INTRODUCTION

History of the Company:

Infosys Technologies Limited (BSE: 500209, NASDAQ: INFY) is a multinational information technology
services company headquartered in Bengaluru, India. It is one of India's largest IT companies with over
94,379 professionals (including subsidiaries) as of June 30, 2008. It has nine development centers in
India and over 30 offices worldwide. Its annual revenues for the fiscal year 2007-2008 exceeded US$4
billion with a market capitalization of over US$30 billion.

Infosys was founded on July 2, 1981 in Pune by N. R. Narayana Murthy and six others: Nandan Nilekani,
N. S. Raghavan, Kris Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora, with Raghavan officially
being the first employee of the company. N.Murthy started the company by borrowing INR 10,000 from
his wife Sudha Murthy. The company was incorporated as "Infosys Consultants Pvt. Ltd.", with
Raghavan's house in Matunga, north-central Mumbai as the registered office.

In 2001 it was rated "Best Employer in India" by Business Today, Infosys won the Global MAKE (Most
Admired Knowledge Enterprises) award, for the years 2003, 2004 and 2005, being the only Indian
company to win this award and is inducted into the Global Hall of Fame for the same.

One of the major initiatives taken by Infosys in terms of research was to develop a corporate R&D wing
called Software Engineering and Technology Labs (SETLabs). SETLabs was founded in 2000 to carry out
applied research for the development of processes, frameworks and methodologies to effectively
capture customer requirements and to iron out common critical issues during a project lifecycle.

Infosys publishes a peer-reviewed quarterly journal called SETLabs Briefings which has articles written by
the researchers at SETLabs on various current and future business-transforming technology
management themes. Infosys has an RFID and Pervasive Computing Technology practice which is
providing RFID and wireless services to clients. Infosys along with Motorola developed an RFID
interactive mirror for Paxar.

SETLabs has created about five to six frameworks in the domains of business modelling, technology and
product innovation.

Services offered by Infosys:

• Application Development & Maintenance,
• Corporate Performance Management,
• Enterprise Quality Services
• Infrastructure Services
• Packages Application Services
• Product Engineering
• Systems Integration
Industries served by Infosys:
• Aerospace & Defense
• Automotive
• Banking and Capital Markets
• Communication Services
• Consumer Packaged Goods
• Discrete Manufacturing
• Energy
• Healthcare
• High Technology
• Hospitality & Leisure
• Insurance
• Life Sciences
• Media & Entertainment
• Resources
• Retail
• Transportation Services
• Utility

STRENGTHS & WEAKNESSES

Strengths:

• Undervalued: During analysis, two values for the INFY stock price were calculated. Two separate
approaches were used: a relative value approach using the P/E ratio and a multiple cash flow model
approach in order to achieve an intrinsic value. The average of the two were then taken and a target
price of $50.09 was settled upon. This value is $6.49 higher than the stock price of $43.60 (at that point
of time).

• Satisfies Client Needs: Due to a great decline in IT spending, many companies do not want big
contracts. They want some things outsourced for cheap, this way they could focus on their core
business. In general, Infosys saves a company about 40% in costs, does an excellent job in the services
they provide, and allows the client to focus on increasing its revenue by targeting what they want to.
Infosys makes everything customized to each client’s needs.

• Honorable Achievements: Infosys got ICRA’s highest corporate governance rating. It also bagged the
CII-EXIM Bank Award for Business Excellence for 2002. The chairman was voted “IT Man of the Year” and
awarded the Corporate Leadership Award. The management team is well experienced and involved in
various substantial activities outside the firm. Several articles talk about its excellent leadership and
strategy implementation.

• Has Great Future Outlook: Outsourcing is a great trend in the marketplace. It has entered into huge
deals with many leading firms. There is an increased opportunity in the government marketplace
because of defend spending. It provides a valuable resource by adding to the customer’s bottom line
results.

Weaknesses:

• Not doing well enough when it comes to innovation beyond process IP.

• Reliance on less experienced talent pool for lower costs and therefore better financial results. This
precludes certain types of work.

• Over reliance on India as delivery geography, has not diversified delivery capability to other offshore
locations.

FINANCIAL INFORMATION

Balance Sheet of Infosys Technologies Limited As On March 2007 & March 2008

(Rs. Crore)
Particulars March 2008 March 2007
Sources Of Funds
Owned Fund
Equity Share Capital 286.00 286.00
Share Application Money - -
Preference Share Capital - -
Reserves & Surplus 13,204.00 10,876.00
Borrowed Fund
Secured Loans - -
Unsecured Loans - -
Total 13,490.00 11,162.00
Application Of Funds
Fixed Assets
Gross Block 4,508.00 3,889.00
Less: Revaluation Reserve - -
Less: Accumulated Depreciation 1,837.00 1,739.00
Net Block 2,671.00 2,150.00
Capital Work In Progress 1,260.00 957.00
Investments 964.00 839.00
Net Current Assets
Current Assets, Loans & Advances 12,326.00 9,040.00
Less: Current Liabilities & Provisions 3,731.00 1,824.00
Total Net Current Assets 8,595.00 7,216.00
Misc. Expenses Not Written - -
Total 13,490.00 11,162.00
Notes:
Book Value Of Unquoted Investments 964.00 839.00
Market Value Of Quoted Investments - -
Contingent Liabilities 603.00 670.00
Number Of Equity Shares Outstanding (Lacs) 5719.96 5712.10

Profit & Loss Account for the Years Ended March 2007 & March 2008

(Rs Crore)
Particulars March 2008 March 2007
Income
Operating Income 15,648.00 13,149.00
Expenses
Material Consumed 18.00 22.00
Manufacturing Expenses 1,549.00 1,378.00
Personnel Expenses 7,771.00 6,316.00
Selling Expenses 89.00 63.00
Administrative Expenses 1,257.00 1,144.00
Expenses Capitalised - -
Cost of Sales 10,684.00 8,923.00
Operating Profit 4,964.00 4,226.00
Other Recurring Income 678.00 333.00
Adjusted PBIT 5,642.00 4,559.00
Financial Expenses 1.00 1.00
Depreciation 546.00 469.00
Other Write Offs - -
Adjusted PBT 5,095.00 4,089.00
Tax Charges 630.00 352.00
Adjusted PAT 4,465.00 3,737.00
Non Recurring Items 5.00 46.00
Other Non Cash Adjustments - -5.00
Reported Net Profit 4,470.00 3,778.00
Earnings Before Appropriation 9,314.00 5,973.00
Equity Dividend 1,902.00 649.00
Preference Dividend - -
Dividend Tax 323.00 102.00
Retained Earnings 7,089.00 5,222.00

RATIO ANALYSIS

Current Ratio:

Current Ratio as on 31st March 2008:

Current Ratio = Current AssetsCurrent Liabilities
=> 123263731
= 3.30 : 1
Current Ratio as on 31st March 2007: 4.96

Earnings Per Share (EPS):

Earnings Per Share as on 31st March 2008:

Earnings Per Share (EPS) = Net Profit After Tax - Proposed DividendNumber Of Equity Shares
=> 44650000000 - 0571995758
= Rs. 78.06
Earnings Per Share as on 31st March 2007: Rs. 65.42

Return On Investment (ROI):

Return On Investment as on 31st March 2008:

Return On Investment = Net Profit Before Tax + InterestCapital Employed x 100
=> 5095 + 0286 + 13204 x 100
=> 509513490 x 100
=> 0.3776 x 100
= 37.77%
Return On Investment as on 31st March 2007: 36.64%

Gross Profit Ratio:

Gross Profit Ratio as on 31st March 2008:

Gross Profit Ratio = Gross ProftNet Sales x 100
=> 496415648 x 100
= 31.72%
Gross Profit Ratio as on 31st March 2007: 28.57%

Net Profit Ratio:

Net Profit Ratio as on 31st March 2008:

Net Profit Ratio = Net Profit Before TaxNet Sales x 100
=> 446515648 x 100
=> 0.2853 x 100
= 28.53%
Net Profit Ratio as on 31st March 2007: 28.05%

Price Earning Ratio:

Price Earning Ratio as on 31st March 2008:

Price Earning Ratio = Market Price of SharesEarnings Per Share
=> 169578.06
= 21.71 (Approx)
Price Earning Ratio as on 31st March 2007: 31.32 (Approx)

LEVEL OF COMPETITION FACED

Infosys faces increasing competition from global rivals in the outsourcing business, with some overseas
companies, such as IBM and Intel, setting up units in India. There is also the threat of decreased
spending for IT services. Infosys has to deal with changes in the economy and find ways to overcome
certain obstacles not under its control.

Large Competitors:
Infosys resides in an industry that has plenty of competitors. Its three largest competitors include IBM,
Wipro, and Satyam Computer Services. Wipro and Satyam are headquartered in India.

 IBM:
International Business Machines Corporation, abbreviated IBM and nicknamed "Big Blue", is a
multinational computer technology and consulting corporation headquartered in Armonk, New York,
USA. The company is one of the few information technology companies with a continuous history dating
back to the 19th century. IBM manufactures and sells computer hardware and software, and offers
infrastructure services, hosting services, and consulting services in areas ranging nanotechnology. to 
from mainframe computers

 Technologies: Wipro
Wipro Tech (NYSE: WIT) is an information technology service company established in India in 1980. With
revenue in the excess of US $5 billion, Wipro is one of India's major IT companies. The Wipro Employee
Stock Option Plan (WESOP) allows employees to share in the company’s success. It has dedicated
development centers and offices across India, (Headquartered at Bangalore, the company has
operations in Mumbai, Pune, Chennai, Hyderabad, and Gurgaon.) Europe, (Romania), Egypt, North
Pacific. Asia and America America, Latin

 Services: Computer Satyam
Satyam Computer Services Ltd. is a consulting and information technology services company based in
Hyderabad, India. The company offers a variety of information technology (IT) services spanning various
industry sectors, and is listed on the New York Stock Exchange. Satyam's network spans 66 countries
across six continents. It serves over 654 global companies, 185 of which are Fortune 500 corporations.
Satyam has strategic technology and marketing alliances with over 50 companies. Apart from
Hyderabad, it has development centers in India at Bangalore, Chennai, Pune, Mumbai, Nagpur, Delhi,
Kolkata, Bhubaneswar, and Visakhapatnam.

Small Competitors:

Their small competitors include Accenture, EDS, iGate, Sapient, Computer Sciences, Bull, and S1. These
companies are noticing the advantages of having outsourcing as one of its services and are starting to
put them to use.

 Accenture:
Accenture (NYSE: ACN, ISIN: BMG1150G1116) is a global management consulting, technology services,
and outsourcing company. It is registered in Hamilton, Bermuda. It is said to be the largest consulting
firm in the world. Accenture is a Fortune Global 500 countr ies. 49 in people 181,000 than more 
with company

 EDS:
Electronic Data Systems (EDS) (NYSE: EDS, LSE: EDC) is a global business and technology services
company headquartered in Plano, Texas that defined the outsourcing business when it was established
in 1962 by Ross Perot. General Motors acquired the company in 1984, spun it off again as an
independent company in 1996, and became an EDS client.

 iGate:
iGATE Corporation (NASDAQ: IGTE)is the first fully integrated technology and operations firm with a
Global Services Model. iGATE caters to different geographies through its wholly owned subsidiary iGATE
Global Solutions Ltd. iGATE has offices throughout the United States, Canada, Europe, Australia, Japan
and four delivery centers in India including Bangalore, Chennai, Hyderabad and Noida (Delhi). iGATE
enables clients to optimize their business through a combination of process investment strategies,
technology leverage and business process outsourcing and provisioning.

MARKET RESTRICTIONS / RISKS

For more than a decade Infosys has preserved for itself the number one position in the Indian
information technology space. The company has a highly competent management which has helped
Infosys built a premium brand. Add to this well diversified revenue streams like IT consulting, BPO/KPO
and with substantial revenues from software application development and maintenance. Recently
Infosys achieved one more mile stone when it was included in the prestigious NASDA 100 Index.
On the future front, Infosys it appears is gradually regaining pricing power. New contracts are likely to
attract higher billing rates. At present the company has 12 key accounts which yield more than US$ 50
million. In the foreseeable future, this number is projected to multiply 5 folds to 60.
Issues such as higher crude prices inflation and interest rate concerns and the domestic political
environment have no impact whatsoever on Infosys.
Key Risks and Responses:
 Risk: Rate Exchange
The Indian Re has appreciated by 10% in the near past. This has increased the anxiety of Infy stake-
holders. It is true that the continuous depreciation of the US dollar viz-a-vis the Indian Rupee will prove
to be detrimental for Infy’s financial performance. It is believed that the 43-44 band is a currency rate
comfort zone for Infy.
 Risk: Economy US The
If the current slowdown in the US economy gets converted into a recession, this indeed will bring bad
times for the entire Indian IT sector including Infosys. Factually speaking, there seems to be no evidence
to support such a worst case imagination turning itself into economic reality. Major US IT companies
such as IBM, Accenture, EDS, Yahoo and Google have not yet reported any signs which signal a reversal
in the fortunes of these IT giants. Thus it is difficult to construct a case for Infy’s decline in the light of
facts emerging from the US. As a contrarian call, a slowdown in the US may herald in an era of brand
new opportunities for companies such as Infosys. Traditional factors to the Indian cost advantage such
as talented tech pool, high quality execution skills, and English fluency will lead to higher US
productivity, greater corporate profitability thereby bringing about an acceleration in offshoring and
outsourcing deals.

 Management: Talent
With growing demand for skilled resources the competition for acquiring talent is also intensifying.
Going forward talent acquisition and talent retention is likely to emerge as a major challenge. In
response to this emerging situation, Infosys has put in place a world class training centre in Mysore
along with well structured training initiatives. On the compensation front, Infosys has adopted a highly
competitive compensation policy which will enable Infy to manage the talent challenge effectively.

FUTURE OUTLOOK
At this point of time, Infosys is positioned as a rank ONE tire 1 Indian IT company. From its modest
beginnings in 1981, the company today has emerged as the number 2 software services exporter.
Infosys is recognised globally for its excellent management practices and work ethics. It has been making
consistent efforts to move up the software value chain and offers services like software development,
testing, package implementation, IT consulting and maintenance. Infosys offers all these services
through its globally acknowledged global delivery model. The company’s top line and bottom line have
grown at 40% and 37% CAGR in period FY02 to FY07.
EPS Projections:
Year FY 09 FY10
EPS (Rs) 109.68 (Assuming 25% y-o-y growth) 137.10 (Assuming 25% y-o-y growth)

Recommendation to Market Players:

Buy. In the volatile Indian stock market where we currently have a view driven by a bullish buyers,
investors are constantly in the search for a dependable high return stock. Infosys is one of the prized
possessions of any intelligent investor. The stock which is currently trading at a forward PF multiple of
22.10 presents an attractive investment opportunity. This is not to say that the Infy stock price will not
fall further or that it has bottomed out. Any stock price declined in this best of blue-chips should be
utilized to add positions.