Company update | Sector: Technology

Zensar Technologies

th

12 Annual Global Investor Conference

BSE Sensex
29,045

S&P CNX
8,953

CMP: INR1,005

TP: INR1,300 (+29%)

Buy

Setting the stage right

With focused execution in Digital, Cloud and IMS

Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)

ZENT IN
44.6
1136/755
-11/0/14
45.7
0.7
71.0
52.1

Net Sales
EBITDA
PAT
EPS (INR)
Gr. (%)
BV / Sh (INR)
ROE (%)
ROCE (%)
Payout (%)
Valuations
P /E (x)
P / BV (x)
EV/EBITDA
Div. Yield (%)

2016

2017E

2018E

29.6
4.3
3.1
68.2
17.0
314.4
24.0
28.5
17.6

32.2
4.8
3.5
77.0
12.3
373.8
22.3
27.1
21.3

37.2
6.2
4.4
98.0
27.3
448.0
23.9
29.5
20.8

14.8
3.2
10.2
1.2

13.1
2.7
8.3
1.6

10.3
2.2
6.0
2.0

Shareholding pattern (%)

As on

Financial Snapshot (INR b)

Y/E Dec

ZENT has been taking several transformation measures post the recent investor and
leadership change. The key ingredients of its strategy are: [1] Focus on Digital, [2]
Attention towards 65 key accounts, and [3] Rejigging presence in Infrastructure
Management (IM) towards Services and Cloud.
While the first two are revenue drivers, the third leg of its strategy is a driver of
margins. Progress in these areas has been substantial, but simultaneous pruning of
low-yield accounts and trimming of the Product business is likely to limit revenue
growth at 5% in FY17.
The churn in the portfolio lays a better foundation for growth beyond FY17, driving
our estimate of 12% revenue growth in FY18. This should be seconded by margin
expansion from scaling up of newer areas and reconstitution of IM portfolio.

Favorable Digital skew: Digital constitutes 27% of ZENTs revenue, amongst the
highest in the industry, facilitated by acquisition of Professional Access (PA). All
segments in Digital grew in the range of 21-37% YoY in FY16, and will continue with
similarly significant contribution to overall growth. PA is the third largest
implementer of Oracle Commerce globally. Its success with large retailers provides
ZENT with marquee clients that can be mined extensively.
limiting pressure on Legacy: On the 77% revenue from Application Services,
strong Digital presence and high proportion of Maintenance revenue have capped
the risk on portfolio from cloud shift of on-site implementation. Less than 20% of
the portfolio is likely to be at risk from cloud migration and smaller deal sizes. Also,
ZENTs bet on the Oracle Cloud ecosystem has been paying off Oracles strides in
SaaS and PaaS are reflected in its 65% YoY growth in these areas.

Jun-16 Mar-16 Dec-15

Promoter

47.94

47.84

47.94

Public

52.06

52.16

52.06

--

--

--

Others
Relative to Index

IM restructuring, a key margin lever: The managements three-pronged strategy for

the IM business is likely to lead to higher revenue from Services (60% v/s 40%
earlier), higher profitability in MVS and reduction of the Product portfolio (10% v/s
30% earlier). This will aid expansion of margins in the IM business from 5% in FY16
to ~10% in FY17 (~115bp improvement in overall EBITDA), providing headroom for
reinvestments in focus areas and also for booking some gains in the P&L.
Continued strategy execution offers re-rating potential: We expect 5% revenue
growth in FY17 because of pruning of non-core areas. That said, execution progress
in focus areas lends confidence on gradual growth improvement (12% estimate for
FY18). Despite reinvestments, portfolio reconstitution and revenue growth revival
will potentially aid margin expansion of ~200bp over the next two years. Given
ZENTs improved positioning and our expectation of consequent improvement in
financials, we see potential for growth acceleration and stock re-rating. Maintain
Buy, with a price target of INR1,300, which discounts forward earnings by 13x.

Sagar Lele (Sagar.Lele@MotilalOswal.com); +91 22 6129 1531

Ashish Chopra (Ashish.Chopra@MotilalOswal.com); +91 22 6129 1530
September
Investors
are2016
advised to refer through important disclosures made at the last page of the Research Report. 1
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Zensar Technologies
th

12 Annual Global Investor Conference

Higher Digital, lower Legacy and revamped Infrastructure Management >>

WIP in FY17 and reasons for outperformance in FY18

ZENT has been going through a portfolio reconstitution since the new investor
and new leadership got on board. While these corrective measures are likely to
be implemented through FY17, the portfolio is likely to be in much better shape
in FY18, enabling industry-leading growth.
The key drivers of this outperformance are going to be: [1] 30% of total revenue
from Digital, [2] Lower exposure to Legacy because of higher Digital,
Maintenance and Cloud revenue (<20% of total revenue), and [3] Reconstitution
of Infrastructure Management (IM) revenue to Services and Cloud (20% of total
revenue).
While Digital has been growing at ~30% YoY, and IMS and Cloud have been
gaining scale, there is a simultaneous pruning of low-yield accounts and
Products business in IM. This has been leading to lower growth in FY17.
However, with this exercise far into implementation by the end of FY17, the
base would be set right for 12% YoY growth in FY18.

Exhibit 1: Portfolio reconstitution to aid growth FY18 onwards

Organic revenue (USDm)

4.9

Growth (YoY, %)

12.0

4.9

4.2
(0.7)

(1.7)
389

383

399

427

475

532

FY13

FY14

FY15

FY16

FY17E

FY18E

Source: MOSL, Company

This would naturally lead to better margins, given better profitability in Digital and
pruning of lower profitability MVS and Products businesses in Infrastructure
Management, and termination of low-yield accounts.
We expect these measures to result in headroom for the company to reinvest into
the business to augment capabilities in newer areas, and sales and marketing
functions. However, once the newer areas gain critical mass, margins are expected
to follow suit.
Take for instance, the IM business. Restructuring is likely to result in flat revenue in
FY17. However, the portfolio is likely to undergo a change to
Services:Maintenance:Products::60:30:10 in FY17 from 40:30:30 in FY16. This is
likely to improve profitability in the IM business from ~5% in FY16 to ~10% in FY17,
and further improvement is likely in FY18, as the MVS business gets on track.

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Exhibit 2: Restructuring of IM business a key margin driver
16.5

EBITDA margin (%)

EBITDA margin change (YoY, bp)

160
98

14.9

14.7

99

14.4

52

55

FY16

FY17E

13.9

13.7

(81)
FY13

FY14

FY15

FY16

FY17E

FY13

FY18E

FY14

FY15

FY18E

Source: MOSL, Company

Vector #1: Well-placed in Digital

ZENT has been shifting its business model from traditional IT services to Digital by
realigning its focus on Digital transformation/enterprise. Traction in Digital has been
evidently moving the needle in its overall performance. Contribution of Digital as a
% of revenue has risen from 5% in FY14 to 27% in FY16, and the company expects it
to reach 30% in FY17. The contribution of Digital to total revenue is among the
highest in the industry, and could help ZENT to record industry-leading growth.
Exhibit 3: Portfolio favorably skewed towards Digital
Digital revenue (USDm)

Digital (% of total revenue)

36%
27%
13%

30%

17%

15%

12%

2,154

1,252

256

122

104

61

59

TCS

WPRO

MTCL

ZENT

PSYS

NITEC

KPIT

Source: MOSL, Company

In Digital, ZENT has carved out a niche through its focus on eCommerce enablement.
The presence in this area was brought about by its acquisition of Professional Access
(PA) in August 2014. This contributes to half of ZENTs Digital revenue. The
remainder is contributed by Other Digital Services, and the cross-over between
Legacy and Digital.
Betting on success of Oracle Commerce
Oracle Commerce is an eCommerce platform for online retailers, which spans across
multiple channels, and facilitates purchasing transactions. PA is one of the largest
Oracle ATG and Endeca partners in the world (implementation and maintenance). It
is an Oracle Platinum partner with presence in the US, the UK, Latin America, Middle
East and Africa. The company works with several large and mid-sized retailers in
these geographies to build and implement their eCommerce strategies.
September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Exhibit 4: Revenue break-up of PA (by service line and vertical; % of revenue)
BFS and Others, 3.9
public
sector, 5.2

Others, 0.3

Maintenanc
e&
support,
46.1

Implement
ation, 53.7

Retail and
telecom,
90.8

Source: MOSL, Company

Oracle Commerce combines ATG and Endeca two companies Oracle acquired.
ATG's solutions enable enterprises to provide a cohesive online customer
experience with sophisticated merchandising, marketing, content personalization,
automated recommendations, and live-help services. Endeca was recognized as a
pioneer of faceted search, particularly in the context of electronic commerce and
online libraries.
Oracle Commerce has a dominant market share among eCommerce platforms for
online retailers. The other dominant players in the market are IBM WebSphere, SAP
Hybris and Magento. Other players in the market with a lower share include Digital
River, Elastic Path, Apttus and CloudCraze.
Oracle Commerce has seen particularly high success in larger retailers. Some of the
largest retailers using the Oracle Commerce platform are Neiman Marcus,
Walgreens, Macys, Express, CVS, Kohls, Blue Nile, American Eagle, OfficeMax and
Chicos.
Exhibit 5: Oracle Commerce rated highly by Forrester and Gartner

Source: Forrester, Gartner

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

In the fast-growing commerce suite technology market

The market for commerce suite technology is mature, yet it is set to almost double
from USD1.2b in 2014 to USD2.1b in the US alone by 2019. Although adoption of
commerce technology in B2C verticals is already largely saturated, much of the
anticipated growth over the next five years will be driven by re-platforming
activities, as established online retailers look to fortify the scalability of their
technology and branded manufacturers increase their focus on direct-to-consumer
digital channels.
Exhibit 6: 12% CAGR expected in the US commerce platform market
Commerce suite technology market in the US (USDb)
2.1

1.2

2014

2019
Source: Forrester

Other Digital solutions are now up and running

While eCommerce implementation comprises 50% of ZENTs Digital revenue, the
balance comes from other Digital and cross-over services. The companys
perspective on Digital is divided into two parts:
Enterprise Digital (1) Digital agility (front-end), (2) cross-over of Digital and
IT/business processes (cloud and hybrid infra/IT), and (3) stability of the core
systems (ADM, back-end systems with APIs built in).
CMO-led Digital solutions ZENT launched CMO-centric services on April 1, 2016. It
sees a massive opportunity in tapping CMO budgets, with solutions around
marketing analytics, digital analytics, content and creative solutions.
The company has seen strong growth across services in Digital, and is poised for
further acceleration in FY17, given the progress it has made in building and
launching new solutions over the current year. Given the 27% contribution of Digital
to overall revenue, organic growth has the potential to accelerate further.

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Exhibit 7: Strong growth across the Digital solution stack
FY16 Growth (YoY, %)
30

29

34

37

35
25

21

5
Company

Big data &

analytics

Cloud

Design
Digital
B2C
B2B
experience marketing Commerce Commerce
services

Cyber
security

Source: MOSL, Company

Vector #2: Decreasing threat of cannibalization

ZENT broadly classifies its revenue between Application Services and Infrastructure
Management, not giving a further break-down between Application Development,
Application Management, Package Implementation, Testing and BPO. This has been
leading to a seemingly high perception of risk from the movement of on-premise
applications to cloud, and from the foray of Digital in traditional application
development. However, a further dissection (based on disclosure and guesstimates)
gives more clarity on portfolio risks.
Exhibit 8: Revenue composition by services (% of total revenue)
IMS - Services,
16%
IMS Maintenance, 8%

Application
Management
Services, 76%
Source: MOSL, Company

In Application Services (77% of revenue), 33% revenue is derived from the Oracle
ecosystem, of which 37% is Digital. This leaves 63% of the Oracle ecosystem (21% of
total revenue) exposed to Legacy.
In the rest of the Application Services business (44% of revenue), Digital forms ~15%
of total revenue, and assuming Testing and BPO together form ~8%, it leaves an
additional 21% of total revenue exposed to Legacy.
However, ZENT has a strong Maintenance presence (nearly half of the 42%), and has
made significant in-roads in Cloud implementation in its Oracle practice. Effectively,
this leaves less than 20% of total revenue exposed to on-premise implementation.

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Exhibit 9: Exposure to on-premise implementation is <20% of total revenue (1QFY17)
Revenue
(USD m)
88
38
14
24
17
23
5
5
26
9
17
114

Application Services
Oracle
Commerce
Legacy
Digital
Legacy
Testing
BPO
Infrastructure Management
Maintenance
Services
Total

Composition (% of
revenue)
77.2%
33.0%
12.3%
20.7%
14.9%
20.5%
4.4%
4.4%
22.8%
8.1%
14.7%
100.0%
Source: MOSL

Moreover, ZENT has been betting big on the Oracle ecosystem (33% of total
revenue), and remains positive on the likelihood of Oracles success in the Cloud.
Revenue from Oracles SaaS and PaaS reached USD690m in 4QFY16, up 66% YoY in
USD terms and 68% CC. Year over year growth rates have steadily increased through
FY16, and Oracle expects the momentum to continue in 1QFY17, wherein its expects
SaaS and PaaS revenue to grow 75-80% YoY.
In FY16, while total revenue for Oracle was down 2% CC to USD37b, SaaS and PaaS
revenue was at USD2.2b, up 52% YoY CC. The companys Executive Chairman and
CTO has mentioned Oracle of having a fighting chance to be the first SaaS and PaaS
company to grow to USD10b in revenue.
The proportion of cloud revenue in ZENTs Oracle piece would see a rapid expansion
of base, and contribute higher to incremental growth as this shift becomes more
rapid and profound at Oracle.
Exhibit 10: Oracles Cloud revenue growth increasing with scale
SaaS and PaaS (USDm)

Growth SaaS and PaaS (YoY, %)

65.9

56.7
33.8

34.1

1QFY16

2QFY16

3QFY16

4QFY16
Source: MOSL, Company

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Vector #3: Reconstitution of IMS offerings

ZENT has been de-focusing from the products business in Infrastructure
Management. The company intends to include the products bit only where it is
integral to the services portfolio of the organization. Revenue from Products has
gradually inched lower to 6% of total revenue in FY16 from 11% in FY13.
Moreover, the companys focus is on IMS & Cloud, which would mean the Services
business in Infrastructure Management would grow, Maintenance would remain
stagnant and Products would decline.
Exhibit 11: Services the focus area in IM
Services

30%

MVS

Products
10%
30%

30%
40%
IM composition at the end of FY16

60%

IM composition at the end of FY17E

Source: MOSL, Company

ZENTs infrastructure business comprises of (1) MVS and (2) IMS & Cloud, which are
run separately as focused businesses. The company intends to grow its IMS & Cloud
business to 15% of total revenue over the next 12 months. The key focus areas in
this business are:

September 2016

Hybrid IT: Automated and orchestrated provisioning and management of public,

private and on-premise infrastructure ZENTs focus is on an integrated
platform across technologies and hosting models that will enable it to target the
G-1000.
Next-gen end-user experience: Focusing on predictive analytics and mobility
ZENT combined Aternity, Nano Heal, Lakeside and Service Now to build a
predictive end-user management solution, which spans over user interface and
backend systems.
Network security: Design, implement and manage comprehensive IT security
frameworks.
Unified IT management: Driven by automation, orchestration and analytics.

Zensar Technologies
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12 Annual Global Investor Conference

Exhibit 12: IM portfolio growing in the right areas (USD revenue growth, YoY, %)
Maintenance

Services
2%

4%

4%

-2%
-8%
-16%

-13%

1QFY16

-15%
2QFY16

-17%
3QFY16

-21%
4QFY16

1QFY17
Source: MOSL, Company

Maintenance revenue for ZENT mainly stems from the acquisition of Akibia in
November 2010. The proposition was for ZENT to provide total infrastructure
outsourcing and for it to become the single point of contact for all infrastructure
support. The profitability of this business has been hampered because of scale.
The fixed costs in this business are high because of limited manpower requirement,
fixing of the supply chain, and the fact that warehouses are already set up. Any
uptick in revenue would thus result in disproportionate increase in profitability. The
company has recently hired new leadership for this segment, with a head who has
prior experience in turning around a similar business.
All these measures (focus on scaling up Services + reduction of Products +
profitability resurrection in Maintenance) are likely to result in flat revenue in FY17.
However, margins have the potential to improve from ~5% in FY16 to ~10% in FY17,
giving ample room for reinvestments in other parts of the business without hurting
company-level margins.

September 2016

Zensar Technologies
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12 Annual Global Investor Conference

Valuation and view

September 2016

Execution for next leg of growth is in progress: Post the leadership change at
ZENT, execution has become fast-tracked, with several steps taken toward
realigning the organization with its growth engines. In line with this, several
services/solutions have been launched, sales function has been augmented and
there is a renewed focus on client mining and large deals. These initiatives are
currently in the investment mode and likely to start adding to growth along with
Digital and IMS.
Riding the Digital wave: Digital accounts for 27% of ZENT's revenue and has
been seeing growth of 21-37% YoY. Half of Digital is constituted by eCommerce
implementation, where capabilities have increased post ZENT's acquisition of
Professional Access, which in FY16 grew by 25% YoY. The rest of Digital revenue
comes from other Digital and cross-over services. Moreover, with increased
emphasis on Enterprise Digital and CMO-led solutions, Digital will only get a
further boost from current levels.
Re-constitution to continue for the better: ZENT had earlier laid focus on
achieving the Diamond partnership with Oracle. However, elevation from
Platinum partnership is a function of the work around Oracle's installed base,
and not cloud services. Oracle has a managed cloud partner program, on which
ZENT has turned its attention as this better aligns with changing market
dynamics, Oracle's strategy and ZENT's focus areas. Moreover, the realignment
of focus in infrastructure management toward IMS & Cloud too marks a step in
this direction.
Aggressive consolidation of non-core business: Over the last two years, ZENT
has cut out non-core geographies, verticals and service lines. Since the
leadership change, the company has renewed focus on strategic accounts, and is
in the process of cutting its long tail of low-yield and non-scalable accounts.
Over the last two quarters itself, the number of active customers has come
down to 183 from 217.
Expect rebound in revenue growth: On account of ongoing restructuring, we
expect revenue growth of 5% in FY17. However, with the implementation of
growth engines well in progress, we expect a revival in revenue growth to 12%
in FY18.
Margin comfort for FY17-18E: Revenue growth pick-up, profitability
improvement in the IMS business, and current investments should lead to a
210bp EBITDA margin expansion over FY16-18. EBIT margins in the IMS business
(18% of revenue) can improve from 6% in FY16 to 14% in FY18, led by higher
revenues from 'IMS and Cloud' and the restructuring in the MVS business. This
alone has the potential to improve overall margins by 150bp. We expect an EPS
CAGR of 20% over FY16-18.

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Zensar Technologies
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12 Annual Global Investor Conference

Key triggers

Pick-up in Financial Services vertical and in the US

Margin improvement despite investments
Significant increase in deal wins and deal pipeline

Key risk factors

Problems in top accounts

Risk from slower spend on ERP
Hindrances in structural recovery of margins

Exhibit 13: 1-year forward PE band

PE (x)
Median(x)

20

Exhibit 14: 1-year forward PB band

Peak(x)
Min(x)

Avg(x)

4.0

14.6

15

11.8

10

Peak(x)
Min(x)

2.5
1.5

1.0

4.9

1.1

Avg(x)

3.1

3.0
2.0

6.1

PB (x)
Median(x)

1.3

0.4

Sep-16

Jun-15

Mar-14

FY16
12.3
27.4
21.0
16.5
28.9
19.0
19.5
24.0

Dec-12

Jun-10

FY18E
12.8
13.0
8.2
11.4
12.4
7.4
12.9
10.2

Sep-11

Mar-09

Dec-07

Sep-06

Sep-16

Jun-15

Mar-14

Dec-12

Sep-11

Jun-10

Mar-09

Dec-07

Sep-06

0.0

Exhibit 15: Comparative valuation

Company

Mcap
USD b
Mphasis
1.7
Mindtree
0.6
KPIT Tech
0.4
Cyient
0.8
Hexaware
0.9
NIIT Tech
0.4
Persistent Sys.
0.7
Zensar
0.7

Rating
Neutral
Neutral
Neutral
Buy
Neutral
Neutral
Neutral
Buy

TP
Upside
EPS (INR)
(INR)
(%)
FY16 FY17E FY18E
570
4.8
34.5 38.1 42.4
550
6.8
35.9 29.9 39.6
160
22.1 14.1 13.7 16.0
550
15.5 30.7 34.2 41.6
230
15.0 12.9 13.6 16.1
530
34.5 45.8 41.3 53.4
710
16.0 37.2 37.7 47.4
1,300
30.0 68.2 77.0 98.0

FY16
15.8
14.4
9.3
15.5
15.5
8.6
16.5
14.7

P/E (x)
FY17E
14.3
17.2
9.5
13.9
14.7
9.5
16.2
13.0

RoE (%)
FY17E
12.8
19.9
18.0
16.2
26.7
15.2
17.3
22.3

FY18E
14.0
23.1
17.5
17.4
26.9
17.4
20.0
23.9

FY16-18E CAGR (%)

USD rev.
EPS
6.1 11.0
13.1 5.0
4.3 6.6
12.9 16.4
11.2 11.7
7.8 8.0
19.5 12.9
8.4 19.8

Source: Company, MOSL

September 2016

11

Zensar Technologies
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12 Annual Global Investor Conference

Story in charts

FY16 Growth (YoY, %)

36%

30

34

37

21

256

122

104

61

59

TCS

WPRO

MTCL

ZENT

PSYS

NITEC

KPIT

Source: MOSL, Company

Exhibit 18: Expect organic revenue growth to pick up

Organic revenue (USDm)

Growth (YoY, %)

Source: MOSL, Company

Exhibit 19: Coupled with margin expansion

16.5

EBITDA margin (%)

12.0

14.9

14.7

4.9

4.2

Cyber security

1,252

B2B Commerce

2,154

B2C Commerce

12%

Digital marketing
services

15%

Company

17%

4.9

35

25

30%

27%
13%

29

Design
experience

Digital (% of total revenue)

Cloud

Digital revenue (USDm)

Exhibit 17: 21-37% YoY growth in all areas of Digital in FY16

Big data &

analytics

Exhibit 16: Contribution of Digital to total revenue among

the highest in the industry

14.4
13.9

13.7
(0.7)

(1.7)
389

383

399

427

475

532

FY13

FY14

FY15

FY16

FY17E

FY18E

FY13

FY14

FY15

FY16

FY17E

Source: MOSL, Company

Exhibit 20: Assisted by portfolio reconstitution

Maintenance

Source: MOSL, Company

Exhibit 21: Compounding to earnings CAGR of 20%

Services

Net profit (INRb)

4%

4%

2%

FY18E

Growth (YoY, %)

36.1
27.3

-2%
-8%
-16%

-13%

1QFY16

-15%
2QFY16

-17%
3QFY16

-21%
4QFY16

1QFY17

Source: MOSL, Company

September 2016

17.0
11.4

10.0

12.3

1.7

2.4

2.6

3.1

3.5

4.4

FY13

FY14

FY15

FY16

FY17E

FY18E

Source: MOSL, Company

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12 Annual Global Investor Conference

Operating metrics
Exhibit 22: Operating metrics
1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

1QFY17

75
11
14

75
11
14

76
9
15

78
10
12

78
10
12

74
12
14

75
12
13

78
10
12

75
11
15

Manufacturing
Retail and consumer services
Financial services
Emerging
Service Mix (%)

67
11
21
2

62
14
20
4

56
18
21
6

57
18
21
4

57
20
19
4

54
23
19
4

52
21
20
7

54
24
18
4

54
24
18
4

Application Management Services

Infrastructure Management Services
Maintenance
Services
Project Type (%)

70
30
12
18

74
26
11
15

72
28
10
18

74
26
10
16

77
23
9
14

78
22
8
14

74
26
8
18

77
23
8
16

77
23
8
15

Fixed price
Time & material
Revenue by delivery (%)

48
52

46
54

52
48

45
55

47
53

50
50

54
46

53
47

50
50

Onsite
Offshore
Client metrics

68
32

67
33

67
33

65
35

65
35

63
37

66
34

64
36

69
31

37
7
44
8
52

38
6
44
8
52

31
8
39
13
52

39
7
46
6
52

38
8
46
10
56

37
10
47
8
55

35
8
43
9
52

38
8
46
10
56

37
9
46
10
56

55
7
2
1

65
9
2
1

73
11
3
1

75
9
3
1

63
4
3
2

64
5
3
2

65
4
4
2

66
5
4
2

65
6
4
2

85
178
19

82
183
10

75
182
18

83
204
14

79
196
24

86
217
19

84
211
26

85
194
18

77
183
21

6,894
695
103
79
15

7,846
742
952
79
12

8,037
709
191
78
12

8,174
573
137
78
13

7,895
1,531
(279)
79
16

8,050
844
155
80
16

8,192
730
142
82
16

8,256
588
64
81
16

8,238
662
(18)
80
18

Geographic Mix (%)

USA
Europe
ROW
Vertical Mix (%)

Client concentration (%)

Top 5
Top 6-10
Top 10
Top 11-20
Top 20
Client brackets
1 Million dollar +
5 Million dollar +
10 Million dollar +
20 Million dollar +
Other metrics
Repeat business (%)
Number of active clients
New clients added in the period
Employee metrics
Total headcount
Gross employees added during the period
Net employees added during the period
Utilization
Attrition

Source: Company, MOSL

September 2016

13

Zensar Technologies
th

12 Annual Global Investor Conference

Financials and Valuations

Income Statement
Y/E March
Sales
Change (%)
Cost of Services
SG&A Expenses
EBITDA
% of Net Sales
Depreciation
Interest
Other Income
Forex
PBT
Tax
Rate (%)
Minority Interest
PAT
Net Income
Change (%)
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest
Loan
Capital Employed
Applications
Gross Block
Less : Depreciation
Net Block
CWIP
Other LT Assets
Curr. Assets
Current Investments
Inventories
Debtors
Cash & Bank Balance
Loans & Advances
Other Current Assets
Current Liab. & Prov
Current Liabilities
Other liabilites
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates

September 2016

FY11
11,383
19.5
7,906
1,948
1,529
13.4
294
39
305
0
1,502
184
12.3
0
1,318
1,318
3.3

FY12
17,825
56.6
12,337
3,224
2,263
12.7
333
93
527
0
2,364
777
32.9
0
1,587
1,587
20.4

FY13
21,145
18.6
14,809
3,444
2,892
13.7
332
100
332
-187
2,606
861
33.0
0
1,745
1,745
10.0

FY14
23,156
9.5
15,957
3,803
3,396
14.7
383
109
290
205
3,399
1,023
30.1
0
2,375
2,375
36.1

FY15
26,277
13.5
18,329
4,307
3,641
13.9
415
112
364
181
3,659
1,013
27.7
-1
2,646
2,646
11.4

FY16
29,643
12.8
20,366
5,015
4,262
14.4
454
106
181
407
4,289
1,169
27.3
-26
3,094
3,094
17.0

FY17E
32,173
8.5
22,440
4,931
4,802
14.9
467
133
337
358
4,896
1,398
28.6
-24
3,473
3,473
12.3

(INR Million)
FY18E
37,242
15.8
25,314
5,773
6,155
16.5
559
129
471
236
6,175
1,729
28.0
-24
4,422
4,422
27.3

FY11
433
4,027
4,460
2,392
6,852

FY12
434
5,325
5,759
2,755
8,514

FY13
436
6,853
7,289
2,353
9,642

FY14
438
9,017
9,455
11
2,032
11,498

FY15
443
11,127
11,570
12
1,396
12,977

FY16
446
13,812
14,258
39
1,878
16,175

FY17E
446
16,420
16,866
39
1,628
18,533

(INR Million)
FY18E
446
19,767
20,213
39
1,378
21,630

5,480
-2,007
3,473
50
744
5,558
246
836
1,876
1,100
916
584
2,973
997
1,682
294
2,585
6,852

6,045
-2,269
3,776
27
583
7,869
468
950
2,911
1,745
1,142
654
3,741
1,337
1,884
521
4,128
8,514

6,341
-2,372
3,969
25
545
8,035
417
1,049
3,354
1,420
856
937
2,931
1,059
1,556
315
5,104
9,642

6,503
-2,287
4,215
21
608
10,015
1,478
1,288
3,581
1,458
817
1,392
3,361
1,507
1,385
468
6,654
11,498

8,201
-2,728
5,474
14
617
11,240
931
1,226
4,539
1,960
880
1,704
4,368
1,305
2,426
637
6,872
12,977

8,889
-3,182
5,706
17
517
13,989
1,016
1,259
5,427
2,823
1,072
2,392
4,054
1,643
2,118
293
9,935
16,175

9,289
-3,649
5,639
13
619
17,887
1,116
1,234
5,891
5,888
1,163
2,596
5,624
2,250
3,000
375
12,263
18,533

9,739
-4,208
5,531
9
721
21,758
1,216
1,326
6,819
8,052
1,346
2,998
6,388
2,555
3,407
426
15,370
21,630

14

Zensar Technologies
th

12 Annual Global Investor Conference

Financials and Valuations

Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout %

(INR Million)
FY18E

FY11

FY12

FY13

FY14

FY15

FY16

FY17E

30.5
37.3
103.3
3.5
11.5

36.6
44.2
132.7
7.0
19.1

40.2
47.8
167.9
8.0
20.0

54.7
63.6
217.9
10.1
18.4

61.0
70.5
266.6
11.2
18.4

68.2
78.2
314.4
12.0
17.6

77.0
87.3
373.8
16.4
21.3

98.0
110.4
448.0
20.4
20.8

18.4
14.9
12.5
1.8
4.6
1.0

16.5
15.1
11.5
1.6
3.8
1.1

14.8
11.9
10.2
1.5
3.2
1.2

13.1
6.5
8.3
1.2
2.7
1.6

10.3
4.9
6.0
1.0
2.2
2.0

Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC

34.0
23.4
39.7

31.1
26.2
22.1

26.7
30.3
24.4

28.4
30.8
25.8

25.2
28.6
25.1

24.0
28.5
24.7

22.3
27.1
26.0

23.9
29.5
33.8

Turnover Ratios
Debtors (Days)
Fixed Asset Turnover (x)

79
3.3

73
4.7

74
5.3

78
5.5

86
4.8

96
5.2

96
5.7

96
6.7

FY11
1,014
392
1,406
-272
1,134
-3,129
-3,401
11
1,886
-138
1,759
36
-200
1,299
-200
1,100

FY12
2,281
-546
1,735
-263
1,472
-190
-452
10
-320
-329
-640
6
649
1,096
649
1,745

FY13
2,212
-1,152
1,060
-334
726
87
-247
16
-776
-379
-1,139
8
-318
1,739
-318
1,420

FY14
2,720
-625
2,094
-323
1,771
-961
-1,284
59
-422
-411
-774
10
46
1,413
46
1,458

FY15
2,823
382
3,206
-372
2,834
-1,448
-1,819
62
-395
-542
-874
0
512
1,448
512
1,960

FY16
3,805
-1,218
2,587
-423
2,164
1
-422
42
-375
-969
-1,302
0
863
1,960
863
2,823

FY17E
4,074
737
4,811
-396
4,415
-102
-498
0
-383
-865
-1,249
0
3,065
2,823
3,065
5,888

Cash Flow Statement

Y/E March
CF from Operations
Cash for Working Capital
Net Operating CF
Net Purchase of FA
Free Cash Flow
Net Purchase of Invest.
Net Cash from Invest.
Proc. from equity issues
Proceeds from LTB/STB
Dividend Payments
Cash Flow from Fin.
Exchange difference
Net Cash Flow
Opening Cash Bal.
Add: Net Cash
Closing Cash Bal.
E: MOSL Estimates

September 2016

(INR Million)
FY18E
5,109
-943
4,166
-446
3,720
-102
-548
0
-379
-1,075
-1,454
0
2,165
5,888
2,165
8,052

15

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16