.5 25.0 25.3 24.9

26 24.9
24.0 24.0 24.1

23

20
FY10

FY11

FY12

FY13

FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

Q3

Q4

FY16E

Q1

FY17E

FY18E

EBIT

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Exhibit 5: Moderation in attrition testimony to management’s employee engagement initiatives

25

22
20.1 20.4
19.5
18.7 18.9 18.9
19 17.2
17.0 16.7
16.3 15.8

%
15.4 15.0
16
13.4 13.8 13.6
13

10

FY10

FY11

FY12

FY13

FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

Q3

Q4

FY16E

Q1
LTM attrition - standalone

Source: Company, ICICIdirect.com Research

Exhibit 6: Utilisation improvement may be key margin lever in FY17E

84.3
85 83.1
82.3 82.7
80.9 80.2 81.3 80.6 81.0 80.5
80.1 80.1
80 78.2 78.6
76.4
74.2
75 72.6
%

70.7
70

65
FY10

FY11

FY12

FY13

FY14

Q1

Q2

Q3

Q4

FY15

Q1

Q2

Q3

Q4

FY16E

Q1

FY17E

FY18E
Utilisation - IT Services (ex-trainees)

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 5

 Outlook and valuation
Infosys reported weak Q1FY17 results as dollar revenue growth was
below our estimates, EBIT margins were in line with our estimates while
the company has lowered its FY17E constant currency revenue growth
guidance to 10.5-12.0%, which translates to US$ revenue growth
guidance of 10.0-11.5%.

Though Infosys’ Q1FY17 reported a weak set of results, the improvement

in large deals and client matrix lends us comfort that it could be a
quarterly blip and revenues growth may improve, going ahead. We
anticipate Infosys revenues will grow at a CAGR of 12.4% with average
EBIT margin of 25.1% in FY16-18E. Furthermore, a weak Q1FY17 is
already reflected in its share price. Hence, we maintain our BUY
recommendation on Infosys with a revised target price of | 1290 (18x
FY18E EPS). We have lowered our target multiple to 18x (19x earlier) to
reflect uncertain demand environment post Brexit.

Exhibit 7: One year forward rolling PE

1800

1500

1200

900

600

300

0
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Price 26 22 18 14 10

Source: Company, ICICIdirect.com Research

Exhibit 8: Valuation
Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY15 53,319 6.4 53.9 15.8 19.9 14.3 22.5 31.4
FY16 62,441 17.1 59.0 9.4 18.2 12.2 21.9 30.3
FY17E 70,022 12.1 64.7 9.7 16.6 10.5 21.4 30.1
FY18E 78,825 12.6 71.8 10.9 14.9 9.2 21.3 29.9
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 6

Company snapshot
1,600 90.0
1,400 80.0

1,200 70.0
60.0
1,000
50.0
(|)

800

(%)
40.0
600
30.0
400 20.0
200 10.0
0 0.0
Jul-14 Sep-14 Dec-14 Feb-15 Apr-15 Jul-15 Sep-15 Dec-15 Feb-16 May-16 Jul-16

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date Event
Apr-11 The company exceeds its annual guidance; guides for 18-20% in FY12
Apr-12 Infosys names SD Shibulal as new Chief Executive Officer till 2015
Sep-12 Infosys considers buying Lodestone for $350 million to boost its consulting service offering
Apr-13 Company misses Q4 sales estimates and provides lower revenue guidance (6-10%) compared to Nasscom average of 12-14%
Jun-13 Narayana Murthy appointed Executive Chairman of the company
Jul-13 The company reports better-than-expected dollar revenue growth and operating margin
Oct-13 Infosys posts better-than-expected growth for second consecutive quarter. Raises guidance to 8-10%
Mar-14 Infosys provides weak outlook for Q4FY14E, which could impact H1FY15E
Apr-14 Infosys guides 7-9% YoY dollar revenue growth for FY15E, below Nasscom guidance of 13-15%. Q4FY14 revenue declines 0.4%

Jun-14 Infosys appoints Dr Vishal Sikka as the successor to the current CEO, Mr Shibulal, for a period of five years. Earlier he worked with SAP for 12 years
Oct-14 Infosys reports a stellar Q2FY15 earnings under the leadership of Dr Sikka. It also announces a 1:1 bonus issue for equity shareholders
Nov-14 Infosys announces December 2 as record date for allotment of bonus shares
Apr-15 Infosys reports weak Q4FY15 earnings led by energy and telecom weakness. The management guided for 6.2-8.2% revenue growth in US$ terms for FY16E (10-12%
Infosys reports strong Q1FY16 earnings led by volumes and were above market expectations. The management maintained its 10-12% constant currency growth
Jul-15 guidance but raised its dollar revenue growth guidance to 7.2-9.2% for FY16E
Infosys reports strong Q2FY16 earnings led by volumes, realisaiton and were above market expectations. The management maintained its 10-12% constant currency
Oct-15 growth guidance but lowered its dollar revenue growth guidance to 6.4%-8.4% (7.2-9.2%) for FY16E
Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
1 Life Insurance Corporation of India 31-Dec-15 5.62 128.5 1.4 Promoter 13.08 13.08 13.08 12.75 12.75
2 Invest AD 31-Dec-15 2.38 54.4 -1.8 FII 40.99 39.89 39.56 40.24 40.46
3 GIC Private Limited 31-Dec-15 2.25 51.4 1.5 DII 16.11 17.17 17.52 17.45 17.25
4 OppenheimerFunds, Inc. 31-Dec-15 2.17 49.6 -1.7 Others 29.82 29.86 29.84 29.56 29.54
5 BlackRock Institutional Trust Company, N.A. 31-Mar-16 1.85 42.3 0.1
6 HDFC Asset Management Co., Ltd. 31-Dec-15 1.62 37.0 -0.5
7 Aberdeen Asset Management (Asia) Ltd. 29-Feb-16 1.41 32.2 -0.2
8 Murty (Rohan) 31-Dec-15 1.39 31.8 0.0
9 The Vanguard Group, Inc. 31-Dec-15 1.35 30.8 -4.0
10 ICICI Prudential Life Insurance Company Ltd. 31-Dec-15 1.30 29.8 3.1
Source: Reuters, ICICIdirect.com Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
Shibulal (Shreyas) 240.3m 14.7m Gopalakrishnan (Sudha) -996.3m -54.2m
Shibulal (Shruti) 251.7m 13.7m William Blair Investment Management, LLC -135.5m -8.1m
Fidelity Management & Research Company 50.4m 3.2m The Vanguard Group, Inc. -66.9m -4.0m
ICICI Prudential Life Insurance Company Ltd. 51.2m 3.1m Genesis Investment Management, LLP -56.6m -3.6m
Norges Bank Investment Management (NBIM) 27.5m 1.6m ICICI Prudential Asset Management Co. Ltd. -36.9m -2.3m
Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 7

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
(Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E
Total operating Income 53,319 62,441 70,022 78,825 Profit after Tax 12,329 13,491 14,793 16,402
Growth (%) 6.4 17.1 12.1 12.6 Add: Depreciation 1,069 1,459 1,506 1,735
COGS (employee expenses) 31,814 37,640 42,308 48,030 (Inc)/dec in Current Assets (2,004) (2,166) (1,800) (2,090)
Admin expenses 3,663 4,292 4,691 5,202 Inc/(dec) in CL and Provisions 873 1,196 994 1,154
S&M expenses 2,941 3,431 3,781 4,257 Taxes paid (6,751) (5,251) (6,042) (6,699)
Total Operating Expenditure 38,418 45,363 50,781 57,488 CF from operating activities 10,752 10,855 12,393 13,701
EBITDA 14,901 17,078 19,241 21,336 (Inc)/dec in Investments* 1,101 3,125 3,100 3,500
Growth (%) 11.1 14.6 12.7 10.9 (Inc)/dec in Fixed Assets (2,247) (2,500) (2,500) (2,500)
Depreciation 1,069 1,459 1,506 1,735 CF from investing activities (1,279) 625 600 1,000
Other Income 3,427 3,125 3,100 3,500 Dividend paid & dividend tax (4,935) (6,552) (7,488) (8,290)
PBT 17,258 18,742 20,835 23,101 Others - - - -
Total Tax 4,929 5,251 6,042 6,699 CF from financing activities (4,935) (6,552) (7,488) (8,290)
PAT 12,329 13,491 14,793 16,402 Net Cash flow 4,538 4,928 5,505 6,411
Growth (%) 15.8 9.4 9.7 10.9 Exchange difference (121) - - -
EPS (|) 54 59 65 72 Opening Cash 25,950 30,367 35,295 40,800
Growth (%) 15.8 9.4 9.7 10.9 Closing Cash 30,367 35,295 40,800 47,211

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E
Equity Capital 572 1,144 1,144 1,144 Per share data (|)
Reserve and Surplus 54,191 60,558 67,864 75,976 EPS 53.9 59.0 64.7 71.8
Total Shareholders funds 54,763 61,702 69,008 77,120 Cash EPS 58.6 65.4 71.3 79.3
Employee benefit obligations - - - - BV 239.6 269.9 301.9 337.4
Debt - - - - DPS 24.5 28.0 31.0 -
Deferred Tax Liability 160 160 160 160 Cash Per Share 132.9 154.4 178.5 206.6
Other non current liabilties 46 46 46 46 Operating Ratios (%)
Total Liabilities 54,969 61,908 69,214 77,326 EBIT Margin 25.9 25.0 25.3 24.9
Assets - - - - PBT Margin 32.4 30.0 29.8 29.3
Property,plant and equipment 9,125 10,166 11,160 11,925 PAT Margin 23.1 21.6 21.1 20.8
Goodwill 3,091 3,091 3,091 3,091 Debtor days 66 66 66 66
Intangibles 638 638 638 638 Unbilled revenue 19 18 18 18
Available for sale assets 1,345 1,345 1,345 1,345 Creditor days 1 1 1 1
Other assets 4,864 4,864 4,864 4,864 Return Ratios (%)
Cash 30,367 35,295 40,800 47,211 RoE 22.5 21.9 21.4 21.3
Investment in CD - - - - RoCE 31.4 30.3 30.1 29.9
Trade receivables 9,713 11,375 12,756 14,359 RoIC 68.9 70.7 74.2 76.6
Unbilled revenue 2,845 3,332 3,736 4,206 Valuation Ratios (x)
Prepayment & O.fin.assets 101 118 133 149 P/E 19.9 18.2 16.6 14.9
Other current assets 4,170 4,170 4,170 4,170 EV / EBITDA 14.3 12.2 10.5 9.2
Total Current Assets 47,196 54,290 61,595 70,096 EV / Net Sales 4.0 3.3 2.9 2.5
Trade payables 140 164 184 207 Market Cap / Sales 4.6 3.9 3.5 3.1
Unearned revenue 1,052 1,232 1,382 1,555 Price to Book Value 4.5 4.0 3.6 3.2
OCL & provisions 10,188 11,180 12,004 12,961 Solvency Ratios
Total Current Liabilities 11,383 12,579 13,572 14,726 Debt/EBITDA - - - -
Net Current Assets 35,813 41,712 48,023 55,370 Debt / Equity - - - -
Application of Funds 54,969 61,908 69,214 77,326 Current Ratio 1.9 1.9 1.9 1.9
Source: Company, ICICIdirect.com Research Quick Ratio 1.9 1.9 1.9 1.9
Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 8

ICICIdirect.com coverage universe (IT)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E
Cyient (INFENT) 473 480 Hold 5,500 29.0 37.0 44.0 16.3 12.8 10.8 10.4 7.8 6.2 18.6 21.0 22.2 15.0 17.0 17.8
Eclerx (ECLSER) 1,463 1,250 Sell 5,776 87.7 93.3 104.9 16.7 15.7 13.9 10.8 9.8 8.5 43.3 39.3 37.3 33.7 30.4 28.8
Firstsource (FIRSOU) 48 45 Buy 3,384 3.8 4.7 5.1 12.6 10.2 9.4 10.1 8.3 7.0 10.3 11.8 13.5 12.7 13.9 13.3
HCL Tech* (HCLTEC) 718 950 Buy 105,764 53.0 59.0 63.0 13.6 12.2 11.4 9.9 8.7 7.3 30.4 28.7 27.1 25.0 23.4 21.8
Infosys (INFTEC) 1,073 1,290 Buy 245,144 59.0 64.7 71.8 18.2 16.6 14.9 12.2 10.5 9.2 30.3 30.1 29.9 21.9 21.4 21.3
KPIT Tech (KPISYS) 144 175 Hold 3,052 14.7 15.7 17.5 9.8 9.1 8.2 6.7 5.7 4.8 18.8 18.5 18.7 17.2 16.4 15.8
Mindtree (MINCON) 574 595 Hold 9,639 32.9 34.8 39.6 17.5 16.5 14.5 10.6 10.0 8.6 32.3 30.6 31.9 24.6 23.6 24.2
NIIT Technologies (NIITEC) 470 525 Hold 3,197 45.8 50.0 54.0 10.3 9.4 8.7 5.8 5.0 4.3 31.6 31.5 31.7 17.9 17.0 16.2
Persistent (PSYS) 656 675 Hold 5,474 37.2 40.0 47.0 17.6 16.4 14.0 11.2 9.3 7.4 27.9 27.3 28.1 21.2 20.4 20.7
TCS (TCS) 2,445 2,700 Buy 491,040 123.2 135.5 149.6 19.9 18.0 16.3 16.9 14.7 13.0 79.3 77.4 77.7 37.5 33.6 30.7
Tech Mahindra (TECMAH) 504 600 Buy 50,414 31.7 36.0 40.0 15.9 14.0 12.6 11.3 9.5 8.4 28.2 28.5 28.0 23.4 22.7 22.1
Wipro (WIPRO) 555 680 Buy 138,829 36.1 37.5 42.0 15.4 14.8 13.2 10.4 9.5 7.7 20.7 20.0 19.4 17.9 16.9 15.9
* June year end, Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research Page 9

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities Ltd | Retail Equity Research Page 10

ANALYST CERTIFICATION
We /I, Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is full-service, integrated investment banking and is, inter alia,
engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various
subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are
available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.
Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research Page 11