INTRODUCTION

India is a developing country. Nowadays many people are interested to invest in financial
markets especially on equities to get high returns, and to save tax in honest way. Equities are
playing a major role in contribution of capital to the business from the beginning. Since the
introduction of shares concept, large numbers of investors are showing interest to invest in
stock market.
In an industry plagued with skepticism and a stock market increasingly difficult to predict
and contend with, if one looks hard enough there may still be a genuine aid for the Day
Trader and Short Term Investor.
The price of a security represents a consensus. It is the price at which one person agrees to
buy and another agrees to sell. The price at which an investor is willing to buy or sell
depends primarily on his expectations. If he expects the security's price to rise, he will buy it;
if the investor expects the price to fall, he will sell it. These simple statements are the cause
of a major challenge in forecasting security prices, because they refer to human expectations.
As we all know firsthand, humans expectations are neither easily quantifiable nor
predictable. If prices are based on investor expectations, then knowing what a security should
sell for (i.e., fundamental analysis) becomes less important than knowing what other
investors expect it to sell for. That's not to say that knowing what a security should sell for
isn't important--it is. But there is usually a fairly strong consensus of a stock's future earnings
that the average investor cannot disprove
Fundamental analysis and technical analysis can co-exist in peace and complement each
other. Since all the investors in the stock market want to make the maximum profits possible,
they just cannot afford to ignore either fundamental or technical analysis.
Stock Exchange:
A stock exchange is an entity that provides trading facilities for stock brokers and traders to
trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and
redemption of securities and other financial instruments, and capital events including the
payment

of

income

and dividends.

Securities

traded

on

stock

exchange

include shares issued by companies, unit trusts, derivatives, pooled investment products
and bonds.

Primary Market:
The primary market is that part of the capital markets that deals with the issuance of
new securities. Companies, governments or public sector institutions can obtain funding
through the sale of a new stock or bond issue. This is typically done through a syndicate of
securities dealers. The process of selling new issues to investors is called underwriting. In the
case of a new stock issue, this sale is an initial public offering (IPO). A primary market
creates long term instruments through which corporate entities borrow from capital market.
Secondary Market:
The secondary market, also known as the aftermarket, is the financial market where
previously issued securities and financial instruments such as stock, bonds, options, and
futures are bought and sold. The term "secondary market" is also used to refer to the market
for any used goods or assets, or an alternative use for an existing product or asset where the
customer base is the second market (for example, corn has been traditionally used primarily
for food production and feedstock, but a "second" or "third" market has developed for use in
ethanol production).

Equity market:
An equity market is a public market for the trading of company stock at an agreed price;
these are the securities listed on a stock exchange as well as those only traded privately. The
equity market provides us with an insight into the equities segment and also provides realtime quotes and statistics of the equity market. In depth information regarding listing of
securities, trading systems & processes, clearing & settlement, risk management, trading
statistics etc;
The participants here would understand the overview of equity research, its role in capital
markets and different approaches of equity research.

1.2 NEED FOR THE STUDY

To start any business capital plays major role. Capital can be acquired in two ways by issuing
shares or by taking debt from financial institutions or borrowing money from financial
institutions. The owners of the company have to pay regular interest and principal amount at
the end.
Stock is ownership in a company, with each share of stock representing a tiny piece of
ownership. The more shares you own, the more of the company you own. The more shares
you own, the more dividends you earn when the company makes a profit. In the financial
world, ownership is called Equity.
Stock/shares play a major role in acquiring capital to the business in return investors are paid
dividends to the shares they own. The more shares you own the more dividends you receive.
The role of equity analysis is to provide information to the market. An efficient market relies
on information: a lack of information creates inefficiencies that result in stocks being
misrepresented (over or under valued). This is valuable because it fills information gaps so
that each individual investor does not need to analyze every stock thereby making the
markets more efficient.

1.3 OBJECTIVES OF THE STUDY

The basic objective of this project is to analyze Information Technology (IT) Industry for
investment purpose by monitoring the growth rate and performance on the basis of historical
data.
The objectives of the Project study are:

To understand the concept of investing in equity shares.

To understand the performance of 3 Indian I.T. companies viz., INFOSYS, TCS and
WIPRO.

To do technical and fundamental analysis of chosen securities..

To suggest the investors to analyze the stock before investing into any companys
stock. To understand the movement and performance of stocks of selected I.T. sector
in I.T. industry.
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1.4 SCOPE OF THE STUDY

The study is confined to equity study through use of fundamental and valuation analysis.
Fundamental analysis deals with financial analysis fluctuations of market prices. The primary
data has been collected through personal contact with employees of the company. Further, the
study deals with analysis of performance, and is made by taking into consideration three
leading IT companies i.e., INFOSYS, TCS and WIPRO and comparing them.

1.5 RESEARCH METHODOLOGY

Research design or research methodology is the procedure of collecting, analyzing and
interpreting the data to diagnose the problem and react to the opportunity in such a way
where the costs can be minimized and the desired level of accuracy can be achieved to arrive
at a particular conclusion.
The methodology used in the study for the completion of the project and the fulfillment of
the project objectives.
Type of the study:
The research has been based on secondary data analysis. The study has been exploratory as it
aims at examining the secondary data for analyzing the previous researches that have been
done in the area of technical and fundamental analysis of stocks. The knowledge thus gained
from this preliminary study forms the basis for the further detailed Descriptive research. In
the exploratory study, the various technical indicators that are important for analyzing stock
were actually identified and important ones short listed.
Sample design and sample size:
The sample of the stock for the collection of data and research analysis has been selected on
random basis.
The stock is chosen from the Information Technology (IT). The sample size taken for the
analysis is the stock of three company in IT sector.

Tools and Techniques:

Total Income, Net Profit, Earnings Per Share (EPS), Equity Dividend, and Return on Long
Term Funds.

LIMITATIONS

The analysis is fully based on secondary data and hence the accuracy of data is a
major concern.

Only three IT companies are selected for analysis because of time constraints.

Analysis helps the investor in making investment decisions but not every investment
is entirely dependent on the analysis alone.

Some important concepts would have been left uncovered in the project due to lack of
data availability and the project has to be completed in a short span of time.

There was a constraint with regard to time allocation for the research study i.e. for a
period of 45 days.

Suggestions and conclusions are based on the limited data of five years.

REVIEW OF LITERATURE
Investment in Equity Shares
Investment success is pretty much a matter of careful selection and timing of stock purchases
coupled with perfect matching to an individuals risk tolerance. In order to carry out
selection, timing and matching actions an investor must conduct deep security analysis.
Investors purchase equity shares with two basic objectives;
1. To make capital profits by selling shares at higher prices.
2. To earn dividend income.
These two factors are affected by a host of factors. An investor has to carefully understand
and analyze all these factors. There are basically two approaches to study security prices and
valuation i.e. fundamental analysis and technical analysis
The value of common stock is determined in large measure by the performance of the firm
that issued the stock. If the company is healthy and can demonstrate strength and growth, the
value of the stock will increase. When values increase then prices follow and returns on an
investment will increase. However, just to keep the savvy investor on their toes, the mix is
complicated by the risk factors involved. Fundamental analysis examines all the dimensions
of risk exposure and the probabilities of return, and merges them with broader economic
analysis and greater industry analysis to formulate the valuation of a stock.

FUNDAMENTAL ANALYSIS
The intrinsic value of an equity share depends on a multitude of factors. The
earning of the company the growth rate and the risk exposure of the company has a
direct bearing on the price of the share. These factors in turn rely on the host of
other factors like economic environment in which they function, the industry they
belong to, and finally companies own performance.

So basically the whole fundamental analysis is divided into three main parts:

Economic Analysis

Industry Analysis

Company Analysis

Fig 2.1

Economic Analysis
The level of economic activity has an impact on investment in many ways. If the
economic grows rapidly, the industry can also be expected to show rapid growth
and vice versa. When the level of economic activity is low, stock prices are low,
and when the level of economic activity is high, the stocks prices are high
reflecting the prosperous outlook for sales and profits of the firms. The analysis of
macroeconomic environment is essential to understand the behavior of the stock
prices. The commonly analyzed macroeconomic factors are as follows: 7

Gross Domestic Product (GDP)

Savings and Investment

Inflation

Interest Rates

Budget

Tax Structure

Balance of Payment

Infrastructure Facilities

Monsoon and Agriculture

Considering all factors for economic analysis is not always feasible and also not
always required. Depending upon the type of research, some of the above factors
are considered for analysis. In this analysis, important factors like GDP, Inflation
and Interest rates are taken as indicators as these factors directly influence the
Indian Stock Index. After the individual analysis a comparative analysis is made to
draw the relationship between them. Later the influence of the above three factors
on Stock Market Index is analyzed.
Before stepping into the analysis of all factors together lets individually understand
the Factors taken for study.
Gross Domestic Product (GDP)
GDP indicates the rate of growth of the economy. GDP represents the aggregate
value of the goods and services produced in the economy. GDP consists of personal
consumption expenditure, gross private domestic investment and government
expenditure on goods and services and net export of goods and services. Growth is
usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the
effect of inflation on the price of the goods and services produced.
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Quarterly GDP rate by March 2008 was 8.5% which continued to fall throughout
the year ending March 2009. This decline was mainly due to the effect of recession
in some sectors like IT, Tourism sector, Export sector, etc. which depended on
foreign countries for its earnings. The GDP rates were 7.8% in June, 7.5% in
September, 6.1% in December and 5.8% in March 09. When the economy,
comprising of different sectors, started to bounce back on its pace of production,
GDP rate started showing a slight rise from 6% in June to 8.6% in September. By
the end of December 2009, it again showed a fall to 6.5% mainly due to high
inflation rate. But an onset of 2010, improved GDP rate back to 8.6%.
The diagram below shows Annual GDP Growth Adjusted by Inflation:

Fig 2.2
Inflation Rate
In mainstream Economics, the word inflation refers to a general rise in prices
measured against a standard level of purchasing power. Previously the term was
used to refer to an increase in the money supply, which is now referred to as
expansionary monetary policy or monetary inflation. Inflation is measured by
comparing two sets of goods at two points in time, and computing the increase in
cost not reflected by an increase in quantity.

Monthly inflation rate is taken for indentifying the fluctuations. In each month of
the year 2011, inflation is showing a continuous rise and it follows until the end of
November 2011 at 10.45%. Before January it showed a slight dip during December
at 9.7% compared to last month. But in January it bounced back to 10.45% and
there after showed a low inflation rate for the next four months (Feb: 9.63%, Mar:
8.03%, Apr: 8.7%, May: 8.63%). Thereafter, inflation rate made a steep rise. By the
end of January 2013, it became 16.22%. A high rate of inflation is not desired by
any nation as it hampers the production and GDP growth of any economy. During
February and March 2013, inflation rate remained stagnant at 14.86% but still
being high.
The diagram below shows the Annual Change on Consumer Price Index since
2011:

Fig 2.3
Interest Rate
Interest rate or the Bank rate affects the cost of financing to the firms. The interest
rate term structure is the relation between the interest rate and the time to maturity
10

of the debt for a given borrower in a given currency. A decrease in interest rate
implies lower cost of finance for firms and more profitability. More money is
available at a lower interest rate for the brokers who are doing business with
borrowed money. Availability of cheap fund encourages speculation and rise in the
price of shares.
Even much before 2011, the interest rate has been constant to 6% but it remained
so till the onset of 2012. During December 2011, interest rate was slightly
decreased to 5.24%. Thereafter showing a not stop fall by every month. From
5.24% to 4.05%, then to 4%, 3.55%, 3.39% and so on during the month of Jan,
Feb, March, April respectively. However, in the following month it further declined
to 3.25% and remained stagnant at it for the rest of the month in the year 2015
along with first two months of the 2016. It was in March 2013 that first time after
16months interest rate slight rose to 3.34%.
The diagram below shows Central Bank Overnight Rate since 2016:

Fig 2.4
Relationship between GDP, Inflation rate & Interest rate
GDP, Inflation and interest rate are inter-dependent on each other. For stock market investors,
annually growth in GDP is vital. If overall economic output is declining or merely holding
11

steady, most companies will not be able to increase their profits, which is the primary driver
of stock performance. However, too much GDP growth is also dangerous, as it will most
likely come with an increase in inflation, which erodes stock market gains by making
investors money (and future corporate profits) less valuable.
Again, investors aim to preserve the value of their money by opting for investments that
generate yields higher than the rate of inflation. In developed economies, banks try to keep
the interest rates on savings accounts equal to the inflation rate. However, when the inflation
rate raises, then companies or governments issuing debt instruments need to lure investors
with a higher interest rate. Inflation is an autonomous occurrence that is impacted by money
supply in an economy. Central governments use the interest rate to control money supply and,
consequently, the inflation rate. When interest rates are high, it becomes more expensive to
borrow money and savings become attractive. When interest rates are low, banks are able
to lend more, resulting in an increased supply of money.
Alteration in the rate of interest can be used to control inflation by controlling the supply of
money in the following ways:

A high interest rate influences spending patterns and shifts consumers and businesses
from borrowing to saving mode. This influences money supply.

A rise in interest rates boosts the return on savings in building societies and banks.
Low interest rates encourage investments in shares. Thus, the rate of interest can
impact the holding of particular assets.

A rise in the interest rate in a particular country fuels the inflow of funds. Investors
with funds in other countries now see investment in this country as a more profitable
option than before

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Fig 2.5
The chart above displays last two years GDP, inflation rate and interest rate where GDP is
quarterly calculated, inflation and interest rate is monthly drawn so as to make an easy
pictorial comparison.
When inflation was between 5-7%, GDP growth rate was around 8% at a stagnant interest
rate of 6%. But with a slight rise of inflation during June11, leads to a fall in GDP at the
same interest level of 6%. With the onset of June09, GDP rises even though with a rise in
inflation rate mainly due to the curbing of interest rate by RBI to 3.25%. Again a further rise
in inflation after December12 to 14.97%, the dip in GDP at 6% was seen, interest rate
remaining constant at 3.25%. By the end of March 2013, GDP rose to 8.6% along with high
inflation rate of 14.86% and interest rate being increased to 3.34%.

Industry Analysis
An industry is a group of firms that have similar technological structure of production and
produce similar products and Industry analysis is a type of business research that focuses on
the status of an industry or an industrial sector (a broad industry classification, like
"manufacturing"). Irrespective of specific economic situations, some industries might be
expected to perform better, and share prices in these industries may not decline as much as in
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other industries. This identification of economic and industry specific factors influencing
share prices will help investors to identify the shares that fit individual expectations
Industry Life Cycle: The industry life cycle theory is generally attributed to Julius
Grodensky. The life cycle of the industry is separated into four well defined stages.
1)Pioneering stage: The prospective demand for the product is promising in this stage and
the technology of the product is low. The demand for the product attracts many producers to
produce the particular product. There would be severe competition and only fittest companies
survive this stage. The producers try to develop brand name, differentiate the product and
create a product image. In this situation, it is difficult to select companies for investment
because the survival rate is unknown.

2)Rapid growth stage: This stage starts with the appearance of surviving firms from the
pioneering stage. The companies that have withstood the competition grow strongly in
market share and financial performance. The technology of the production would have
improved resulting in low cost of production and good quality products.
The companies have stable growth rate in this stage and they declare dividend to the
shareholders. It is advisable to invest in the shares of these companies.
3)Maturity and stabilization stage: the growth rate tends to moderate and the rate of growth
would be more or less equal to the industrial growth rate or the gross domestic product
growth rate. Symptoms of obsolescence may appear in the technology. To keep going,
technological innovations in the production process and products should be introduced. The
investors have to closely monitor the events that take place in the maturity stage of the
industry.
4)Decline stage: demand for the particular product and the earnings of the companies in the
industry decline. It is better to avoid investing in the shares of the low growth industry even
in the boom period. Investment in the shares of these types of companies leads to erosion of
capital.

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Growth of the industry: The historical performance of the industry in terms of growth and
profitability should be analyzed. The past variability in return and growth in reaction to
macro economic factors provide an insight into the future.
Nature of competition: Nature of competition is an essential factor that determines the
demand for the particular product, its profitability and the price of the concerned company
scraps. The companies' ability to withstand the local as well as the multinational competition
counts much. If too many firms are present in the organized sector, the competition would be
severe. The competition would lead to a decline in the price of the product. The investor
before investing in the scrip of a company should analyze the market share of the particular
company's product and should compare it with the top five companies.
SWOT Analysis: SWOT analysis represents the strength, weakness, opportunity and threat
for an industry. Every investor should carry out a SWOT analysis for the chosen industry.
Take for instance, increase in demand for the industrys product becomes its strength,
presence of numerous players in the market, i.e. competition becomes the threat to a
particular company. The progress in R & D in that industry is an opportunity and entry of
multinationals in the industry is a threat. In this way the factors are to be arranged and
analyzed.

COMPANY ANALYSIS
In the company analysis the investor assimilates the several bits of information related to the
company and evaluates the present and future values of the stock. The risk and return
associated with the purchase of the stock is analyzed to take better investment decisions. The
present and future values are affected by a number of factors.
Competitive edge of the company: Major industries in India are composed of hundreds of
individual companies. Though the number of companies is large, only few companies control
the major market share. The competitiveness of the company can be studied with the help of
the following;
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Market share: The market share of the annual sales helps to determine a companys relative
competitive position within the industry. If the market share is high, the company would be
able to meet the competition successfully. The companies in the market should be compared
with like product groups otherwise, the results will be misleading.
Growth of sales: The rapid growth in sales would keep the shareholder in a better position
than one with stagnant growth rate. Investors generally prefer size and growth in sales
because the larger size companies may be able to withstand the business cycle rather than the
company of smaller size.
Stability of sales: If a firm has stable sales revenue, it will have more stable earnings. The
fall in the market share indicates the declining trend of company, even if the sales are stable.
Hence the stability of sales should be compared with its market share and the competitors
market share.
Earnings of the company: Sales alone do not increase the earnings but the costs and
expenses of the company also influence the earnings. Further, earnings do not always
increase with increase in sales. The companys sales might have increased but its earnings per
share may decline due to rise in costs. Hence, the investor should not only depend on the
sales, but should analyze the earnings of the company.
Financial analysis: The best source of financial information about a company is its own
financial statements. This is a primary source of information for evaluating the investment
prospects in the particular companys stock. Financial statement analysis is the study of a
companys financial statement from various viewpoints. The statement gives the historical
and current information about the companys operations. Historical financial statement helps
to predict the future and the current information aids to analyze the present status of the
company. The two main statements used in the analysis are Balance sheet and Profit and Loss
Account. The balance sheet is one of the financial statements that companies prepare every
year for their shareholders. It is like a financial snapshot, the company's financial situation at
a moment in time. It is prepared at the year end, listing the company's current assets and
liabilities. It helps to study the capital structure of the company. It is better for the investor to
avoid a company with excessive debt component in its capital structure. From the balance
sheet, liquidity position of the company can also be assessed with the information on current
assets and current liabilities.

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Ratio analysis: Ratio is a relationship between two figures expressed mathematically.

Financial ratios provide numerical relationship between two relevant financial data. Financial
ratios are calculated from the balance sheet and profit and loss account. The relationship can
be either expressed as a percent or as a quotient. Ratios summarize the data for easy
understanding, comparison and interpretations. Ratios for investment purposes can be
classified into profitability ratios, turnover ratios, and leverage ratios. Profitability ratios are
the most popular ratios since investors prefer to measure the present profit performance and
use this information to forecast the future strength of the company. The most often used
profitability ratios are return on assets, price earnings multiplier, price to book value, price to
cash flow, and price to sales, dividend yield, return on equity, present value of cash flows and
profit margins.
a) Return on Assets (ROA)
ROA is computed as the product of the net profit margin and the total asset turnover ratios.
ROA = (Net Profit/Total income) x (Total income/Total Assets)
This ratio indicates the firm's strategic success. Companies can have one of two strategies:
cost leadership, or product differentiation. ROA should be rising or keeping pace with the
company's competitors if the company is successfully pursuing either of these strategies, but
how ROA rises will depend on the company's strategy. ROA should rise with a successful
cost leadership strategy because the companys increasing operating efficiency. An example
is an increasing, total asset, turnover ratio as the company expands into new markets,
increasing its market share. The company may achieve leadership by using its assets more
efficiently. With a successful product differentiation strategy, ROA will rise because of a
rising profit margin.
b) Return on Investment (ROI)
ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men,
machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI is
25%. The computation of return on investment is as follows:
Return on Investment (ROI) = (Net profit/Equity investments) x 100

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As this ratio reveals how well the resources of a firm are being used, higher the ratio, better
are the results. The return on shareholders investment should be compared with the return of
other similar firms in the same industry. The inert-firm comparison of this ratio determines
whether the investments in the firm are attractive or not as the investors would like to invest
only where the return is higher.
c) Return on Equity
Return on equity measures how much an equity shareholder's investment is actually earning.
The return on equity tells the investor how much the invested rupee is earning from the
company. The higher the number, the better is the performance of the company and suggests
the usefulness of the projects the company has invested in.
The computation of return on equity is as follows:
Return on equity = (Net profit to owners/value of the specific owner's
Contribution to the business) x 100
The ratio is more meaningful to the equity shareholders who are invested to know profits
earned by the company and those profits which can be made available to pay dividend to
them.

d) Earnings per Share (EPS)

This ratio determines what the company is earning for every share. For many investors,
earnings are the most important tool. EPS is calculated by dividing the earnings (net profit)
by the total number of equity shares.
The computation of EPS is as follows:

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Earnings per share = Net profit/Number of shares outstanding

The EPS is a good measure of profitability and when compared with EPS of similar other
companies, it gives a view of the comparative earnings or earnings power of a firm. EPS
calculated for a number of years indicates whether or not earning power of the company has
increased.
e) Dividend per Share (DPS)
The extent of payment of dividend to the shareholders is measured in the form of dividend
per share. The dividend per share gives the amount of cash flow from the company to the
owners and is calculated as follows:
Dividend per share = Total dividend payment / Number of shares outstanding
The payment of dividend can have several interpretations to the shareholder. The distribution
of dividend could be thought of as the distribution of excess profits/abnormal profits by the
company. On the other hand, it could also be negatively interpreted as lack of investment
opportunities. In all, dividend payout gives the extent of inflows to the shareholders from the
company.
f) Dividend Payout Ratio
From the profits of each company a cash flow called dividend is distributed among its
shareholders. This is the continuous stream of cash flow to the owners of shares, apart from
the price differentials (capital gains) in the market. The return to the shareholders, in the form
of dividend, out of the company's profit is measured through the payout ratio. The payout
ratio is computed as follows:

Payout Ratio = (Dividend per share / Earnings per share) * 100

The percentage of payout ratio can also be used to compute the percentage of retained
earnings. The profits available for distribution are either paid as dividends or retained
internally for business growth opportunities. Hence, when dividends are not declared, the
entire profit is ploughed back into the business for its future investments.

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g) Dividend Yield
Dividend yield is computed by relating the dividend per share to the market price of the
share. The market place provides opportunities for the investor to buy the company's share at
any point of time. The price at which the share has been bought from the market is the actual
cost of the investment to the shareholder. The market price is to be taken as the cum-dividend
price. Dividend yield relates the actual cost to the cash flows received from the company. The
computation of dividend yield is as follows
Dividend yield = (Dividend per share / Market price per share) * 100
High dividend yield ratios are usually interpreted as undervalued companies in the market.
The market price is a measure of future discounted values, while the dividend per share is the
present return from the investment. Hence, a high dividend yield implies that the share has
been under priced in the market. On the other hand a low dividend yield need not be
interpreted as overvaluation of shares. A company that does not pay out dividends will not
have a dividend yield and the real measure of the market price will be in terms of earnings
per share and not through the dividend payments.
h) Price/Earnings Ratio (P/E)
The P/E multiplier or the price earnings ratio relates the current market price of the share to
the earnings per share. This is computed as follows:
Price/earnings ratio = Current market price / Earnings per share
This ratio is calculated to make an estimate of appreciation in the value of a share of a
company and is widely used by investors to decide whether or not to buy shares in a
particular company. Many investors prefer to buy the company's shares at a low P/E ratio
since the general interpretation is that the market is undervaluing the share and there will be a
correction in the market price sooner or later. A very high P/E ratio on the other hand implies
that the company's shares are overvalued and the investor can benefit by selling the shares at
this high market price.
i) Debt-to-Equity Ratio
Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firms
assets.
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Debt-to-equity ratio = Outsiders Funds / Shareholders Funds

The debt-equity ratio is calculated to measure the extent to which debt financing has been
used in a business. It indicates the proportionate claims of owners and the outsiders against
the firms assets. The purpose is to get an idea of the cushion available to outsiders on the
liquidation of the firm.

INDUSTRY PROFILE &COMPANY PROFILE

The US information technology (IT) industry includes about 120,000 establishments (singlelocation companies and branches of multi-location companies) with combined annual
revenue of about $250 billion. Major companies include Computer Sciences Corporation
(CSC), Unisys, and the technology consulting arms of IBM and Hewlett-Packard. The
computer facilities management segment of the industry is highly concentrated: the 50 largest

21

companies hold more than 80 percent of the market. The rest of the industry is fragmented:
the 50 largest companies hold less than half the market.
Related industries covered in separate profiles include manufacturers of computer hardware,
software, and telecommunications equipment, as well as providers of Internet and
telecommunications services.
COMPETITIVE LANDSCAPE
Demand for IT services is driven by rapid technological advances, but spending for these
expensive products depends on the health of the US economy. The profitability of companies
depends on offering technical expertise, innovative services, and effective marketing. Large
companies have advantages in broad service offerings and global reach, which give them the
ability to provide outsourcing services to big corporate customers. Small companies can
compete effectively by specializing in market niches or by partnering with larger companies
that want to broaden their mix of services.
PRODUCTS, OPERATIONS & TECHNOLOGY
IT

companies

mainly

provide consulting,

systems

integration,

data

processing,

and technology outsourcing services to business customers. Computer systems design,

development, and integration services account for about 35 percent of industry revenue;
application design and development services, 25 percent.

INDUSTRY PROFILE OF INDIA

Information Technology (IT) industry in India is one of the fastest growing industries. Indian
IT industry has built up valuable brand equity for itself in the global markets. IT industry in
India comprises of software industry and information technology enabled services (ITES),
which also includes business process outsourcing (BPO) industry. India is considered as a
pioneer in software development and a favorite destination for
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IT-enable services.
The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer,
Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export
programmers for installing system software for a U.S. client. The IT industry originated
under unfavorable conditions. Local markets were absent and government policy toward
private enterprise was hostile. The industry was begun by Bombay-based conglomerates
which entered the business by supplying programmers to global IT firms located overseas.
During that time Indian economy was state-controlled and the state remained hostile to the
software industry through the 1970s. Import tariffs were high (135% on hardware and 100%
on software) and software was not considered an "industry", so that exporters were ineligible
for bank finance. Government policy towards IT sector changed when Rajiv Gandhi became
Prime Minister in 1984. His New Computer Policy (NCP-1984) consisted of a package of
reduced import tariffs on hardware and software (reduced to 60%), recognition of software
exports as a "delicensed industry", i.e., henceforth eligible for bank finance and freed from
license-permit raj, permission for foreign firms to set up wholly-owned, export-dedicated
units and a project to set up a chain of software parks that would offer infrastructure at
below-market costs. These policies laid the foundation for the development of a world-class
IT industry in India.
Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, and
HCL at all are renowned in the global market for their IT prowess. Some of the major factors
which played a key role in India's emergence as key global IT player are:

Indian Education System

The Indian education system places strong emphasis on mathematics and science, resulting in
a large number of science and engineering graduates. Mastery over quantitative concepts
coupled with English proficiency has resulted in a skill set that has enabled India to reap the
benefits of the current international demand for IT.
23

High Quality Human Resource

Indian programmers are known for their strong technical and analytical skills and their
willingness to accommodate clients. India also has one of the largest pools of Englishspeaking professionals.
Competitive Costs
The cost of software development and other services in India is very competitive as
compared to the West.
Infrastructure Scenario
Indian IT industry has also gained immensely from the availability of a robust infrastructure
(telecom, power and roads) in the country.
In the last few years Indian IT industry has seen tremendous growth. Destinations such as
Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT parks have
come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc. These parks offer Silicon
Valley type infrastructure. In the light of all the factors that have added to the strength of
Indian IT industry, it seems that Indian success story is all set to continue.
INFOSYS TECHNOLOGY
Infosys Technologies is a leading Information Technology (IT) company which provides endto-end business solutions that leverage technology. Infosys serves the client globally and as
one of the pioneers in strategic offshore outsourcing of software services, it has leveraged the
global trend of offshore outsourcing. Infosys helps large global corporations and new
generation technology companies in building new products or services and in implementing
prudent business and technology strategies in the contemporary dynamic digital environment.

Services offered by Infosys are:

Application Management,

Management Consulting,

Enterprise Quality Services

24

Infrastructure Services

Packages Application Services

Product Engineering

Systems Integration

Industries served by Infosys include:

Aerospace & Defense

Automotive

Financial Services

Communication Services

Consumer Packaged Goods

Industrial Manufacturing

Energy

Healthcare

High Technology

Hospitality & Leisure

Insurance

Life Sciences

Media & Entertainment

Resources

Retail

Publishing

Utility
25

Infosys was founded on July 2, 1981 by N.R. Narayan Murthy and six of his colleagues,
namely, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and
Ashok Arora. Narayan Murthy borrowed Rs.10,000 from his wife Sudha Murthy as seed
capital for the company. In 1987 Infosys got its first foreign client, Data Basics Corporation
from the United States and opened its first office in the USA. In 1993, Infosys became a
public limited company and successfully completed IPO in India. In the same year Infosys
received ISO 9001/TickIT certification. Infosys set up its first office in Europe in Milton
Keynes, UK in 1996. In 1999, Infosys crossed $100 Million in annual revenue and was listed
on NASDAQ. It was Indian company to be listed on NASDAQ. In the same year Infosys
opened offices in Germany, Sweden, Belgium, and Australia. In 2000, Infosys crossed $200
Million in annual revenue. In 2004, Infosys crossed US $1 Billion in annual revenue. In
2006, Infosys completed 25 years of its existence and its revenues crossed $ 2 billion. Today,
Infosys is a global leader in consulting, technology and outsourcing with revenues of
US$7.231 billion. Infosys has a global footprint with 67 offices and 69 development centers
in U.S ,India, China, Australia ,Japan .Middle East ,UK, Germany, France, Switzerland
,Canada and many other countries . Infosys and its subsidiaries have 1,55,629 employees as
on Dec 31,2012. Its corporate headquarters is in Bangalore.
Infosys follows highest standards of corporate governance. No relative of the founders is
eligible to work in Infosys and all the employees including founders are to retire at the age of
60. Some of the persons occupying key positions in Infosys are: N. R. Narayan Murthy
(Founder, Chairman Emeritus)Members of Board, S.

Gopalakrishnan (Co-founder,and

Executive co-chairman), S. D. Shibulal (Co-founder,Chief Executive Officer and Managing

Director) , V.Balakrishnan (Head ,Infosys BPO,Finacle and India Business unit) , Srinath
Batni (Head of Delivery Excellance) , B.G.Srinivas ,Ashok Vemuri.
Major Achievements of Infosys

First Indian company to be listed on NASDAQ

First company to be awarded the "National Award for Excellence in Corporate

Governance" conferred by the Government of India in 2000.

Rated Best Employer of India in a study by Business Today-Hewitt Associates in

2001.

26

First rank in the Business World's survey of "India's Most Respected Company" in
2002.

At Oracle Open World 2012, Infosys won the Oracle Excellence Award for
Specialized Partner of the year.

Infosys has been ranked No.1 among the best managed companies in Asia Pacific in
the annual Euromoney Best Managed Companies in Asia survey, 2013.

WIPRO
Wipro Technologies is a global services provider delivering technology-driven business
solutions. Wipro is the No.1 provider of integrated business, technology and process
solutions on a global delivery platform. Azim Premji is the Chairman of Wipro Technologies.
He took over the mantle of leadership of Wipro at the age of 21 in 1966. Under his
leadership, the fledgling US$ 2 million hydrogenated cooking fat company has grown to a
US$1.76 billion IT Services organization serving customers across the globe. Wipro is
presently ranked among the top 100 Technology companies in the world. It has 66,000+
employees, serves 592 clients, and has 46 development centers across globe.
Wipro Technologies deals in following businesses:

IT Services: Wipro provides complete range of IT Services to the organization. The

range of services extends from Enterprise Application Services (CRM, ERP, eProcurement and SCM) to e-Business solutions. Wipro's enterprise solutions serve a
host of industries such as Energy and Utilities, Finance, Telecom, and Media and
Entertainment.

Product Engineering Solutions: Wipro is the largest independent provider of R&D

services in the world. Using "Extended Engineering" model for leveraging R&D
investment and accessing new knowledge and experience across the globe, people
and technical infrastructure, Wipro enables firms to introduce new products rapidly.

Technology Infrastructure Service: Wipro's Technology Infrastructure Services

(TIS) is the largest Indian IT infrastructure service provider in terms of revenue,
people and customers with more than 200 customers in US, Europe, Japan and over
650 customers in India.

27

Business Process Outsourcing: Wipro provides business process outsourcing

services in areas Finance & Accounting, Procurement, HR Services, Loyalty Services
and Knowledge Services. In 2002, Wipro acquiring Spectra mind and became one of
the largest BPO service players.

Consulting Services: Wipro offers services in Business Consulting, Process

Consulting, Quality Consulting, and Technology Consulting.

Group Companies of Wipro:

Wipro Infrastructure Engineering: It has emerged as the leader in the hydraulic

cylinders and truck tipping systems market in India.

Wipro Infotech: It is one of the leading manufacturers of computer hardware and a

provider of systems integration services in India.

Wipro Lighting: It manufactures and markets the Wipro brand of luminaries. Wipro
Lighting offers lighting solutions across various application areas such as commercial
lighting for modern work spaces, manufacturing and pharmaceutical companies,
designer petrol pumps and outdoor architecture.

Achievements of Wipro

First Indian IT Service Provider to be awarded Gold-Level Status in Microsoft's

Windows Embedded Partner Program.

World's largest independent R&D Services Provider.

World's 1st PCMM Level 5 software company.

World's 1st IT Services Company to use Six Sigma.

The first to get the BS15000 certification for its Global Command Centre.

Among the top 3 offshore BPO service providers in the world.

Only Indian company to be ranked among the 'Top 10 Global Outsourcing Providers'
in the IAOP-Fortune Global 100 listings.

First company in the world to be certified in BS 7799 (2002) security standards.

28

TCS
Tata Consultancy Services (TCS) is one of the world's leading information technology
companies. Through its Global Network Delivery Model?, Innovation Network, and Solution
Accelerators, TCS focuses on helping global organizations address their business challenges
effectively.
TCS continues to invest in new technologies, processes, and people which can help its
customers succeed. From generating novel concepts through TCS Innovation Labs and
academic alliances, to drawing on the expertise of key partners, it keeps clients operating at
the very edge of technological possibility.
Whether TCS is envisioning a business advantage, engineering and IT solution, or executing
an outsourcing strategy, it helps its customers experience certainty in their everyday business.
Services
Organizations must continuously innovate and transform themselves to stay ahead of
competition. TCS helps enterprises stay agile and respond better to changing market
conditions by optimizing business processes, making their IT infrastructure resilient, and
ensuring faster business results.
Infrastructure Outsourcing : TCS works with enterprises to increase their IT
infrastructures flexibility, scalability, and security, to help maximize performance, cost
effectiveness and availability.
IT Services: By aligning IT with their business needs, TCS helps enterprises experience real
business results.
Engineering & Industrial Services: TCS provides solutions globally to help enterprises
realize their product development, production management and asset management strategies,
using

best-in-class

technologies,

processes

and

competencies.

Business Process Outsourcing: TCS leverages its years of domain and IT experience to
bring in process improvements, process automation, and platform based solutions to
enterprises across industries.
Consulting: TCS partners with enterprises worldwide to help them achieve business
transformation. Leveraging its industry insight and technology expertise, TCS enables
success in essential strategic initiatives by aligning IT strategies with business objectives.
29

TCS has its experts in more than 50 countries; building solutions that help customers meet
complex business challenges. At TCS, you will find opportunities across technologies and
geographies. Learn more about these opportunities at TCS and your contribution in TCS'
commitment to helping its customers experience certainty.

3.2 COMPANY PROFILE

INTRODUCTION
Indiabulls is Indias leading Financial, Real Estate and Power Company with a wide presence
throughout India. They ensure convenience and reliability in all their products and services.
VISION
To be the largest and most profitable financial services organization in Indian retail market
and become one stop shop for all non banking financial products and services for the retail
customers. To become the preferred long term financial partner to a wide base of customers
whilst optimizing stake holders value.
MISSION
Rapidly increase the number of client relationships by providing a broad array of product
offering to emerge as a clear market leader. To establish a base of 1 million satisfied
customers by 2010. We will create this by being a responsible and trustworthy partner.
HISTORY
In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal acquired
Orbis; a Delhi based stock broking company. Young entrepreneur Sameer Gehlaut
established Indiabulls in 2000, after acquiring orbis Securities, a stock brokerage company in
Delhi. The group started its operations from a small office near Hauz Khas bus terminal in
Delhi.
The idea of leveraging technology for trading stocks led to the creation of Indiabulls
Incorporated on 10th January 2000, it was converted into a public limited company on 27th
February 2004.
Its original idea of leveraging technology bore fruit when Indiabulls was accorded permission
to conduct online trading on Indian stock exchanges.
30

The challenges facing it were immense not least of all the mind set of investors who were
called to make the big leap from traditional stock trading to a completely online interface.
Having overcome this resistance, the company later expanded its service portfolio to include
equity, F&O, wholesale debt, mutual fund distribution and equity research.
In 2003/04, Indiabulls ventured into insurance distribution and commodity trading. It
successfully floated its IPO in September 2004 and in the same year entered the consumer
finance segment. Real estate
Opportunities were opening up in retail and infrastructure as well. To cement its position in
the Indian business and industry firmament,
Indiabulls acquired Pyramid Retail In 2007 and marked its presence in the power sector by
launching Indiabulls Power.

GROUP STRUCTURE
Indiabulls Group has four separately listed companies with subsidiaries which contributed in
enhancing scope and profile of the business.

Fig 3.1

I) INDIABULLS FINANCIAL SERVICES LTD (IBFSL) :

31

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s Orbis
InfoTech Private Limited at New Delhi under the Companies Act, 1956. The name of
company was changed to M/s. India bulls Financial Services Private Limited on March 16,
2001.
IBFSL is one of India's leading non-banking financial companies (NBFCs). IBFSLs wholly
owned subsidiary Indiabulls Housing Finance Limited (IBHFL) is a SARFAESI notified
Housing Finance Company (HFC) providing mortgages across India. With a cumulative
disbursal of Rs. 40,000 crores over past five years, IBFSL is a leading provider of lending
and other financial products including home mortgages, loans against property, commercial
vehicle loans, and commercial credit to prime corporates only. IBFSL offers a very high level
of client servicing standards through its highly trained staff and large distribution network
encompassing more than 140 locations across India. IBFSL's focus is on lending to prime
AAA clients backed by fully secured loans. IBFSL enjoys AA+ rating and has among the
lowest leverage and highest net worth among its peer group and has very stable long term
financing from leading banks and financial institutions.

II) INDIABULLS REAL ESTATE LTD (IBREL):

Indiabulls stepped into the real estate market as Indiabulls Real Estate Limited (IREL) in
2005. A joint venture between Indiabulls and a US based investment major Farallon Capital
Management LLC resulted in bringing FDI (Foreign Direct Investment) for the first time in
the Indian real estate market. Another joint venture amongst Indiabulls and DLF, Kenneth
Builders and Developers (KBD), has brought up projects for development of residential
apartments.
Projects include:
Centrum Park Gurgoan , Indiabulls Greens Panvel, Indiabulls sky, Greens Chennai, Central
Park Hyderabad, Nashik SEZ, Indiabulls Finance Center.

III)

INDIABULLS POWER LTD (IBPOW):

32

Indiabulls Power Limited was established in 2007 to capitalize on emerging opportunities in

the Indian power sector. Indiabulls is currently developing five thermal power projects with
an aggregate capacity of approximately 6600 MW. These projects include:
Amravati Phase-I (1320 MW), Amravati Phase-II (1320 MW), Nasik (1335 MW) in
Maharashtra, Bhaiyathan Thermal Power Project (1320 MW), Chhattisgarh Power Project
(1320 MW).
IV)

INDIABULLS SECURITIES LTD (ISL):

Indiabulls Securities Limited is the jewel in the crown of Indiabulls group. Indiabulls
Securities Limited is Indias leading capital markets company with All-India presence and an
extensive client base. Indiabulls Securities is the first and only brokerage house in India to be
assigned the highest rating BQ 1 by CRISIL. Indiabulls Securities Limited is listed on
NSE, BSE & Luxembourg stock exchange.

PROFILE OF THE COMPANY

Name of the Company : INDIABULLS SECURITIES LTD

Year of Establishmen : 2000

Headquarter

: Indiabulls Finance centre,

Tower 1, 8th floor,
Elphinstone Tower, Mumbai-40013.

Nature of Business

: Broking Services.

Services Offered

: Online IPOs, NRI Equity Trading, Equity Research

Number of employees : over 20,000

Customers

: Greater than 6lakh

Website

: www.indiabulls.com

Slogan

: Creating a world of smarter Investors.

33

CEO & chairman

: Sameer Gehlot

President and CFO

: Rajiv Rattan

Director

: Saurav Mittal.

PRODUCTS AND SERVICES OF INDIABULLS SECURITIES LIMITED

1. Power Indiabulls: - Power Indiabulls (PIB) is an online trading platform which brings the
power of a brokers terminal on your desktop.
2. Depository Services: - Indiabulls is a depository participant with the National Securities
Depository Limited and Central Depository Services (India) Limited.
3. IPO Online: - You can quickly and seamlessly apply to the latest public offerings with just
a few clicks.
4. Indiabulls Signature Account: - Indiabulls Signature account provides you the platform
to trade in Equity and Derivatives.
5. NRI Trading: - Non-Resident Indians (NRIs) can also enjoy the state of the art Online
Trading Platforms of Indiabulls to trade in Indian Capital Markets.
6. Indiabulls Equity Analysis: - Indiabulls Equity Analysis complements its equity
Broking and advisory services with high quality comprehensive report which can be
accessed online.
7. Currency Derivatives: - Indiabulls offers trading in the Currency Derivatives Segment in
National Stock Exchange (NSE).

34

REASONS TO CHOOSE INDIABULLS SECURITIES LTD

The Indiabulls Financial Services stock is the best performing stock in the MSCI Index the
global benchmark for equity investments
Reasons why investing with Indiabulls Securities Limited is smarter.
1) Customization: Formulates investment plans based on customer individual requirements
2) Expertise: Brings within customer reach, about institutional expertise and companies
valuable understanding of the financial markets
3) One-stop shop: Caters to all customers investment needs under one roof.
4) Trust: Enjoys the pedigree of Indiabulls Securities Ltd and share its expertise in financial
services.
5) Personalized service: Helps customer through the entire investment process, step by step,
with innovative and efficient services.
6) Unbiased & Objective advice: We partner you in your investment process, with our team
of expert investment advisors.
PROCESS OF OPENING ACCOUNT AT INDIABULLS SECURITIES LTD.

Lead Management System/

References

Contact the person over phone or

Email.

Fixing an appointment with the

person.
Yes

35

Give a Demonstration
Yes

Collect the Document

Filling up the form

Scrutiny of the form at branch level

Submission of the form

Scrutiny of the form at department level

/ HO
Generate an account Id

Send the welcome kit to the client.

Now the account is ready for Trading

Fig 3.2
Apart from two passport sized photos one needs to provide the following documents in order
to open an account with INDIABULLS securities ltd.
Photocopies of the clients PAN card which should be duly attached.

36

Photocopy of any of the following documents duly attached which will serve as
correspondence:
Address Proof
Passport
Voters ID card
Ration Card
Driving License
Electricity bill (latest and should be in the name of the client)
Telephone bill (should be latest and should be in the name of the client)
Insurance policy (should be latest and should be in the name of the client)
Lease and rent agreement
Saving bank statement
Two cheques drawn in the favor of Indiabulls Securities Ltd, one for account opening fees
and other for the Margin Money (the minimum margin amount is 5000)
Note: only saving bank accounts are accepted for the purpose of opening an account.
MILES STONES ACHIEVED
Developed one of the first internet trading platforms in India.
Amongst the first to develop in-house real-time CTCL (computer to computer
link) with NSE.
Introduction of integrated accounts with automatic gateways to client bank
accounts.
Development of products such as Power Indiabulls for high volume traders.
Indiabulls Signature Account for self-directed investors.
Indiabulls Group Professional Network for information and trading service.

37

38

ANALYSIS AND INTERPRETATION

Over a period of more than two decades the Indian Automobile industry has been
driving its own growth through phases. With comparatively higher rate of economic
growth rate index against that of great global powers, India has become a hub of
domestic and exports business. The automobile sector has been contributing its share
to the shining economic performance of India in the recent years.
To understand this industry for the purpose of investment we need to analyze it by the
following approach:
Fundamental Analysis
Fundamental analysis is the study of economic, industry and company conditions in
an effort to determine the value of a company s stock. Fundamental analysis typically
focuses on key statistics in company s financial statements to determine if the stock
price is correctly valued.
Fundamental Analysis focuses:
a. Economy analysis
b. Industry analysis
c. Company analysis
The typical approach to analyzing a company involves three basic steps:
1. Determine the condition of the general economy.
2. Determine the condition of the industry.
3. Determine the condition of the company.

39

1. ECONOMY ANALYSIS
Economic analysis is the analysis of forces operating the overall economy a country.
Economic analysis is a process whereby strengths and weaknesses of an economy are
analyzed. Economic analysis is important in order to understand exact condition of an
economy.
GDP:
In absolute terms, India is 16th in the world in terms of nominal factory output. The service
sector is growing rapidly in the past few years. This is the pie- chart showing contributions of
different sectors in Indian.

Fig 4.1

Fig 4.2
40

Today, information technology sector in India is one of the key sectors of the economy in
terms of the employment. Directly and indirectly it employs more than 10 million people and
if we add the number of people employed in the IT and ITES industry then the number goes
even higher.
As the world economy slipped into recession hitting the demand hard and the information
technology sector takes conservative approach towards lending to corporate sector, the GDP
growth has downgraded it to 6.1% for 2011-12 and it has increased to 8.6% in 2013 by
overcoming the setbacks of recession.
Recession
The Indian IT sector led by the top three namely, Infosys, TCS and Wipro were badly
bruised by the recession in the US. With more than 50% of its revenue coming from that
region, the revenue outlook for the software companies became bleak and valuations tanked
to historic lows. However, with the US coming out of recession and a slow recovery in the
Euro region, sector outlook started to turn positive. The software companies also started to
turn their focus at other upcoming areas of growth like IMS (Infrastructure Management
Service), Asia Pacific to reach the next level of incremental growth.
The top three software companies have started to see revival with volume growth and order
flow showing marked improvement in the last couple of quarters. Pricing has remained stable
at current levels and we do not expect a major uptick in it at least by the second half of FY12.
With wage pressure coming into play in a big way and tax benefits coming to an end,
margins are likely to come under pressure. We, therefore, see limited upside in the top three
IT stocks as we believe current valuations have factored in an improved demand
environment. We, thereby, initiate coverage on Infosys, TCS and Wipro with an
ACCUMULATE on dips call.
Inflation
Inflation is defined as the rate at which the general level of prices for goods and services is
rising and subsequently purchasing power is falling. The rise in inflation will have adverse
impact on the industry that will not only see interest rates getting further hardened but also a
drop in demand due to the squeeze in purchasing power.Inflation is measured by calculating
the percentage rate of change of a price index, which is called the inflation rate.
41

To control inflation a well planned, reasonable and balanced intervention by the government
people have to understand the facts and logistics of price inflation.
Effect on IT sector:

TCS other companies warns its employees that nonperformance wont be tolerated.

Wipro

Company

cut

down

on

incentives

and

other

perks.

Foreign Direct Investment

The information technology sector in the Indian industry is one of the high performing
sectors of the Indian economy. This has contributed largely in making India a prime
destination for many international players in the information technology industry who wish
to set up their businesses in India.
Exports
The Indian information technology (IT) industry has played a key role in putting India on the
global map and is now envisioned to become a US$ 225 billion industry by 2020. The report
estimates export revenues to gross US$ 59 billion in FY2011 and contribute 26 per cent as its
share in total Indian exports (merchandise plus services), employing around 2 million
employees.Within exports, IT Services segment was the fastest growing segment, growing by
22.7 per cent over FY2016, and aggregating export revenues of US$ 33.5 billion, accounting
for 57 per cent of total exports.

2. INDUSTRY ANALYSIS
The information technology in India annual revenue estimated for the industry is US$87
billion. The last 20 years of the 20th century was most significant period for Indian economy.
During this period the nation has identified its economic destiny with great clarity. The most
precious achievements of this period was the development of Information Technology. Indian
Software industry has made significant contributions to the world of IT by gifting some of
the leaders of the industry from Indian soil. Infosys and Wipro are already within the top ten
leaders of the list, and many others are occupying significant places in the list.

42

The industrial life cycle is a term used for classifying industry life over time. Industry life
cycle classification generally groups industries into one of four stages: pioneer, growth,
maturity and decline.
In the pioneer phase, the industry has not been widely accepted or adopted. Business
strategies are developing, and there is high risk of failure. However, successful companies
can grow at extraordinary rates. The Indian IT sector has passed this stage quite successfully.
The industry is growing rapidly, often at an accelerating rate of sales and earnings growth.
Software and Services will contribute over 7.5% of the overall GDP growth of India.
For the first time, India's information technology sector is likely to post a single-digit growth
rate of 9 per cent in fiscal 2008-09, as measured in gross domestic product calculations. The
IT sector, which constitutes 3.5-4 per cent of India's GDP, grew at an average rate of around
25 per cent in three years up to March 2008. Thus, the sharp fall in growth rate is cited as one
reason for drop in growth rate of the Indian economy in fiscal 2009.Even though IT sector
constitutes a small part of our GDP, its contribution to growth rate is almost same as
agricultural sector. The IT sector, which has only 4 per cent weight in GDP, contributed 1
percentage point to GDP growth rate at 25 per cent growth rate. Thus a sharp fall in IT
growth rate has pulled down overall GDP by at least half percentage point.
Swot Analysis:
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified
as strengths (S) or weaknesses (W), and those external to the firm can be classified as
opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis. SWOT analysis of the Indian IT sector gives the
following points:

43

Strengths

Weaknesses

Highly skilled human resource

Absence of practical knowledge

Low wage structure

Dearth of suitable candidates

Quality of work

Initiatives taken by the Government

(setting

up

Less Research and Development

Hi-Tech

implementation

of

Parks

and

e-governance

projects)

Many global players have set-up

Contribution of IT sector to India 's GDP is

still rather small.
Employee

salaries

in

IT

sector

are

increasing tremendously. Low wages benefit

will soon come to an end.

operations in India like Microsoft,

Oracle, Adobe, etc.

Following Quality Standards such as

ISO 9000, SEI CMM etc.

English-speaking professionals

Cost competitiveness

Quality

telecommunications

infrastructure

Indian time zone (24 x 7 services to

the global customers). Time difference
between

India

and

America

is

approximately 12 hours, which is

beneficial for outsourcing of work.
Opportunities

Threats

High quality IT education market

Lack of data security systems

Increasing number of working age

Countries like China and Philippines

people

with qualified workforce making

efforts to overcome the English
India 's well developed soft
language barrier
infrastructure
Upcoming International Players in the IT development concentrated in a few cities
only
market

Table 4.1
44

3. COMPANY ANALYSIS
The company analysis shows the long-term strength of the company that what is the
financial position of the company in the market, where it stands among its competitors and
who are the key drivers of the company, what are the future plans of the company, what are
the policies of government towards the company and how the stake of the company divested
among different groups of people.
Here, I have taken three companies namely TCS, Infosys and Wipro for the purpose of
fundamental analysis.
TCS
Tata Consultancy Services Limited (TCS) is an information technology (IT) company. It
offers a range of IT services, outsourcing and business solutions. It also offers IT
infrastructure services, business process outsourcing services, engineering and industrial
services, global consulting and asset leveraged solutions. Its segments include banking,
financial services and insurance; manufacturing; retail and distribution, and telecom. On June
5, 2009, TCS, through its wholly owned subsidiary, Tata Consultancy Services Canada Inc.,
acquired 100% interest in ERI Holdings Corp. On January 1, 2010, the Company, through its
wholly owned subsidiary, TCS Iberoamerica S.A., subscribed to 100% interest of TCS
Uruguay S.A. On January 1, 2010, it purchased 100% interest of MGDC S.C., Mexico,
through its wholly owned subsidiaries, TCS Uruguay S.A. and TCS Argentina S.A. In
September 2010, Unisys Corporation sold Unisys Insurance Services Limited to Diligent
Limited, a subsidiary of the Company.
INFOSYS
Company Analysis assists individual investors, managers and companies in evaluating
opportunities, trends, market innovations as well as in selecting appropriate information
solutions in order to make effective investment decisions. The study covers information on
the business structure, areas of operation, products and services offered by the company. It
comprises SWOT analysis, Key Ratios, and financials that aid investors in gaining an insight
into the company's performance. The report is based on extensive research using data
available from credible publications, trade journals, industry associations and the company
sources.

45

WIPRO
Wipro is a global IT services company. The company provides comprehensive IT solutions
and services, including systems integration, information systems outsourcing, package
implementation, software application development and maintenance, and research and
development services to corporations. The company mainly operates in the US. It is
headquartered in Karnataka, India and employs approximately 100,000 people. The company
recorded revenues of INR254,564 million ($5,554.6 million) during the financial year ended
March 2009 (FY2009), an increase of 28.9% over 2008. The operating profit of the company
was INR41,390 million ($903.1 million) in FY2009, an increase of 22.8% over 2008. Its net
profit was INR34,415 million ($750.9 million) in FY2009, an increase of 6.7% over 2008.

46

DATA ANALYSIS AND INTERPRETAION

TATA CONSULTANCY SERVICE
Table 4.2 Balance Sheet of TCS
Balance Sheet of TCS
Mar 12

------------------- in Rs. Cr. ------------------Mar 13 Mar '14

Mar '15
Mar '16

48.93
48.93
0
0
5,560.4
0
0
5,609.3
3
26.52
8.98
35.5
5,644.8
3
Mar 09

97.86
97.86
0
0
7,961.1
3
0
8,058.9
9
41.76
8.98
50.74
8,109.7
3
Mar 10

197.86
97.86
0
100
10,806.9
5
0
11,004.81

197.86
97.86
0
100
13,248.3
9
0
13,446.2
5
9.27
32.63
8.98
7.74
18.25
40.37
11,023.06 13,486.6
2
Mar 11
Mar 12

295.72
195.72
0
100
14,820.9
0
0
15,116.62

1,695.1
3
Less: Accum. Depreciation 525.35
Net Block
1,169.7
8
Capital Work in Progress
280
Investments
1,963.5
2
Inventories
22.94
Sundry Debtors
2,326.6
3
Cash and Bank Balance
170.61
Total Current Assets
2,520.1
8
Loans and Advances
1,490.5
7
Fixed Deposits
0.56
Total CA, Loans & 4,011.31
Advances
Deferred Credit
0
Current Liabilities
1,239.2
4
Provisions
540.54
Total CL & Provisions
1,779.7

2,315.3
6
854.75
1,460.6
1
757.85
3,252.0
4
12.06
2,799.8
0
314.66
3,126.5
2
1,925.7
4
242.48
5,294.7
4
0
1,750.4
6
905.05
2,655.5

3,240.64

4,359.24

4,871.21

1,300.11
1,940.53

1,690.16
2,669.08

2,110.69
2,760.52

889.74
4,509.33

685.13
5,936.03

940.72
7,893.39

17.19
3,747.01

16.95
3,717.73

6.78
3,332.30

402.24
4,166.44

479.93
4,214.61

212.31
3,551.39

3,104.74

3,910.85

4,101.84

125.28
7,396.46

1,125.33
9,250.79

0
2,525.56

0
3,604.18

3,183.85
10,837.0
8
0
3,352.74

1,187.44
3,713.00

1,450.23
5,054.41

3,926.61
7,279.35

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Net worth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Gross Block

47

29.25
6.49
35.74
15,152.3
6
Mar 13

Profit
&
Net Current Assets
Loss
account of
Miscellaneous
Expenses
TCS
Total Assets
Income
Contingent
Liabilities
Sales Turnover
Book
Value
Excise
Duty(Rs)
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other
Manufacturing
Expenses
Selling and Admin
Expenses
Miscellaneous Expenses
Preoperative
Exp
Capitalized
Total Expenses

8
1
------------------- in Rs. Cr. ------------------2,231.5 2,639.2 3,683.46 4,196.38
3
3
0
0
0
0
5,644.8
8,109.7
11,023.06
Mar 12
Mar 13
Mar '14 13,486.6
Mar '15
3
3
2
851.64
3,003.2 2,726.11
11,236.01
14,942.09
18,536.5 2,924.33
22,404.0
5
5
0
114.64
82.35
111.43
136.38
5.51
2.12
2.83
2.08

0
15,152.3
Mar '16
6
3,292.50
23,044.84

11,230.50 14,939.97 18,533.7

2
-1.19
216.04
440.45
4.14
-2.79
-0.04
11,233.45 15,153.22 18,974.1
3

76.72
0.39
22,401.9 23,044.45
2
-456.24
182.1
1.73
-1.38
21,947.4 23,225.17
1

161.5
66.85
5,113.96
793.01

22.02
93.89
6,186.85
3,095.82

45.81
135.57
6,015.19
5,687.82

53.67
164.34
7,370.09
6,947.60

23.75
183.62
7,882.43
6,446.99

756.39

765.08

991.43

1,218.41

1,268.03

1,005.52
0

472.04
0

632.25
0

628.71
0

571.08
0

7,897.23

10,635.70 13,508.0
7
Mar 10
Mar 11
4,301.48 5,025.61
4,517.52 5,466.06
3.43
3.42
4,514.09 5,462.64
343.41
458.78
0.00
0.00
4,170.68 5,003.86
-2.59
-37.52
4,168.09 4,966.34

16,382.8
2
Mar 12
6,020.83
5,564.59
7.44
5,557.15
417.46
0.00
5,139.69
-103.11
5,036.58

16,375.90

340.37
4,696.21
16,329.1
5
7.00
1,370.05
234.02

737.89
5,618.51
16,352.15

0.00
660.56
92.64

410.8
457.58
3,757.29 4,508.76
10,613.68 13,462.2
6
0.00
0.08
1,125.39 1,370.05
169.48
232.85

4,893.05

9,786.10

9,786.10

9,786.10

19,572.21

46.07
1,400.00
111.43

47.92
1,400.00
136.38

28.62
2,000.00
76.72

Mar 09
Operating Profit
3,337.41
PBDIT
3,336.22
Interest
4.49
PBDT
3,331.73
Depreciation
257.38
Other Written Off
0.00
Profit Before Tax
3,074.35
Extra-ordinary items
-38.03
PBT (Post Extra-ord 3,036.32
Items)
Tax
319.45
Reported Net Profit
2,716.87
Total Value Addition
7,735.73
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per
share
data
(annualised)
Shares in issue (lakhs)

3,557.73

Mar 13
6,667.17
6,849.27
9.54
6,839.73
469.35
0.00
6,370.38
-13.98
6,356.40

17.00
3,914.43
657.51

48

Earning Per Share (Rs)

Equity Dividend (%)
Book Value (Rs)

55.53
1,350.00
114.64

38.39
1,150.00
82.35

Profit and Loss account table 4.3 INFOSYS

Table 4.3 Balance sheet of Infosys
Balance Sheet of Infosys
Mar 12

------------------- in Rs. Cr. ------------------Mar 13

Mar '14
Mar '15
Mar '16

138.00
138
0.00
0
6,759
0.00
6,897
0
0
0.00
6,897
Mar 09

286.00
286
0.00
0
10,876
0.00
11,162
0
0
0.00
11,162
Mar 10

286.00
286
0.00
0
13,204
0.00
13,490
0
0
0.00
13,490
Mar 11

286.00
286
0.00
0
17,523
0.00
17,809
0
0
0.00
17,809
Mar 12

287.00
287
0.00
0
21,749
0.00
22,036
0
0
0.00
22,036
Mar 13

Application Of Funds
Gross Block

2,837.00

3,889.00

4,508.00

5,986.00

3,779.00

Less: Accum. Depreciation

1,275.00

1,739.00

1,837.00

2,187.00

0.00

Net Block
1,562.00
Capital Work in Progress
571.00
Investments
876.00
Inventories
0
Sundry Debtors
1,518.00
Cash and Bank Balance
544
Total Current Assets
2,062.00
Loans and Advances
1,308.00
Fixed Deposits
2,735.00
Total CA, Loans & 6,105.00
Advances
Deffered Credit
0
Current Liabilities
808.00
Provisions
1,409.00

2,150.00
957.00
839.00
0
2,292.00
680
2,972.00
1,241.00
4,827.00
9,040.00

2,671.00
1,260.00
964.00
0
3,093.00
657
3,750.00
2,804.00
5,772.00
12,326.0
0
0
1,483.00
2,248.00

3,799.00
615.00
1,005.00
0
3,390.00
805
4,195.00
3,303.00
8,234.00
15,732.0
0
0
1,544.00
1,798.00

3,779.00
409.00
4,636.00
0
3,244.00
9,797.00
13,041.00
4,201.00
0.00
17,242.00

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

0
1,162.00
662.00
49

0
1,995.00
2,035.00

Total CL & Provisions

Net Current Assets

2,217.00
3,888.00

1,824.00
7,216.00

3,731.00
8,595.00

Miscellaneous Expenses
Total Assets

0
6,897.00

Contingent Liabilities
Book Value (Rs)

523
250.29

0
0
11,162.00 13,490.0
0
670.00
603.00
195.41
235.84

3,342.00
12,390.0
0
0
17,809.0
0
347.00
310.90

4,030.00
13,212.00
0
22,036.00
295.00
384.69

4.4 Profit and loss account of Infosys

Profit & Loss account of
Infosys

------------------- in Rs. Cr. ------------------Mar 12

Mar 13

Mar '14

Mar '15

Mar '16

9,028
0
9,028
144
0.00
9,172

13,149
0
13,149
379
0.00
13,528

15,648
0
15,648
683
0.00
16,331

20,264
0
20,264
502
0.00
20,766

21,140
0
21,140
958
0.00
22,098

16
62
4,274
792.00

22
88
6,316
1,290.00

18
106
7,771
1,443.00

20
125
9,975
1,697.00

0
0
10,356
2,317.00

773.49
120.51

1,050.53
156.47

1,214.00
132

1,367.00
172

215.00
883

Preoperative Exp Capitalised

Total Expenses

6,038
Mar 09
2,990.0
3,134.0
1
3,133.0
409
0.00
2,724.0
0.00
2,724.0
303
2,421.0
6,022
0.00

8,923
Mar 10
4,226.00
4,605.00
1
4,604.00
469
0.00
4,135.00
-5.00
4,130.00
352
3,783.00
8,901
0.00

10,684
Mar 11
4,964.00
5,647.00
1
5,646.00
546
0.00
5,100.00
0.00
5,100.00
630
4,470.00
10,666
0.00

13,356
Mar 12
6,908.00
7,410.00
2
7,408.00
694
0.00
6,714.00
-1.00
6,713.00
895
5,819.00
13,336
0.00

13,771
Mar 13
7,369.00
8,327.00
0
8,327.00
807.00
0.00
7,520.00
0.00
7,520.00
1,717.00
5,803.00
13,771
0.00

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other
Manufacturing
Expenses
Selling and Admin Expenses
Miscellaneous Expenses

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend

50

Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)

1,238
174

649
102

1,902
323

1,345
228

1,434
240

2,755.55

5,712.10

5,719.96

5,728.30

5,728.30

Earning Per Share (Rs)

Equity Dividend (%)
Book Value (Rs)

87.86
900.00
250.29

66.23
230.00
195.41

78.15
665.00
235.84

101.58
470.00
310.9

101.30
500.00
384.69

WIPRO
Table 4.6 Balance Sheet of Wipro
Balance Sheet of Wipro
Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

------------------- in Rs. Cr. ------------------Mar 12 Mar 13 Mar '14

Mar '15
Mar '16
285.15
285.15
7.49
0
6,135.30
0.00
6,427.94
45.06
5.1
50.16
6,478.10
Mar 09

291.80
291.8
3.50
0
9,025.10
0.00
9,320.40
23.20
214.8
238.00
9,558.40
Mar 10

292.30
292.3
58.00
0
11,260.40
0.00
11,610.70
4.00
3,818.40
3,822.40
15,433.10
Mar 11

293.00
293
1.50
0
12,220.50
0.00
12,515.00
0.00
5,013.90
5,013.90
17,528.90
Mar 12

293.60
293.6
1.80
0
17,396.80
0.00
17,692.20
0.00
5,530.20
5,530.20
23,222.40
Mar 13

2,364.53

1,645.90

2,282.20

5,743.30

6,761.30

1,246.27

0.00

0.00

2,563.70

3,105.00

1,645.90
989.50
4,348.70
240.4
2,582.30
1,849.20
4,671.90
1,666.50
0.00
6,338.40

2,282.20
1,335.00
4,500.10
448.1
3,646.60
3,732.10
7,826.80
4,231.30
0.00
12,058.10

3,179.60
1,311.80
6,895.30
459.6
4,446.40
1,902.10
6,808.10
4,202.00
2,507.10
13,517.20

3,656.30
991.10
8,966.50
606.9
4,754.70
1,938.30
7,299.90
5,519.40
3,726.00
16,545.30

0
2,998.90

0
3,361.60

0
5,564.30

0.00
4,706.00

Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
1,118.26
Capital Work in Progress
612.36
Investments
3,459.20
Inventories
148.65
Sundry Debtors
1,968.07
Cash and Bank Balance
822.42
Total Current Assets
2,939.14
Loans and Advances
1,136.96
Fixed Deposits
0.58
Total CA, Loans & 4,076.68
Advances
Deffered Credit
0
Current Liabilities
1,776.83

51

Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)

1,011.56
2,788.39
1,288.29
0
6,478.11
509.18
45.03

765.20
3,764.10
2,574.30
0
9,558.40
661.60
63.86

1,380.70
4,742.30
7,315.80
0
15,433.10
749.90
79.05

1,810.70
7,375.00
6,142.20
0
17,528.90
1,045.40
85.42

2,230.80
6,936.80
9,608.50
0
23,222.40
778.00
120.49

Table 4.7 Profit and Loss account of Wipro

Profit & Loss account of
Wipro
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other
Manufacturing
Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative
Capitalised

------------------- in Rs. Cr. ------------------Mar 12

Mar 13

Mar '14

Mar '15

Mar '16

10,264.0
9
36.97
10,227.1
2
151.92
24.21
10,403.2
5

13,758.5
0
74.6
13,683.9
0
288.7
86.30
14,058.9
0

17,658.1
0
165.5
17,492.6
0
326.9
187.00
18,006.5
0

21,612.8
0
105.5
21,507.3
0
-480.4
-3.80
21,023.1
0

23,006.3
0
84.3
22,922.0
0
875.3
111.00
23,908.3
0

1,391.88
86.46
4,279.03
934.24

1,975.30
0
5,768.20
120.50

3,139.30
0
7,409.10
299.80

3,438.80
154
9,249.80
1,687.80

4,140.40
141.4
9,062.80
2,071.80

801.07
274.76

27.60
2,624.1

557.80
2,558.0

1,523.00
691.4

1,475.10
640

10,515.7
0
Mar 10
3,254.50
3,543.20
7.2
3,536.00
359.8
0.00
3,176.20
0.00
3,176.20
334.1
2,842.10

13,964.0
0
Mar 11
3,715.60
4,042.50
116.8
3,925.70
456
0.00
3,469.70
0.00
3,469.70
406.4
3,063.30

16,744.8
0
Mar 12
4,758.70
4,278.30
196.8
4,081.50
533.6
0.00
3,547.90
0.00
3,547.90
574.1
2,973.80

17,531.5
0
Mar 13
5,501.50
6,376.80
108.4
6,268.40
579.60
0.00
5,688.80
0.00
5,688.80
790.80
4,898.00

Exp 0

Total Expenses

7,767.44

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit

Mar 09
2,483.89
2,635.81
3.13
2,632.68
292.26
0.00
2,340.42
-33.85
2,306.57
286.1
2,020.48

52

Total Value Addition

6,375.55

8,540.40
0.00
873.70
126.8

10,824.7
0
0.00
876.50
148.9

13,306.0
0
0.00
586.00
99.6

13,391.1
0
0.00
880.90
128.3

Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)

0.00
712.88
99.98

14,590.0
0

14,615.0
0

14,649.8
1

14,682.11

Shares in issue (lakhs)

14,257.5
4

Earning Per Share (Rs)

Equity Dividend (%)
Book Value (Rs)

14.17
250.00
45.03

19.48
300.00
63.86

20.96
300.00
79.05

20.30
200.00
85.42

33.36
300.00
120.49

COMPARITIVE ANALYSIS OF INFOSYS, TCS AND WIPRO

TOTAL INCOME
TOTAL INCOME(in Crores)
Mar 13
Mar '14
Mar '15
13,528.0 16,331.0 20,766.0

YEARS
INFOSYS

Mar 12
9,172.00

TCS

0
11,233.45 15,153.2

0
18,974.1

0
21,947.4

0
23,225.1

10,403.2

2
14,058.9

3
18,006.5

1
21,023.1

7
23,908.3

WIPRO

Mar '16
22,098.0

Table 4.8

Fig 4.3

Interpretation:
All the three companies showed a positive trend in total income over the last 5 years. The
total income of TCS is more than Wipro till 2015 but in 2016 WIPROs total income is more
53

than TCS. The growth rate of INFOSYS in all the years is less than the other companies viz.,
WIPRO and TCS.

NET PROFIT
YEARS
INFOSYS
TCS
WIPRO

Mar 12
2,421.00
2,716.87
2,020.48

NET PROFIT (in Crores)

Mar 13 Mar '14
Mar '15
3,783.00 4,470.00 5,819.00
3,757.29 4,508.76 4,696.21
2,842.10 3,063.30 2,973.80
Table 4.9

Fig 4.4

Interpretation:
54

Mar '16
5,803.00
5,618.51
4,898.00

TCS is showing a positive trend in all the 5 years whereas INFOSYS is showing positive
trend till 2013 but in 2014 the same trend is not continuing as the net profit has gone below
the profits for the year 2013 but INFOSYSs net profit is more than TCS. Wipro is also
showing upward trend till 2016 but there is a decrease in their net profit in 2013 but
WIPROs net profit has increased sharply in 2014.
INFOSYS would be the best option for an investor to expect good growth compared to other
companies on basis of net profit.

EARNINGS PER SHARES

YEARS
INFOSYS
TCS
WIPRO

MAR12
87.86
55.53
14.17

EARNINGS PER SHARES(Rs.)

MAR'13 MAR'14 MAR'15
66.23
78.15
101.58
38.39
46.07
47.92
19.48
20.96
20.30
Table 4.10

MAR'16
101.30
28.62
33.36

Fig 4.5

Interpretation:
EPS measures the profit available to the equity shareholders per share, that is, the amount
that they can get on every share held. Although, all the three IT companies have declared an
increase in their Earnings Per Share. INFOSYS stands on top of the three players. WIPRO
and TCS have good potential and shareholders can expect better returns in the future.
55

EQUITY DIVIDENDS
YEARS
INFOSYS
TCS
WIPRO

MAR12
1,238.00
660.56
712.88

EQUITY DIVIDENDS(Rs.)
MAR'13 MAR'14 MAR'15 MAR'16
649.00
1,902.00 1,345.00 1,434.00
1,125.39 1,370.05 1,370.05 3,914.43
873.70
876.50
586.00
880.90
Table 4.11

Fig 4.6

Interpretation:
Equity Dividends provides an idea to an investor of how well earnings support the dividend
payments. The equity dividend of INFOSYS is not stable its moving up and down whereas in
WIPRO it has increased for a period of 3years and later in the 4 th year it has fallen down, and
subsequently increased in the 5th year. In case of TCS, equity dividend has increased till 3

56

years and has been stable for the 4th year but in 5th year i.e.,2016 it has increased three fold
compared to 2012 equity dividend.

RETURN ON LONG TERM FUNDS

YEARS
INFOSYS
TCS
WIPRO

RETURN ON LONG TERM FUNDS (%)

MAR12 MAR'13 MAR'14 MAR'15 MAR'16
40.62
36.64
37.77
39.8
33.9
55.97
50.12
42.96
43.27
42.46
35.87
33.31
23.32
37.17
30.12
Table 4.12

Fig 4.7

Interpretation:
ROI is one of the most important ratios used for measuring the overall efficiency of a
Company and determines whether the investments in the companies are attractive or not. ROI
of all the companies in 2014 is less when compared to ROI of 2010. ROI of WIPRO has
declined to a larger extent in 2008 but again its ROI has increased from 2012. Even though,
there is an increase in the ROI of WIPRO from 2013 but its a quite risky project than others
because ROI is less when compared to other companies. The ROI of INFOSYS is not stable
57

and is not showing a particular trend. TCSs ROI is also declining but it is higher compared
to INFOSYS and WIPRO in all years 2012 to 2016.
As the investors would like to invest only where the return is high, TCS would be attractive
for investment.

COMPARATIVE STATISTICS
Last Price

Market Cap. Sales

(Rs.cr.)

Turnover

Net Profit

Total Assets

TCS

1,114.85

218,200.78

23,044.45

5,618.51

15,152.36

Infosys

3,030.90

174,012.97

21,140.00

5,803.00

22,036.00

445.4

109,278.89

23,177.60

4,898.00

23,222.40

Wipro

Table 4.13

Fig 4.8

Interpretation:

The last price of Infosys is more when compare to TCS and Wipro.

Market cap of TCS is good.

Sales Turnover of Wipro is more than Infosys and Wipro.

58

Net profit of Infosys is best among three.

.

FINDING CONCLUSION SUGGESTIONS

5.1 FINDINGS
From the data analysis and interpretations of the ratios of three Information Technology (IT)
companies the following findings have been given:

All the three companies showed a positive trend in total income over the last 5 years.
The total income of TCS is more than Wipro till 2012 but in 2013 WIPROs more
total income than TCS. The growth rate of INFOSYS in all the years is less than the
other companies viz., WIPRO and TCS.

TCS is showing a positive trend in all the 5 years whereas INFOSYS is showing
positive trend till 2015 but in 2016 the same trend is not continuing as the net profit
has gone below the profits for the year 2013. Wipro is also showing upward trend till
2012 but there is a decrease in their net profit in 2013 but WIPROs net profit has
increased sharply in 2014. TCS would be the best option for an investor to expect
good growth compared to other companies on basis of net profit.

EPS measures the profit available to the equity shareholders per share, that is, the
amount that they can get on every share held. Although, all the three IT companies
have declared an increase in their Earnings Per Share. INFOSYS stands on top of the
three players. WIPRO and TCS have good potential and shareholders can expect
better returns in the future.

Equity Dividends provides an idea to an investor of how well earnings support the
dividend payments. The equity dividend of INFOSYS is not stable its moving up and
down whereas in WIPRO it has increased for a period of 3years and later in the 4 th
year it has fallen down, and subsequently increased in the 5 th year. In case of TCS,
equity dividend has increased till 3 years and has been stable for the 4 th year but in 5th
year i.e.,2013 it has increased three fold compared to 2012 equity dividend.
59

ROI is one of the most important ratios used for measuring the overall efficiency of a
Company and determines whether the investments in the companies are attractive or
not. ROI of all the companies in 2014 is less when compared to ROI of 2012. ROI of
WIPRO has declined to a larger extent in 2012 but again its ROI has increased from
2012. Even though, there is an increase in the ROI of WIPRO from 2012 but its
aquite risky project than others because ROI is less when compared to other
companies. The ROI of INFOSYS is not stable and is not showing a particular trend.
TCSs ROI is also declining but it is higher compared to INFOSYS and WIPRO in
2014. As the investors would like to invest only where the return is high, TCS would
be attractive for investment.

By analyzing the current trend of Indian Economy and Banking Sector it is found that being a
developing economy there is lot of scope for growth and this sector still has to cross many
levels so there are huge opportunities to invest in.
Increase in income level, increase in consumer demand, technology development,
globalization, foreign investments are few of the opportunities which the sector has to
explore for developing the economy.

60

5.2 CONCLUSION
Equity analysis plays a vital role in the life of an investor, whether he is an institutional
investor or retail, it doesnt matter. It gives the investor options and opportunities to take
lump-sum amount of money from the buoyant market.
With proper analysis, backed up by accurate past data and strong investment rationale, the
estimation can give an accuracy of 70 80%. It also depends on the logical and analytical
skills and prediction capability of the equity analyst.
Due to volatile nature of the market, the analysis is subject to review, time and again, so that
the risk is initiated to the minimum possible extent and chances of losing money is negated.
This not only increases the probability of a good return on investment, but also boost up the
confidence to the investors and make them feel safe.
IT continues to develop rapidly as the key underlying technologies of semiconductors, disk
drives, and network communications improve at exponential rates. Constant improvements in
the underlying technologies make possible new IT applications that affect all areas of society,
including the economy, households, government, and the R&D enterprise.
Throughout society, the utility of IT applications tends to advance much more slowly than the
underlying technologies. A doubling of processing speeds, for example, does not bring a
doubling of utility. The effective implementation and use of IT are the result of a complex
process that requires not only adoption of a technology but also changes in organizations and
institutions. As part of this process, individuals and organizations actively adapt (and
sometimes resist) the technologies. As a result, the effects of IT on society often take place
more slowly than visionaries predict. Nevertheless, the effectsdriven by the continual
change in underlying technologiesare substantial over time.
The analysis gives an optimistic view about the industry and its growth which
recommends the investors to keep a good watch on the major players to benefit in
61

terms of returns on their investments.

5.3 SUGGESTIONS
By analyzing the information technology sector with the help of fundamental analysis, it has
been revealed that this sector has a lot of potential to grow. So recommending investing in
equity shares of information technology sector with no doubt is going to be a good and smart
option because this sector is booming like never before not only in India but all over the
world.
The three giants of Indian Information Technology Sector viz. INFOSYS, TCS and WIPRO
have outperformed in the industry.

INFOSYS stands first in IT sector. Its earnings per share is much higher when
compared to TCS and WIPRO. INFOSYS would be the best option for an investor to
expect good growth compared to other companies viz., TCS and WIPRO on basis of
net profit also.

TCS stands second in IT sector. Despite the challenging business environment, TCS
has maintained its upward equity dividend level and its Return on Investment is high
when compared to INFOSYS and WIPRO. Therefore, the company has potential to
grow and investor can gain good returns in long term.

WIPRO stands third in IT sector. Considering the upward trend in total income the
investors can invest in this company in long term and can expect better return if
companys profitability is proportioned to the increase in total income.

Few Suggestions for Investing in Right Equity Shares

There are three factors which an investor must consider for selecting the right stocks.

Business: An investor must look into what kind of business the company is doing,
visibility of the business, its past track record, capital needs of the company for
expansion etc.
62

Balance Sheet: The investor must focus on its key financial ratios such as earnings
per share, price-earnings ratio; debt-equity ratio, dividends per share etc and he must
also check whether the company is generating cash flows.

Bargaining: This is the most important factor which shows the true worth of the
company. An investor needs to choose valuation parameters which suit its business.

Rules for Investment in Equity

Invest for long term in equity markets

Align your thought process with the business cycle of the company.

Set the purpose for investment.

Long term goals should be the objective of equity investment.

Disciplined investment during market volatility helps attains profits.

Planning, Knowledge and Discipline are very crucial for investment.

63

BIBLOGRAPHY:
Text Books:
1. James.R.english (2001), applied equity analysis: stock valuation techniques Wall
Street professionals (1st edition), the McGraw- hill, p1, 21.

2. Eve.s.harvey (2000), Equity Analysis: Assessing Value, Forecasting Performance

(2nd edition), Euro money Institutional Investor PLC, p1.
3. George Luther Clark (2008), Equity: an analysis and discussion of modern equity
problems (14th edition), Johnson & Hardin, 1928, p309.
4. Michael G. McMillan, Jerald E. Pinto, CFA, Wendy Pirie, Gerhard Van de
Venter(2010), Investments: Principles of Portfolio and Equity Analysis (37 th
edition), John Wiley & Sons,p21.
5. Vedpuriswar A V (2001), IT sector (1st edition), ICFAI University Press, p1, 21.
6. Security analysis and portfolio management by V.A. Avadhani

Newspapers

Economic times

Business line

64

Journals
1. Marcus Ingram, Speros Margetis, (2010). A practical method to estimate the cost of
equity capital for a firm using cluster analysis, Managerial Finance, 36(2).
2. Dr. Thillai Rajan Annamalai, Mr. Ashish Deshmukh, (2011). Venture Capital and
Private Equity in India: An Analysis of Investments and Exits, Journal of Indian
Business Research, 3(1).
3. Sudheer Chava, C.S. Agnes Cheng, Henry Huang, Gerald J. Lobo, (2010).
Implications of securities class actions for cost of equity capital, International
Journal of Law and Management, 52(2).
4. Robert Schwartz, Avner Wolf, Jacob Paroush, (2010). The dynamic process of price
discovery in an equity market, Managerial Finance, 36(7).
5. Andreas A. Jobst, (2008). The development of equity derivative markets: An
examination of current standards and challenges in emerging Asia, International
Journal of Emerging Markets, 3(2).
6. Abdulnasser Hatemi-J, Bryan Morgan, (2009). An empirical analysis of the
informational efficiency of Australian equity markets, Journal of Economic Studies,
36(5).
7. Alper Ozun, Mike P. Hanias, Panayiotis G. Curtis, (2010). A chaos analysis for
Greek and Turkish equity markets, EuroMed Journal of Business, 5(1).
8. Ramaprasad Bhar, Shigeyuki Hamori, (2008). A new approach to analysing
comovement in European equity markets, Studies in Economics and Finance , 25(1).

Websites
www.nseindia.com
www.bseindia.com
www.investopedia.com

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 www.moneycontrol.com
www.indiabulls.com
www.sebi.gov.in

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