INFOSYS vs.

TCS
The IT INDUSTRY

Members:
Vishal Agarwal Karan Mehta Neeta Pai Kavita Shetty Kishori Sawant 01 15 18 27 38

Tata Consultancy Services formed Alliance with Infor Global Solutions (Feb 2012)

Airtel selected Infosys Limited for its Mobile Wallet service (Feb 2012)

Industry Overview and Growth Forecasts

Global IT services spend increased from US$ 566 billion in 2009 to US$ 3.7 trillion in 2011. Global Business Process Outsourcing (BPO) services spend has increased from US$ 152 billion in 2009 to US$ 158 billion in 2010. IT services spend is expected to increase from US$ 566 billion in 2009 to US$ 684 billion by 2014 at a CAGR2 of 3.9%. IT spend forecasts by global technology analyst firms like Gartner, Forrester, IDC and others indicate a growing market for IT and ITES for industry verticals, service offerings and geographies of interest to the Company and excellent prospects for growth in the future.

Contribution of IT Industry-GDP

% GDP
7 Contribution of IT Indusry to GDP

GDP

2005 3.6

2006 4.1

2007 4.7

2008 5.2

2009 5.2

2010 6.1

2011 6.4

IT Industry - Economic Analysis

1.Political stability: Indian political structure is considered stable enough expect the fact that there is a fear of hung parliament (no clear majority). 2. U.S. government has declared that U.S companies that outsource IT work to other locations other than U.S. will not get tax benefit. 3. Government owned companies and PSUs have decided to give more IT projects to Indian IT companies. 4. Terrorist attack or war.
Positve

Deep Negative
Positive Negative

Political

Economic

1. Global IT spending (demand) 2. Domestic IT Spending (Demand):Domestic market to grow by 20% and reach approx USD 78.9 billion in 2012 - NASSCOM 3. Currency Fluctuation 4. Attrition: Due to recession, the layoffs and job-cuts have resulted in low attrition rate. 6. ECOMONIC ATTRACTIVENESS due to cost advantage and other factors.

Negative Positive Negative

Mildly Positive Mildly Positve

IT Industry - Economic Analysis

Social
1. Language spoken: English is widely spoken language in India, English medium being the most accepted medium of education. Thus, India boasts of large English speaking population. 2. Education: A number of technical institutes and universities over the country offer IT education. 3. Working age population
Highly Positve

Highly Positive Positive

Technological

1. Telephony: a. India has the worlds lowest call rates (1-2 US cents). b. Expected to have total subscriber base of about 500 million by 2010. c. ARPU for GSM is USD 6.6 per month. d. India has the second largest telephone network after china. e. Teledensity 19.86 % f. Enterprise telephone services, 3G, Wi-max and VPN are poised to grow. 2. Internet Backbone: Due to IT revolution of 90s, Indian cities and India is well connected with undersea optical cables. 3. New IT technologies: Technologies like SOA, Web 2.0, High-definition content, grid computing, etc and innovation in low cost technologies is presenting new challenges and opportunities for Indian IT industry.

Highly Positve

Positive Positive

IT Industry - Economic Analysis

Legal
1. IT SEZ requirement: IT companies can set up SEZ with minimum area of 10 hectares and enjoy a host of tax benefits and fiscal benefits. 2. Contract / Bond requirements: Huge debates surrounding the bonds under which the employees are required to work, which is not legally required. 3. IT Act: Indian government is strengthening the IT act, 2000 to provide a sound legal environment for companies to operate esp. related to security of data in transmission and storage, etc. 4. Companies operating in Software Technology Park (STPI) scheme will continue to get tax-benefit till 2010.
Positve Negative Positive

Mildly Positive

Environment

Energy Efficient processes and equipments: Companies are focusing on reducing the carbon footprints, energy utilization, water consumption, etc.

Positive

Industry Analysis
Market Size
45 40 35 30 25 20 15 10 5 0 Domestic Export 40.3 31.3 in USD billion $

23.6
17.7 12.9 3.8 2004 3.8 12.9 4.8 2005 4.8 17.7 6.7 8.2 11.7

More than 80% of revenues come from Exports and only 20% from domestic business

2006 6.7 23.6

2007 8.2 31.3

2008 11.7 40.3

Market Share in %

Industry Analysis
APAC, 17.30% USA, 43% USA EUROPE APAC EUROPE, 39.70%

Revenue by Geography

BFSI

40.4 19.1 15 8 3.3 3.5 2.5 3.4 4.7 0 10 20 30 40 50

TELECOM
MANUFACTURING RETAIL

Indian IT industry Revenue Breakup by sector . Focus must shift from BFSI sector to other sectors.

MEDIA ,PUBLISHING & CONSTRUCTION & UTILITIES HEALTH CARE AIRLINES & TRANSPORTATION OTHERS

Company Level

Company Analysis

N . Chandrasekaran CEO and MD

S.Gopalakrishnan CEO and MD

Particulars Particulars Area Operations Area OfOf Operations

TCS TCS
Application Development and Application Development and Maintenance Maintenance Business Intelligence Business Intelligence Enterprise Solutions Enterprise Solutions Assurance Services Assurance Services Engineering and Industrial Services Engineering and Industrial Services Infrastructure Services Infrastructure Services Consulting Consulting Asset Leveraged Solutions Asset Leveraged Solutions Business Process outsourcing Business Process outsourcing

INFOSYS INFOSYS

Year of Incorporation

Year of Incorporation

Financial Year End Credit Year Financial ratingEnd

Credit rating

Stock Exchanges where listed

Global Consulting Global Consulting IT Services IT Services End to End Business Solutions End to End Business Solutions Software consulting Software consulting Software Design Software Design Software Development Software Development Software reengineering Software reengineering Software maintenance Software integration Systems maintenance Systems integration and Package evaluation Package evaluation and implementation and infrastructure implementation and infrastructure management services management services Banking Software products for Software products for Banking Industry and Business process Industry and Business process management services Date of incorporation is January 19, 1981 as Infosys Consultants management services 1995. incorporation is January 19, Private Limited Date of 1981 as Infosys Consultants July Infosys Technologies Limited in 1995. 2004, it was listed on the NSE and Private Limited BSE on August listed on the NSE and Infosys Technologies Limited in 25, 2004. June 1992 July 2004, it was Infosys Limited in June 2011 BSEston August 25, 2004. June 1992 31 march 31st march Infosys Limited in June 2011 st Corporate 31Investment grade rating A3 march 31st march credit rating BBB+ Foreign Currency Debt rating - Baa1 Dun Brad Street rating- 5A1 Investment grade rating A3 Corporate credit rating BBB+ Corporate credit rating BBB+ Foreign Currency Debt rating - Baa1 Dun Brad Street rating- 5A1 Dun Brad Street rating- 5A1 Corporate credit rating BBB+ Dun Brad Street rating- 5A1 NSE:TCS NSE:INFY BSE:532540 BSE:INFY

Stock Exchanges where listed

Outstanding Shares as of 31.12.2011 Outstanding Shares as of No. of Offices

NSE:TCS BSE:532540 1,957,220,996-fully paid up 1,957,220,996-fullyin Mumbai Head Quartered paid up

145 offices in 42 countries 106 delivery centres 20 countries Head Quartered in Mumbai

NSE:INFY NASDAQ:INFY BSE:INFY fully paid up 57,42,19,117 NASDAQ:INFY 57,42,19,117 fully paid up Head Quartered in Bangalore
68 global development centers - 32 are in India and 36 are outside Head Quartered in Bangalore India 68 global development centers - 32 64 sales offices 36 are outside are in India andaround the world 4 are India in India and 60 are outside India

31.12.2011 No. of Offices

145 offices in 42 countries 106 delivery centres 20 countries

64 sales offices around the world 4 are in India and 60 are outside

Performance trend-Profitability ratios

TCS Operating Profit Margin
2011 2010 2009 2008 2007 25 26 26.87 27.11 28.79 29.96 28.93 2011 2010 2009 2008 2007 29 31.38 31.61 30 31 32 33 33.18

Infosys Operating Profit Margin

32.61 34.57

27

28

29

30

34

35

Net Profit Margin

2011 2010 2009 2008 2007 22.41 0 5 22 10 15 20 25 23 2011 23.93 23.84

Net Profit Margin

2010
23.07 18.69 21.78 2007 2009 2008

26.49 26.48 26.8 27.1 24 25 26

27

28

Performance trend-Profitability ratios

TCS Return on Capital Employed
2011 2010 2009 2008 2007 51.35 0 20 30 40 60 32 44.77 45.04 42.44 43.91 2011 2010 2009 2008 2007

Infosys Return on Capital Employed

35.74 34.1 40.25 38.65 37.42 34 36 38

40

42

Return on Net Worth

2011 2010 2009 2008

Return on Net Worth

2011 2010 2009 2008 26.31 27.18 32.8 33.77 34.26 0 10 20 30

37.11
38.02

33.65
41.19 47.59 0 10 20 30 40

2007

2007

50

40

Performance trend-Profitability ratios

TCS Cash Flow in Cr. Rs..
2011
2010 2009 2008 2007 0 528 557 2698 4718 7378 2011 2010 2009 2008 2007 0 4000 6000 8000 5000 7689 5610 10000 11297 10289

Infosys Cash Flow in Cr. Rs..

15165

2000

15000

20000

Company Performance in Cr. Rs..

35000 30000 25000 20000 15000 10000 5000 0
SALES GP NP

Company Performance in Cr. Rs..

30000 25000 20000 15000 10000 5000 0
SALES GP NP

2007 15153 11941 3757

2008 18974 13104 4509

2009 21947 14781 4696

2010 23225 16570 5619

2011 29761 21367 7570

2007 13528 12128 3783

2008 16331 14764 4470

2009 20766 18924 5819

2010 22107 20092 5803

2011 26532 23896 6443

Performance trend-Leverage ratios

TCS Current Ratios
2011 2010 2009 2008 2007 0 1.89 2.22 2.19 2.14 1 2 3 2.89 2011 2010 2009 2008 2007 4.47 0 1 2 3 4 3.13

Infosys Current Ratios

4.81 4.19 4.34

Debt Equity Ratios

2011 2010 2009 2008 2007 0 0.02 2011 2010 2009 2008 2007 0 0.04 0.06

Debt Equity Ratios

0.2

0.4

0.6

0.8

Performance trend-Leverage ratios

TCS Financial Charges Coverage ratio
2011 2010 2009 2008 2007 555.1 0 200 0 400 600 260.52 205.44 443.34 560.61 2011 2010 2009 2008 5931 2007 4726 2000 4000

Infosys Financial Charges Coverage ratio

5069.5 4383.5 2703.33

6000

Valuation Intrinsic Value and Stock Valuation

TCS Market Capitalization & Net Worth Rs. in Cr.
2011 2010 2009 2008 2007 0 53000 79000 121000 232000 157000 15700 12300 8850 200000 300000 MCAP BV 2007 121000 8850 2008 79000 12300 2009 53000 15700 2010 157000 18467 2011 232000 24505 MCAP BV 2007 115307 195.41 2008 82362 235.84 2009 75837 310.9 18467 24505

Infosys Market Capitalization & Net Worth Rs. in Cr.

2011 2010 2009 2008 2007 0 75837 82362 186100 426.73 150110 310.9 235.84 195.41 100000 150000 2010 150110 384.01 384.01

115307
50000

100000

200000 2011 186100 426.73

Closing Share prices

TCS
Close Market price per Share 1400 1200 1000 800 600 400 200 0

INFOSYS
Close Value 4000 3500 3000 2500 2000 1500 1000 500 0

Continuous Componding Returns

TCS
400 % 300 % 300 % 500 % 300 % 300 % 500 Continuous Compounding Returns %

0.2 0.1 0 -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8

D D D D D D D

INFOSYS
130 % 120 % 545 % 200 % 270 200 Continuous Compounding Returns

400 %

0.15 0.1 0.05 0 -0.05 -0.1 -0.15

Valuation Intrinsic Value and Stock Valuation

TCS Earning Per Share
2011 2010 2009 35.67 26.81 25.68 21.53 0 10 20 30 2009 26.81 46.27 2011 2010 2009

Infosys Earning Per Share

119.05 109.2 104.53 81.45 67.7 0 40 2010 35.67 50 2011 46.27 Rs. 2007 67.7

2008 2007

2008
2007

50

100 150 2009 104.53 2010 109.2 2011 119.05

Rs.

2007 21.53

2008 25.68

2008 81.45

Cash Return on Invested Capital

40 30 20 10 10 0 Ratios 2007 23 2008 20 2009 26 2010 34 2011 19 5 0 25 20 15

Cash Return on Invested Capital

Ratios

2007 16

2008 18

2009 22

2010 23

2011 12

Valuation Intrinsic Value and Stock Valuation

TCS Price Earnings Ratio
35.00 30.00 25.00 20.00 15.00 10.00 5.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 2007 28.97 2008 15.79 2009 10.07 2010 21.89 2011 25.56

Infosys Price Earnings Ratio

0.00
Ratios

0.00
Ratios

2007 29.76

2008 18.40

2009 13.02

2010 21.97

2011 29.64

Owners Earnings Rs. in Cr.

7000.00 6000.00 5000.00 4000.00 6000.00 5000.00 4000.00 3000.00 2000.00 1000.00 2008 2557.00 2009 3896.00 2010 6357.00 2011 4759.00

Owners Earnings Rs. in Cr.

3000.00
2000.00 1000.00 2007 Ratios 2303.00 0.00

2007 Ratios 1813.00

0.00

2008 2446.00

2009 3975.00

2010 5290.00

2011 3118.00

Growth-Sales & Profitability & Annual Growth

TCS Net Operating Profit and Earning per share
300 250 200 150 100 50 0 NP EPS 2007 190.94 21.53 2008 233.63 25.68 2009 284.2 26.81 2010 153.43 35.67 2011 190.7 46.27

Infosys Net Operating Profit and Earning per share

500.00 400.00 300.00 200.00

100.00
0.00 NP EPS 2007 230.20 67.7 2008 273.57 81.45 2009 353.75 104.53 2010 368.40 109.2 2011 442.13 119.05

Day Sales Outstanding in Cr. Rs.

2011 2010 2009 2008 2007 0.00 DSO 2007 67.46 20.00 2008 72.77 59.10 52.05 59.74 72.77 67.46 40.00 2009 59.74 60.00 2010 52.05 80.00 2011 59.10 DSO 2011 2010 2009 2008 2007

Day Sales Outstanding in Cr. Rs.

65.99 59.50 65.23 75.85 66.69 20.00 2008 75.85 40.00 2009 65.23 60.00 2010 59.50 80.00 2011 65.99

0.00 2007 66.69

Growth-Sales & Profitability & Annual Growth

TCS Retained Earnings in Cr. Rs.
2011 2010 2009 2008 2007 0.00 Reserves 2007 7961.00 19284.00 14821.00 13248.00 10807.00 7961.00 5000.00 10000.00 15000.00 2010 14821.00 20000.00 2011 19284.00 Reserves 2011 2010 2009 2008 2007 0 2007 10969 13509 10969 10000 2008 13509 20000 2009 17968 2010 22763 30000 2011 25690 17968

Infosys Retained Earnings in Cr. Rs.

25690 22763

2008 10807.00

2009 13248.00

Net Income & Cash from Operations in Cr. Rs.

8000.00 7000.00 6000.00 5000.00 4000.00 3000.00 2000.00 1000.00 0.00

Net Income & Cash from Operations in Cr. Rs.

10000 8000 6000 4000 2000 0

NPAT CFOP

2007 3757.00 3551

2008 4509.00 3828

2009 4696.00 4874

2010 5619.00 6265

2011 7570.00 5741

NPAT CFOP

2007 3783 4129

2008 4470 5100

2009 5819 6714

2010 5803 7472

2011 6443 8821

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues

TCS vs. Infosys-The Fight continues