Infosys- IT services DCF model, March fiscal year-ends

Rupees mn
Revenues
Cost of revenues
SG&A
EBITDA
Depreciation
EBIT
Tax
Change in net working capital
Capex
Free cash flow
FCF growth (%)

2004
48,530
-25,387
-7,201
15,942
-2,367
13,575
-1,824
1,255
-4,853
10,520

2005
71296.40
-37646.70
-10299.79
23349.91
-2868.80
20481.11
-2808.36
-3727.50
-7632.80
9181.25
-13

PV of cash flows
Terminal Value
PV of terminal value
EV
Debt
Cash
Equity value (Rs mn)
Shares outstanding (mn)
Equity value (Rs/share)

497,878
2,223,222
952,201
1,450,079
0
230,000
1,680,079
574
2,927

34%

Exit FCF multiple (X)

Exit EBITDA multiple (X)

13
9

Current price
Upside/Downside
Weighted average cost of capital-WACC
Terminal growth - g (%)
Risk free rate-Rf (%)
Market risk premium(Rm-Rf) (%)
Beta (x)
Cost of equity-Ke (%)
Cost of debt-Kd (%)
Tax rate (%)
Debt/Capital (%)
Equity/Capital (%)
WACC (%)
Key parameters
Rupee revenue growth (%)
Operating margin
Effective tax rate (%)
Total Employees
Net employee addition
Incremental capex/employee (USD)
Depreciation / revenues ((%)
Depreciation as % of net fixed assets
Net working Capital (days of sales)
Capex/sales ratio
Market Cap (in mn)

2006
95,210
-50,654
-13,643
30,912
-4,371
26,541
-2,603
343
-10,900
17,752
93

66%
100%

2,900
1%

5.0
7.8
5.5
0.9
12.9
8.0
25.0
100.0
12.9

Long Term Real GDP growth Rate

(10-year government bond)
Implied Risk
CAPM

46.9
32.8
13.71
36,750
36,750
4,639
4
35.0
33.8
8.9
1,664,600.0

33.5
32.5
9.81
52,715
15,965
15,435
5
34.8
-1.1
10.6

0
2007
138,930
-74,580
-20,440
43,910
-5,140
38,770
-3,641
-12,390
-15,100
12,779
-28

0
2008
166,920
-92,070
-22,470
52,380
-5,980
46,400
-5,398
-7,990
-14,940
24,052
88

0
2009
216,930
-117,650
-27,330
71,950
-7,610
64,340
-8,611
-4,600
-13,270
45,469
89

0
2010
227,420
-120,710
-28,100
78,610
-9,050
69,560
-14,338
-560
-6,750
56,962
25

0
2011
275,010
-150,540
-34,830
89,640
-8,130
81,510
-20,147
-14,280
-13,080
42,133
-26

2012
322,047
-182,803
-40,776
98,468
-9,164
89,304
-24,393
-6,778
-14,762
52,536
25

2013
376,496
-215,197
-46,218
115,081
-10,613
104,468
-25,872
-6,036
-12,858
70,314
34

1
2014E
434,371
-249,817
-53,771
130,783
-12,057
118,726
-29,025
-6,893
-18,890
75,976
8

2
2015E
498,889
-287,887
-61,613
149,389
-13,696
135,693
-32,128
-7,861
-20,170
89,230
17

Sensivity of DCF value to WACC, Terminal Growth rate

Terminal
Growth
rate (%)

45.9
31.6
9.39
72,241
19,526
17,193
3.7
30.0
37.6
10.1

20.1
31.4
11.63
91,187
18,946
19,727
3.6
25.4
15.1
10.9

30.0
33.2
13.38
104,850
13,663
20,886
3.5
26.0
31.4
5.9

2927
2.0
3.0
4.0
5.0
6.0

12.6
2490
2631
2805
3024
3310

13.1
2400
2524
2676
2865
3108

WACC
13.6
2318
2428
2562
2726
2935

14.1
2244
2342
2460
2604
2784

14.6
2177
2265
2370
2496
2653

4.8
34.6
20.61
113,796
8,946
15,929
4.0
21.2
26.8
4.1

20.9
32.6
24.72
130,820
17,024
16,880
3.0
19.6
31.5
0.8

17.1
30.6
27.31
151,030
20,210
16,318
2.8
20.8
31.9
2.6

16.9
30.6
24.77
167,414
16,384
17,207
2.8
21.3
31.8
4.6

15.4
30.1
24.45
192,284
24,870
16,906
2.8
23.4
32.0
3.3

14.9
29.9
23.68
219,056
26,772
16,938
2.7
23.6
32.0
4.3

3
2016E
568,292
-329,364
-70,030
168,899
-15,530
153,369
-35,108
-8,852
-22,225
102,714
15

4
2017E
644,373
-375,143
-79,234
189,996
-16,477
173,519
-38,261
-10,016
-23,881
117,838
15

5
2018E
724,961
-424,355
-89,102
211,504
-17,828
193,677
-41,194
-11,181
-26,023
133,106
13

6
2019E
811,805
-477,851
-99,749
234,205
-19,674
214,530
-43,900
-12,703
-27,726
149,876
13

7
2020E
904,771
-535,663
-111,155
257,953
-21,722
236,231
-46,374
-14,333
-30,450
166,797
11

13.9
29.7
22.89
247,999
28,943
17,439
2.7
24.1
32.1
4.1

13.4
29.5
22.05
279,390
31,391
17,451
2.6
23.3
32.1
3.9

12.5
29.2
21.27
313,222
33,832
17,823
2.5
22.8
32.1
3.8

12.0
28.8
20.46
349,658
36,436
17,810
2.5
22.8
29.6
3.6

11.5
28.5
19.63
388,663
39,005
18,456
2.4
23.1
29.8
3.5