A Report on Financial Analysis Of

SUBMITTED TO :

PREPARED BY :

Shivam Mehta (32)

Tirth Mehta (41)
Date: - April 26, 2016
Biren Patel (47)
Nitin Prajapati (52)
Financial Condition And Performance
Nikhil Verma (71)

Prof.
(Dr.)
Sundararajan

Of

Infosys
1. Liquidity Ratio:
Sr. No.

01.

Ratio

Formula

2015-16

2014-15

Current
Ratio

Current
Assets
Current
Liabilities

51,695
13,239
= 3.90

47,196
11,383
= 4.15

Interpretation

2. Activity (or Turnover) Ratio:

Sr. No.

01.

Ratio

Formula

2015-16

2014-15

Fixed
Asset
Turnover
Ratio

Sales
Fixed
Assets

62,441
11,515
= 5.42

53,319
9,763
= 5.46

Interpretation

3. Profitability Ratios:
Sr. No.

Ratio

Formula

2015-16

2014-15

01.

Gross
Profit
Ratio

Gross Profit
Sales

23,343
62,441
= 0.37

20,436
53,319
= 0.38

Net Profit
Ratio

Profit after
Taxes
Sales

13,491
62,441
= 0.22

12,329
53,319
= 0.23

18,742
75,389
= 0.25

17,258
45,576
= 0.37

02.

03.

Return on
Investment
(RoI)

PBIT
Capital
Employed

Interpretation

Surendra

04.

Return on
Equity
(RoE)

Profit after
Taxes
Total Equity

13,491
61,779
= 0.22

12,329
54,763
= 0.23

2015-16

2014-15

13,491
228.56
= 59.03

12,329
114.28
= 107.88

4. Market Value Ratios:

Sr. No.

Ratio

Formula

01.

Earnings
per Share
(Basic)

Profit after
Tax (in
crore)
No. Of
Shares (in
crore)

02.

Interpretation

Price/Earn
ings Ratio

Share
1211.25
1995.20
Price*
59.03
107.88
Earnings
= 20.52
= 18.50
per Share
*: The share price taken for calculating the P/E ratio was the closing price of INFOSYS on NSE
NIFTY as on 24th of April for year 2016 and 2015 respectively.

Trend Analysis of Sales, EPS and Stock Price

Here, we can see its Sales and PAT have been increased by 17.19% and 9.42%
respectively in the year ended 2015-16. This is a result of good investment decision and
due
to
expansion
of
its
operation.
80,000

62,441

70,000
50,133

60,000
50,000

53,319

40,352

40,000 33,734

Sales (in crores)

PAT (in crores)

30,000
20,000
10,000 8,316

9,421

10,648

12,329

13,491

0
2011-'12 2012-'13 2013-'14 2014-'15 2015-'16

3500

3282.8

3000 2860
2500

2889.35
2218.35

2000
Closing Stock Price in INR

1500

1218.3

1000
500
0
2011-'12

2012-'13

2013-'14

2014-'15

2015-'16

EPS
180.00
160.00

164.88

140.00 145.54
120.00

EPS

107.88

100.00

93.17

80.00
60.00

59.03

40.00
20.00
0.00
2011-'12

2012-'13

2013-'14

2014-'15

2015-'16

CAPITAL ASSET PRICING MODEL (CAPM)

Er = Rf + [E(rm) Rf]
Er = cost of equity
Rf = risk-free rate of return = 6.90% as on 23/04/2015 (source: https://www.rbi.org.in/)
= beta value of Infosys = 0.69 (source: www.bseindia.com/indices/betavalues.aspx )
( as on 23/04/2015 )
E(rm) = Expected return from market = 11%
E(Ri) = Rf + [(E (Rm) Rf ) ]
= 6.90+ (11-6.90) * 0.69
= 6.90 + 2.83
= 9.73%

Dividend Policy
Particulars

Year ended March 31

2016
Dividend per Share
(par value at Rs. 5/each)

2015

Interim Dividend

10.00

30.00

Final Dividend

14.25

29.50

Total Dividend

24.25

59.50

CAPITAL STRUCTURE
Infosys is a debt free company as of now and it has all equity finance in its Capital Structure. It does not use
any kind of Long Term Sources which has its own advantages and disadvantages:

ADVANTAGES
No interest (coupon) burden and burden of loan
repayment, which results in higher profit and
yields.
The company doesnt have any kind of debt and
has sound amount of Equity i.e. owned capital.
This increases firms borrowing power (if required
in future).
Long term capital gain on equity shares receives a
favourable tax treatment and they serve as a good
inflation hedge. Hence it attracts more
iiiiinvesinveinvestors
It eliminates obligation of future repayment as
there is no fixed Maturity period.
No restrictive covenants such as some
limitations on the payment of Dividend under the
Indenture or any contract of loan.
No dependence on external borrowers and no
Interference of Borrowers in Management
Decision.

DISADVANTAGES
Debt is less expensive compared to equity
financing as Investors view it to be safer and on
Equity dividend is paid out of PAT (Profit After
Tax).
Company cannot take advantage of financial
leverage, which magnifies the impact of increasing
PBIT (Profit Before Interest and Tax) on EPS
(Earning Per Share).
Raising equity finance is costly, time consuming
and floatation charges are comparatively higher on
Equity financing.
Dilution of voting power, due to subsequent issue.
Equity represents residual ownership, hence risk is
high and rate of return expected by investors is also
high.
Company cannot avail advantage of tax shield
provided by interest payment on Long term debt
financing