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Scrip Code Industry CMP Recommendation Target Time Horizon

NUCSOFEQNR IT Rs. 207.3 Buy at CMP and add on dips to Rs. 178191 Rs. 242 12 quarters

Incorporated in 1989, Nucleus Software Exports Ltd. (NSEL) is a leading provider of software solutions to the Banking and
Financial Services Industry. For over 20 years, the company has developed solutions spanning from Retail Banking to Corporate
Banking, Cash Management, Internet Banking and Credit Cards.

We expect NSELs net sales & PAT to grow by 18% & 28.1% respectively in FY15 likely to be driven by revival expected in BFSI
segment due to recovery in global IT spending in developed and emerging markets, revamping of the sales team by NSEL
across the geographies, increase in the customer base and new product orders & launches. Improved revenue growth and cost
optimization would result in higher profitability and margins.

Gartner expects BFSI spend on technology to go up by as much as 9.8% onyear in 2014 to Rs 46,200 crore. IT services will be
the largest segment in overall spending category due to a strong focus on the financial services sector by IT services providers.
Software is expected to be the fastest growing segment, with 15.2% growth in 2014. With strong product portfolio and
financial strength, NSEL is well placed to leverage its strength and exploit the available opportunities.

NSELs cash flows have improved significantly over the last two years and with improved profitability, we expect strong cash
flow generation over the next one to two years, which would enable NSEL to maintain its cash rich & debt free status. Surplus
cash could be utilised for higher dividend payouts & profitable acquisitions.

NSELs priority on improving the business quality over sales growth places the company in better position to benefit from
improved demand for discretionary IT spends compared to other small players. With sound balance sheet, improved financial
performance and revival in the BFSI sector, we expect a gradual rerating in the stock price. Valuing the stock at 9.5xFY15E
EPS, we arrive at a price target of Rs. 242. We recommend investors to buy the stock at current levels and to average it on dips
to Rs. 178191 (77.5xFY15E EPS) for our price target over next one to two quarters.

Particulars (Rs. in Mn) FY11 FY12 FY13 FY14 FY15E
Net Sales 2704.8 2822.5 2937.6 3462.2 4085.4
% Growth yoy 7.3 4.4 4.1 17.9 18.0
Operating Profit 307.9 358.8 463.4 670.9 868.1
% Growth yoy 33.0 16.5 29.2 44.8 29.4
PAT (Adjusted) 263.4 353.4 451.7 643.3 824.4
% Growth yoy 31.1 34.2 27.8 42.4 28.1
EPS (Fully Diluted) 8.1 10.9 13.9 19.9 25.5
PE 25.5 19.0 14.9 10.4 8.1
(Source: Company, HDFC sec Research)
RETAIL RESEARCH
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1-NUCLEUS.Nucleus Software Exports.NSE - 10/06/14 Trend7
Weekly
Stock Details
BSE Code 531209
NSE Code NUCLEUS
Bloomberg NCS IN
Price (Rs) on June 11, 2014 207.3
Equity Capital (Rs Mn) 323.9
Face Value (Rs) 10.0
Eq. Shares O/s (mn) 32.4
Market Cap (Rs Mn.) 6,578.4
Book Value (Rs) 122.6
Avg. Volume (52 Week) 2,33,644
52 wk H/L (Rs) 250.9/ 65.3
Shareholding Pattern
(As on March 31, 2014) % Holding
Promoters 57.5
FII 7.7
Institutions 9.3
Others (incl. body corporate) 25.5
Total 100.0
June 12, 2014
Nucleus Software Exports Ltd.
Mehernosh K. Panthaki
Research Analyst FMCG, IT, Midcaps
mehernosh.panthaki@hdfcsec.com

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Company Overview

Incorporated in 1989, Nucleus Software Exports Ltd. (NSEL) is a leading provider of software solutions to the Banking and
Financial Services Industry. For over 20 years, the company has developed solutions spanning from Retail Banking to Corporate
Banking, Cash Management, Internet Banking and Credit Cards. FinnOne, the Flagship product of NSEL is a comprehensive
suite for Retail Banking applications comprising of modules like Customer Acquisition System, Loan Management, Delinquency
and Recovery Management, Deposits and Finance against Securities. Cash@WillTM and BankONetTM are the offerings from
NSEL in the area of Cash Management and Internet Banking respectively. In addition, NSEL offers comprehensive Transaction
Banking solution covering Global Receivables, Global Payment & Liquidity Management and eFinancial supply chain
management offers flexible, speedy & efficient execution of cash management processes. Nucleus Software also offers
solutions to customers in the areas of Managed Infrastructure services and Application Development & Maintenance.

Over the years, its committed professionals have provided solutions par excellence and with the experience and skills, it has
been able to create a global footprint of Customers and partners across multiple continents with multiproduct, multiservice,
multicurrency and multilingual implementations, leading to worldwide acceptability and customer satisfaction. With an
headcount of 1520 employees and over 156 customers across the globe, NSEL is consistently innovating with cutting edge and
industry driven products in the domain.

NSELs products business accounts for 68.7% of the total revenues (in FY14), while Projects & Services business contributes the
balance 31.3%.

FY14 FY13


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Geographically, NSEL is well diversified. Far East, South East Asia, India & Middle East are major geographies, which contribute
around 77.1% of NSELs total revenues (in FY14).

FY14 FY13


NSEL operates through integrated and wellnetworked subsidiaries in India, Japan, Netherlands, Singapore and USA. As on Dec
31, 2013,, NSEL had six wholly owned subsidiaries (2 Indian and 4 overseas), with Singapore & Japanese subsidiaries being the major
contributors. The details of the subsidiaries are given below:

Name of Subsidiary (Rs. in Mn) Country Date of Incorporation FY13 Turnover FY13 PAT
Nucleus Software Solutions Pte. Ltd., Singapore February 25, 1994
702.2 30.5
Nucleus Software Inc. USA August 5, 1997
163.5 8.8
Nucleus Software Japan Kabushiki Kaisha Japan November 2, 2001
320.6 25.7
VirStra-i Technology Services Ltd. India May 6, 2004
204.9 32.9
Nucleus Software Netherlands B.V. Netherlands February 3, 2006
9.4 9.3
Nucleus Software Ltd. India April 21, 2008
8.3 3.9

In order to rationalize operations, NSEL has closed down its stepdown subsidiary by the name of 'VirStra iTechnology
(Singapore) Pte. Ltd.' w.e.f. Feb 19, 2014. Further, with a new to tap the business potential in Australia region, NSEL
incorporated a wholly owned subsidiary in Feb 2014 named Nucleus Software Australia Pty Ltd.

The subsidiaries in total accounted for 30.4% of the total revenues in FY14 (31.1% in FY13). Their turnover increased by 14.9%,
while the profits increased by 14.4% (profits had tripled in FY13).

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NSEL has branch offices in Chennai and Mumbai in India and in London, UK and Dubai. The Singapore subsidiary has branch
offices in Seoul in Korea and Manila in Philippines. These Subsidiaries/branch offices help the Company in providing frontend
support to customers and explore new opportunities.

Investment Rationale

Strong product portfolio; new product orders and launches, increasing customer base to drive the growth

NSEL derives 68.7% of its revenues from its products business (in FY14). Services & Projects business contributes the balance.
The company has build up a strong product portfolio over the last 20 years and has developed solutions spanning from Retail
Banking to Corporate Banking, Cash Management, Internet Banking and Credit Cards. FinnOne, the flagship product of NSEL,
is a powerhouse of seamlessly integrated applications, designed to provide operational support, risk management and
decisionmaking support to banks and financial services companies. FinnOne focuses on both, retail and corporate loans,
thereby emerging as a comprehensive solution to back any line of the lending business. FinnOne has been ranked as the
Global No. 1 Lending Software solution for the fifth consecutive year by IBS Publishing, UK in their Sales League Table 2013 for
banking product sales. In addition, NSEL offers comprehensive Transaction Banking solution covering Global Receivables,
Global Payment & Liquidity Management and eFinancial supply chain management offers flexible, speedy & efficient
execution of cash management processes. NSEL also offers solutions to customers in the areas of Managed Infrastructure
services and Application Development & Maintenance.

In FY13, NSEL won 20 product orders for implementing 65 product modules from all over the world. With these orders, the
company added 10 new customers during the year. The company has a strong order backlog of Rs. 2590 mn as on March 31,
2014, which includes Rs. 1944.5 mn orders of products business and Rs. 644.6 mn of projects and services business. In FY14,
NSEL won 14 new product orders worldwide. 51 new product modules were successfully implemented across geographies.
The company added 9 new customers in FY14. In Q4FY14, the company successfully launched an integrated transaction
banking product suite, FinnAxia in Singapore, which has been tested globally and has successfully delivered business value.
NSEL expects a few more integrated transactionbanking products to gone live in the coming quarters. The products would
cover the entire spectrum of transaction banking, i.e. Payments, Receivable Collections including EIPP which is Invoice
Presentment and Payments, Liquidity Management and Financial Supply Chain Management. The new FinnOne version that
NSEL has been working on is showing good progress.

Geographically the company is well diversified with an equally strong presence across markets like Far East, South East Asia,
India, Middle East, Africa, America, Europe / UK etc. The company continues to do well in the markets where they hold strong
market share. In order to drive its growth, it is also planning to increase its presence in the markets where they have done less
product implementations. Recently, the company entered into major financial hub, Australia through wholly owned
subsidiary. FinnOne currently contributes a large portion of NSELs revenues. However, going forward, the company expects
transaction banking revenue share to improve. New product launches going ahead would definitely drive the revenue & profit
growth. NSEL has recently developed innovative mobility solutions (mServe, mCas, mCollect), which is getting good response

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from existing customers due to its ability to reduce the total transaction time significantly for banks which may lead to better
ROEs. Though the ticket size is small, it would add to the companys revenues and profits.

NSELs domain specific solutions, product leadership, customized approach, strong delivery capabilities and global footprint
makes it an ideal partner for its customers. The company is increasingly aligning its offerings more closely to the business
priorities of its customers. NSEL is working towards transforming the future of banking technology with widespread adoption
of the Agile methodology to offer its customers strategic business advantages. Significant improvements are visible due to an
increased early visibility through sprint reviews, improved customer satisfaction, reduction in overall project duration resulting
in First time Right solutions. It is now able to better manage its development processes and increase scope control, timeliness
and quality of future projects. As a result of this changed methodology and the underlining business benefits, some of its
major customers have started participating in Agile development adding a nice addendum to their business success story.

Likely to benefit immensely from the turnaround in the BFSI segment

Going by industry experts, the banking, financial services and insurance (BFSI) vertical, which accounts for 4050% of the
revenues of Indian IT companies, would invest big time in IT solutions this year. Financial Services Industry has the largest
software spend and continues to grow rapidly on the back of geographical expansion, new products & new banking models.
Gartner expects BFSI spend on technology to go up by as much as 9.8% onyear in 2014 to Rs 46,200 crore. IT services will be
the largest segment in overall spending category due to a strong focus on the financial services sector by IT services providers.
Software is expected to be the fastest growing segment, with 15.2% growth in 2014. This is a direct outcome of the fact that
focus on expansion and increasing market share remains a top priority for banks in India.

Though there have been a number of requests from Indian banks regarding the modernisation and legacy replacement of core
banking systems, the major issue for many of those banks is still the gap between frontoffice and backoffice services. Recent
changes announced by the RBI and impending new bank licences are also among the reasons for rebound in BFSI industry.

BFSI segment in India is quickly adopting the new nonlinear technology like mobility, data analytics and cloud to upgrade their
systems. Deregulation of this otherwise highlyregulated sector, as well as new banking licences, have provided the required
scope for system upgrading via automation. Also, software firms are getting into the core banking segment, with specialized
offerings like NSELs FinnOne, Oracles iFlex, TCSs bankinabox from BaNCs, Wipros Banking as a shared service, and of
course, Infosyss Finnacle, which offers a variety of banking solutions.

At a global level, too, regulatory changes are forcing banks and insurance companies to switch to new IT systems, resulting in
more BFSI contracts being given out. Besides, better growth in the US this year has resulted in increasing spends on IT from
business profits achieved.


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There is a strong correlation between growth of the US economy (the largest outsourcer of software services to Indian
companies) and the BFSI sector. In 2010, both the US geography and BFSI sector grew faster than average, and three years
later, we observe a similar trend. Software firms are thus quite bullish about the BFSI vertical growth for FY14.

There are indications of improvement in discretionary spending. Though some delay in decision making still persists, we expect
an improvement in the coming quarters. The license booking is expected to improve in CY14 considering the sustained deal
flow momentum in the BFSI segment as indicated from earnings & management commentary of some of the companies. This
augurs well for company like NSEL, one of the leading players in the BFSI segment.

Global Bank IT Spending improving, as European market recovers: Celent

In its report released, Celent, a research and advisory firm in financial services expects banking IT spending in the three major
regions of North America, Europe and AsiaPacific to rise by 4.4% to $188 billion in 2014. AsiaPacific is expected to grow at a
faster rate by 5.8% in 2014 (in 2015, the growth rate is expected to slow marginally). U.S and Canadian banks are also
expected to spend more, the report predicts growth of 4.5% in 2014. After years of little or no growth, Celent reports
headline numbers show that spending by European banks is finally recovering and is expected to rise 2.9% in 2014 before
ramping up further through 2016, increasing by 4.3% to $67.1 billion.

We remain positive on the overall banking product segment and expect players like NSEL with strong products and financial
strength to leverage the improving demand scenario.

Expanding the global footprint with strategic partnerships

For attaining a global presence and providing radically new products and solutions to the BFSI industry, NSEL envisages its
partners playing a strategic and critical role in the growth of the Company and its brand globally. Expanding its global foot
print into new major financial hubs of South Africa and Switzerland with its host of competitive IT products & solutions for
retail banking, corporate banking, auto finance, transaction and cash management, NSEL is exploring strategic partnerships
across technology alliances, channel partners and system integrator partners for business growth. With a well established
channel partner network present in strategic locations across the globe, the company is confident of entering into new
geographies in the quarters ahead while offering localized relationship management for its customers in those markets. NSEL
has been chartering new territories and expanding its global footprint while addressing mission critical needs of its customers.

NSEL has filled in for the gaps in its sales and marketing team across geographies created by major attrition seen during last 2
fiscals. The new team has been mapped well across geographies and it would also benefit from its strong 16 global channel
partners across all major geographies.





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Cash rich, debt free status, improving return ratios, healthy and consistent dividend payouts

NSEL is a cash rich company. Its cash & cash equivalents as on March 31, 2014 stood at Rs. 3 bn, which increased from Rs. 2.7
bn in FY13. The companys cash per share stood at Rs. 30.5 in FY14. Such robust cash balance has enabled NSEL to fund
majority of its expansion plans through internal accruals. As a result the companys debtequity is NIL. NSELs average
operating cash flows over the last 5 years stood at Rs. 514 mn. With robust profit growth expected over the next 12 years, we
expect NSELs cash flow generation to improve, which would enable the company to maintain its cash rich & debt free status.
Also the idle cash balance could be utilised by NSEL for profitable acquisitions (though not a high priority at present, but the
management stated that it may consider the acquisition out of idle cash in future as and when opportunity arises), which
could result in earnings accretion.

NSELs return ratios have improved over FY1114. ROCE has improved from 10.4% in FY11 to 21% in FY14, while RONW as
improved from 9.1% in FY11 to 16.2% in FY13. With improved profitability, we expect the return ratios to improve over the
next two years. ROCE & RONW are expected to improve to 23.6% & 18.2% respectively in FY15.

NSEL has a good track record of enriching its shareholders wealth with healthy & consistent dividend payouts since FY01. The
dividend payments have increased from Rs. 6.8 mn in FY01 to Rs. 194.3 mn in FY14. The dividend payout ratio over the last
four years has been in the range of 2131%. With bright future prospects we expect the company to continue to reward its
shareholders with healthy and consistent dividend payouts. The payout ratio could improve gradually with improved profits.

80.9 81.0 81.0
97.2
194.3
226.7
21.7
30.7
22.9
21.5
30.2
27.5
0
5
10
15
20
25
30
35
0
50
100
150
200
250
FY10 FY11 FY12 FY13 FY14 FY15E
Year End
Div. Amount (Rs. in Mn) LHS Div. Payout (%) RHS


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Revenues to grow by 18% in FY15; margins to improve

NSELs net sales grew marginally by 4.4% over FY1014 largely on account of weaker demand in the developed markets post
the global financial crisis (Europe in particular), saturation in the Far east market (in its segments), aging product profile and
attrition in the marketing team during FY1113. The companys operating profit & PAT grew by 9.9% & 13.9% respectively over
FY1014 (impacted mainly in FY11). However, the company witnessed a turnaround in its financials in FY14. The turnover grew
by 17.9%, while operating profit & PAT grew by 44.8% & 42.4% respectively. The growth was driven by pick up in the BFSI
segment, revamping of the sales team by NSEL across the geographies, increase in the customer base and new product orders
& launches. Increasing penetration in new markets has given NSEL a positive momentum.

We expect the growth momentum to continue in FY15. We expect the turnover to grow by 18% in FY15, while operating profit
& PAT are expected to grow by 29.4% & 28.2% respectively over the same period. OPM is expected to improve from 19.4% in
FY13 to 21.3% in FY15, while PAT margins are expected to improve from 18.6% in FY13 to 20.2% in FY15.

Trend in NSELs turnover since FY11 and future projections:








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Trend in NSELs operating profit & PAT and margins since FY11 and future projections:




Competitive Profile

NSELs competitors range in size from Fortune 100 companies to small, specialized singleproduct businesses. In addition, it
also competes with numerous smaller local companies in the various geographic markets in which it operate. Among the listed
players in India, NSEL faces competition from Oracle & Polaris. Largecap IT players like TCS & Infosys have good presence in
the BFSI segment, but they are more present in IT services rather than product business. At CMP, NSEL trades at a discount of
43% to Oracle & 16% to Polaris (TTM basis). Discount to Oracle could be due to larger business size of Oracle (BFSI) & its MNC
tag. While, NSELs size is smaller than Polaris, it has performed better than Polaris & other regional players (like 3i), whose
product businesses are not doing so well. NSEL has given priority on improving business quality over sales growth & hence
would be in better position to benefit from improved demand for discretionary IT spends compared to other small players.

Apart from being a leading provider of software solutions to the Banking and Financial Services Industry, NSELs geographical
portfolio is well diversified with no single country contributing more than 30% to its total revenues. Hence, any sharp
slowdown in one of the economies is unlikely to impact NSELs revenue & profit growth significantly. We feel the revival in the
IT spending could result in robust growth in the BFSI segment and NSEL is likely to be a key beneficiary along with the other
BFSI players. BFSI sector is much regulated than before. Hence, with improved financial performance and revival in the BFSI
sector, we expect an improvement in NSELs valuations going forward. Strong cash balance, debt free status, strong operating
cash flows further provide comfort to the valuations.

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Peer Comparison:

Company Name TTM
OPM
(%)
NPM
(%)
EPS
(Rs.)
PE
(x)
Net Sales
(Rs. in Mn)
Mkt. Cap / Sales
(x)
P / BV
(x)
Polaris 9.8 7.5 18.2 12.5 24237.0 0.9 1.5
Oracle 37.4 36.3 161.6 18.3 37413.2 6.6 2.8
NSEL 19.4 18.6 19.9 10.4 3462.20 1.9 1.7
(Source: Capitaline)

Risks & Concerns

Delayed recovery / Sharp slowdown in NSELs major markets like Far East, South East Asia, India & Middle East and in other
major IT markets like US & Europe could impact the IT spends and NSELs financial performance. NSELs revenue & profit
growth is largely dependent on the growth of BFSI business. Hence any sharp slowdown in the BFSI vertical could impact
NSELs revenues and profits significantly.
NSEL derives 68.7% revenues from the product business. Sharp slowdown in the IT spends could slow down the growth of
products business and in turn impact NSELs revenue growth and margins (product is a high margin business).
Significant overseas presence exposes NSEL to the risk of sharp forex fluctuations. Sharp rupee appreciation could impact
the companys revenues and margins significantly.
Nonavailability of reasonable priced skilled labour, high attrition rate due to increasing competition from global & Indian IT
players and improvement in IT industry scenario continue to remain major risks for NSEL.
NSEL faces the risk of product liability claim in case of failure of product (as represented to be suitable for customer
requirement) or incorrect consulting advice.
Further measures to dissuade outsourcing of IT services by developed countries could lead to higher cost, thereby affecting
margins.
NSELs competitors range in size from Fortune 100 companies to small, specialized singleproduct businesses. In addition, it
also competes with numerous smaller local companies in the various geographic markets in which it operates. These
competitive pressures may result in decreased sales volumes, price reductions, and/or increased operating costs, such as
for marketing and sales incentives, resulting in lower revenue, gross margins, and operating income.

Conclusion

We expect NSELs net sales & PAT to grow by 18% & 28.1% respectively over FY1315 likely to be driven by revival expected in
BFSI segment due to recovery in global IT spending in developed and emerging markets, revamping of the sales team by NSEL
across the geographies, increase in the customer base and new product orders & launches. Increasing penetration in new
markets has given NSEL a positive momentum, which is expected to continue going forward. NSELs flagship product

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FinnOne would continue to remain a major revenue contributor. Transaction banking revenue share is expected to improve
over the next two years with new launches. Improved revenue growth and cost optimization would result in higher
profitability and margins.

NSELs priority on improving the business quality over sales growth places the company in better position to benefit from
improved demand for discretionary IT spends compared to other small players like Polaris. With improved financial
performance and revival in the BFSI sector, we expect an improvement in NSELs valuations going forward. Strong cash
balance, debt free status, strong operating cash flows further provide comfort to the valuations.

Valuing the stock at 9.5xFY15E EPS, we arrive at a price target of Rs. 242. We recommend investors to buy the stock at current
levels and to average it on dips to Rs. 178191 (77.5xFY15E EPS) for our price target over next one to two quarters.

Quarterly Financials (Consolidated)
(Rs. in Million)
Particulars Q4FY14 Q4FY13 VAR [%] Q3FY14 VAR [%] Q2FY14 Q1FY14
Revenues 876.9 734.4 19.4 899.6 2.5 822.5 863.2
Total Expenditure 674.7 610.4 10.5 703.8 4.1 693.1 719.7
Changes in inventories of stockintrade 0 0.0 0.0 0.0 49.5
Employee benefits expense 460 389.1 18.2 458.0 0.4 443.0 446.5
Travel & Other expense 214.7 221.3 3.0 245.8 12.6 250.1 223.7
EBITDA 202.2 124.0 63.1 195.9 3.2 129.4 143.5
Depreciation 26.6 15.2 75.4 19.3 37.8 17.8 15.7
EBIT 175.6 108.8 61.4 176.6 0.5 111.5 127.9
Finance costs 1.2 1.3 10.3 1.4 14.0 1.1 1.4
Other Income (net) 74.8 41.5 80.2 76.5 2.2 40.8 53.4
PBT 249.2 149.0 67.3 251.7 1.0 151.2 179.9
Tax 60.8 44.5 36.7 17.8 241.8 41.8 68.2
PAT 188.4 104.5 80.3 233.9 19.4 109.4 111.7
Minority Interest 0 0.0 0.0 0.0 0.0
Share of Profit / Loss in Associates 0 0.0 0.0 0.0 0.0
Reported PAT 188.4 104.5 80.3 233.9 19.4 109.4 111.7
Extraord Items 0 0.0 0.0 0.0 0.0
Adjusted PAT 188.4 104.5 80.3 233.9 19.4 109.4 111.7
EPS 5.8 3.2 80.3 7.2 19.4 3.4 3.4
Equity 323.9 323.9 0.0 323.9 0.0 323.9 323.9
FV 10.0 10.0 0.0 10.0 0.0 10.0 10.0
EBITDAM (%) 23.1 16.9 21.8 15.7 16.6
EBITM (%) 20.0 14.8 19.6 13.6 14.8
PATM (%) 21.5 14.2 26.0 13.3 12.9
(Source: Company, HDFC Sec)

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Quarterly Segmental Financials (Consolidated)

Particulars Q4FY14 Q4FY13 VAR [%] Q3FY14 VAR [%] Q2FY14 Q1FY14
GEOGRAPHICAL SEGMENTS
INDIA 166.0 136.2 21.9 148.7 11.6 165.5 218.4
FAR EAST 158.7 192.7 17.7 169.6 6.4 181.6 183.1
SOUTH EAST ASIA 210.7 165.2 27.6 209.0 0.8 188.9 171.4
EUROPE /U.K. 59.5 40.5 46.9 74.1 19.7 45.6 38.7
AMERICAS 45.2 45.2 0.0 63.4 28.6 66.0 51.2
MIDDLE EAST 133.9 123.4 8.5 116.2 15.2 97.4 150.4
AFRICA 32.0 17.2 86.4 78.1 59.0 59.3 33.4
REST OF THE WORLD 41.8 14.0 199.6 40.4 3.5 18.2 16.6
TOTAL 847.8 734.4 15.5 899.6 5.8 822.5 863.2

BUSINESS SEGMENTS
PRODUCTS 591.2 496.1 19.2 614.1 3.7 549.5 624.7
Own 567.8 489.1 16.1 587.7 3.4 523.6 534.8
Traded 23.4 7.0 234.3 26.4 11.5 25.9 89.9
PROJECTS & SERVICES 285.6 238.2 19.9 285.5 0.0 273.0 238.5
TOTAL 876.8 734.4 19.4 899.6 2.5 822.5 863.2
(Source: Company, HDFC Sec)

Financial Estimates (Consolidated)

Profit & Loss A/c

YE March (Rs. Mn.) FY11 FY12 FY13 FY14 FY15E
Revenues 2704.8 2822.5 2937.6 3462.2 4085.4
Changes in inventories of stockintrade 0.0 0.0 0.0 49.5 0.0
Employee benefits expense 1507.5 1570.8 1634.1 1807.6 2165.3
Travel & Other expense 889.5 893.0 840.2 934.2 1052.0
Total Expenditure 2396.9 2463.8 2474.2 2791.3 3217.2
EBITDA 307.9 358.8 463.4 670.9 868.1
Depreciation & Amortisation 92.8 74.5 60.9 79.4 98.0
EBIT 215.1 284.3 402.5 591.5 770.1
Finance Cost 3.1 3.3 4.4 5.1 6.4
Other Income (net) 86.7 202.1 202.5 245.5 306.9
Profit Before Tax 298.7 483.0 600.5 831.9 1070.6
Tax 35.3 129.6 148.9 188.6 246.2

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PAT (before minority interest) 263.4 353.4 451.7 643.3 824.4
Minority Interest & Profit / Loss from Ass 0.0 0.0 0.0 0.0 0.0
Reported PAT 263.4 353.4 451.7 643.3 824.4
Exceptional Items 0.0 0.0 0.0 0.0 0.0
Adjusted PAT 263.4 353.4 451.7 643.3 824.4
(Source: Company, HDFC Sec Estimates)

Balance Sheet

YE March (Rs. Mn.) FY11 FY12 FY13 FY14 FY15E
Equity & Liabilities
Shareholders Funds 2879.5 3141.3 3499.9 3970.1 4529.3
Share Capital 323.8 323.9 323.9 323.9 323.9
Warrant Allotment 0.0 0.0 0.0 0.0 0.0
Reserves & Surplus 2555.7 2817.4 3176.0 3646.2 4205.4
Advance pursuant to stock option plan 2.2 0.2 0.0 0.0 0.0

NonCurrent Liabilities 95.9 112.5 124.4 128.1 140.9
Minority Interest 0.0 0.0 0.0 0.0 0.0
Long Term borrowings 0.0 0.0 0.0 0.0 0.0
Deferred Tax Liabilities (Net) 0.6 0.0 0.0 0.0 0.0
Other Long Term Liabilities 1.0 0.0 0.0 0.0 0.0
Long Term Provisions 94.3 112.5 124.4 128.1 140.9

Current Liabilities 667.3 856.6 965.3 1035.3 1205.2
Short Term Borrowings 0.0 0.0 0.0 0.0 0.0
Trade Payables 248.4 300.8 253.4 246.3 283.2
Other Current Liabilities 297.3 424.7 559.5 487.4 575.1
Short Term Provisions 121.6 131.1 152.4 301.6 346.8

Total Equity & Liabilities 3644.9 4110.6 4589.6 5133.5 5875.4

Assets 470.8 489.1 506.9 619.0 661.8
NonCurrent Assets 794.4 761.9 790.4 1145.8 1227.8
Fixed Assets 550.2 545.7 567.7 686.5 736.1
Gross Block 975.2 1051.9 1049.4 1097.0 1217.0
Depreciation 517.8 578.9 587.9 617.3 715.3
Net Block (Tangible Assets) 457.4 473.0 461.5 479.7 501.7
Intangible Assets 13.4 16.1 45.4 139.3 160.2

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Deferred tax assets (net) 54.2 56.6 60.8 67.5 74.3
Capital workinprogress 25.3 0.0 0.0 0.0 0.0
Non Current Investments 2.5 2.5 2.5 243.2 243.2
Long term Loans and Advances 241.6 199.8 218.2 211.4 243.1
Other NonCurrent Assets 0.0 13.9 2.0 4.7 5.4

Current Assets 2850.6 3348.7 3799.2 3987.7 4647.6
Current Investments 1257.6 1041.3 1547.4 1992.7 2291.6
Inventories 0.0 0.0 49.5 0.0 0.0
Trade Receivables 469.0 878.3 698.0 417.2 500.6
Cash & Cash Equivalents 617.5 920.3 1119.9 987.5 1158.8
Short Term Loans & Advances 133.7 113.2 93.1 192.0 226.6
Other Current Assets 372.7 395.7 291.3 398.3 470.0

Total Assets 3644.9 4110.6 4589.6 5133.5 5875.4
(Source: Company, HDFC Sec Estimates)

Key Ratios

YE March FY11 FY12 FY13 FY14 FY15E
FD EPS (Rs.) 8.1 10.9 13.9 19.9 25.5
PE (x) 25.5 19.0 14.9 10.4 8.1
Book Value (Rs.) 88.9 97.0 108.1 122.6 139.8
P/BV (x) 2.3 2.1 1.9 1.7 1.5
Gross Profit Margin (%) 55.7 55.7 55.6 52.2 53.0
OPM (%) 11.4 12.7 15.8 19.4 21.3
PBT (%) 11.0 17.1 20.4 24.0 26.2
NPM (%) 9.7 12.5 15.4 18.6 20.2
ROCE (%) 10.4 15.4 17.2 21.0 23.6
RONW (%) 9.1 11.3 12.9 16.2 18.2
DebtEquity (x) 0.0 0.0 0.0 0.0 0.0
Current Ratio (x) 4.3 3.9 3.9 3.9 3.9
Mkt. Cap / Sales (x) 2.5 2.4 2.3 1.9 1.6
EV/EBITDA (x) 15.7 13.2 8.7 5.6 3.8
(Source: Company, HDFC Sec Estimates)







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Cash Flow

YE March (Rs. in Million) FY11 FY12 FY13 FY14 FY15E
Profit Before Tax 298.7 483.0 600.5 831.9 1070.6
Net Opt Cash Flow 317.4 134.7 747.7 917.2 902.6
Net Cash from Investing Activities 265.7 42.7 664.3 830.1 479.0
Net Cash from Financing Activities 101.7 94.0 94.1 223.6 252.4
Cash & Cash Equivalents 617.5 920.3 1119.9 987.5 1158.8
Net Inc/(Dec) in Cash 50.0 2.0 10.7 136.5 171.3
(Source: Company, HDFC Sec Estimates)





































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