Result Update

October 25, 2018

Rating matrix
Rating : Buy Wipro Ltd (WIPRO) | 317
Target : | 360
Target Period : 12 months
Potential Upside : 14%
Growth and margin visibility improving ...
What’s Changed?  Wipro reported Q2FY19 results were above our expectations,
Target Changed from | 325 to | 360 excluding one-offs. In constant currency, global IT services revenues
EPS FY19E Changed from | 18.8 to | 20.1
grew 2.8% sequentially (above our estimate of 1.3% QoQ). Adjusted
EPS FY20E Changed from | 21.5 to | 23.8
for one-off settlement of | 514.1 crore, IT services EBIT margin stood
Rating Unchanged
at 18% in Q2FY19 (vs our expectation of 16.1%).
Quarterly Performance  US$ revenues grew 0.7% QoQ to $2041.2 million. However, adjusting
Q2FY19 Q2FY18 YoY (%) Q1FY19 QoQ (%) for divestment of its hosted data centre business, dollar revenue
Revenue 14,541 13,424 8.3 13,978 4.0 growth was 1.9% sequentially.
EBIT 2,062 2,305 (10.5) 2,331 (11.6)
 Reported EBIT margin stood at 14.4% (from adjusted margin of
EBIT (%) 14.2 17.2 -299 bps 16.7 -250 bps
15.6% in Q1FY19). Adjusted EBIT margin improved by 240 bps to
PAT 1,889 2,191 (13.8) 2,121 (10.9)
18.0% mainly led by rupee depreciation (+70 bps), automation &
productivity improvement (+90 bps) and cost optimisation of global
Key Financials subsidiaries (+90 bps).
| Crore FY17 FY18 FY19E FY20E
Net Sales 55,040 54,636 60,171 65,306
Improving growth across verticals gives better revenue visibility…
EBITDA 11,458 10,542 11,763 13,361 After many quarters of company specific headwinds led by client’s
Net Profit 8,490 8,008 9,088 10,721 insolvency and restructuring of business, Wipro reported a strong quarter
EPS (|) 17.5 16.8 20.1 23.8 with 2.8% revenue growth in constant currency. Four verticals out of
seven grew at 4% and more QoQ in cc terms with BFSI reporting 16%
Valuation summary YoY growth. Healthy performance in BFSI for consecutive seventh quarter
FY17 FY18 FY19E FY20E and strong growth in digital business are the highlights for the quarter.
P/E 18.2 18.8 15.7 13.3 Further, incremental positive commentary for healthcare business and
Target P/E 20.5 21.4 17.8 15.1 consumer business segment besides BFSI and communications is a key
EV / EBITDA 10.6 12.1 9.9 8.2 positive.
P/BV 2.9 3.1 2.5 2.2
….Order bookings and higher digital contribution are key positive
RoNW (%) 16.3 16.6 16.2 16.6
RoCE (%) 16.9 16.9 16.9 17.5 Citing the outlook for Q3FY19E, Wipro guided that its IT services revenues
would be in the range of $2028-2068 million, translating to 1-3% QoQ
Stock data
growth. This growth expectation is on the basis of excluding India PSU
and India Government business which contributed $34 million in the
Particular Amount
Market Capitalization (| Crore) 142,762.7
quarter. In addition, two-month consolidation of Alight acquisition (~$25
Total Debt (| Crore) 13,825.9 million) would support the growth in Q3FY19E. Further, improving digital
Cash and Investments (| Crore) 29,525.1 revenues contribution (accounted for 31.4% of services revenue in
EV (| Crore) 127,063.5 Q2FY19 vs 24.1% in Q2FY18) over the coming years will further drive
52 week H/L 339 / 253 growth. Strong order bookings, healthy pipeline, and incremental
Equity capital 904.8 positives across verticals are expected to lead to accelerated growth in
Face value |2 the year ahead. This coupled with rupee depreciation, we expect IT
services rupee revenues to increase at a CAGR of 10% over FY18-20E.
Price performance (%) Margin improvement to boost profitability…
1M 3M 6M 12M
We believe the company’s margins of 18.0% in current quarter are
TCS (15.4) (6.2) 9.3 43.7 sustainable in the coming years mainly led by higher automation (from
Infosys (9.0) (0.8) 11.8 40.2
3% to 10%), healthy revenue growth and rupee depreciation. As a result,
Wipro (8.3) 6.7 2.3 2.7
we upgrade our margin estimates and expect IT services EBIT margin of
HCL Tech (10.9) (0.5) (8.0) 4.2
16.8%, 17.7% in FY19E, FY20E respectively.
Research Analysts
On growth trajectory; maintain BUY…
Devang Bhatt Wipro reported a strong quarter on all fronts. Further, positive guidance in
devang.bhatt@icicisecurities.com
the wake of seasonal Q3 along with optimistic commentary across most
verticals with continued strength in BFSI and digital prompt us to be
constructive on Wipro’s growth trajectory. This coupled with
Deepti Tayal
sustainability of higher margins in coming quarters will further boost
deepti.tayal@icicisecurities.com
profitability. Hence, we maintain our BUY recommendation on the stock
with a revised target price of | 360 per share (15x FY20E EPS).

ICICI Securities Ltd | Retail Equity Research

Variance analysis
Q2FY19 Q2FY19E Q2FY18 YoY (%) Q1FY19 QoQ (%) Comments

Growth was led by IT services revenues wherein revenues grew 4.9% sequentially
Revenue 14,541 14,781 13,424 8.3 13,978 4.0 to | 14,377 crore while IT products declined marginally by 0.2% QoQ
Employee expenses 10,177 10,488 9,469 7.5 10,035 1.4

Gross Margin 4,364 4,293 3,955 10.4 3,943 10.7

Gross margin (%) 30.0 29.0 29.5 55 bps 28.2 180 bps
Selling & marketing costs 1,081 1,100 987 9.6 1,081 0.0
G&A expenses 1,370 869 709 93.3 861 59.1
Adjusted for one-off settlement of | 514.1 crore, IT services EBIT margin expanded
~240 bps QoQ at 18% in Q2FY19 due to operational efficiency (+180 bps) and
EBITDA 2,499 2,788 2,825 -11.5 2,765 -9.6 currency (+70 bps)
EBITDA Margin (%) 17.2 18.9 21.0 -386 bps 19.8 -260 bps
Depreciation 437 444 520 -16.0 434 0.8
EBIT 2,062 2,344 2,305 -10.5 2,331 -11.6
EBIT Margin (%) 14.2 15.9 17.2 -299 bps 16.7 -250 bps
Other income 357 449 528 -32.4 355 0.5
PBT 2,418 2,793 2,832 -14.6 2,686 -10.0
Tax paid 535 613 643 -16.8 587 -8.8
PAT 1,889 2,201 2,191 -13.8 2,121 -10.9

Key Metrics
Jump in employee addition QoQ on account of 9000 employee addition from Alight
Closing employee Count 175,346 165,000 163,759 7.1 164,659 6.5 acquisition
TTM voluntary Attrition (%) 17.4 16.8 15.7 170 bps 17.0 40 bps
Utilisation ex trainees (%) 85.5 85.2 82.5 300 bps 85.2 30 bps
Average $/| 70.4 71.3 65.4 7.7 67.6 4.2
Source: Company, ICICI Direct Research

Change in estimates
FY19E FY20E
(| Crore) Old New % Change Old New % Change
Revenue 58,052 60,171 3.7 63,263 65,306 3.2
EBITDA 10,937 11,763 7.6 12,080 13,361 10.6
Change in margin estimates on the back of robust performance in
EBITDA Margin (%) 18.8 19.5 75 bps 19.1 20.5 136 bps Q2FY19 and company's outlook
PAT 8,489 9,088 7.1 9,722 10,721 10.3
EPS (|) 18.8 20.1 7.1 21.5 23.8 10.3

Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 2

 Conference call highlights:
 Management guidance: Wipro has guided that its Q3FY19E IT
services revenues would be in the range of $2028 -2068 million,
which translates into 1%-3% QoQ growth. This growth expectation
is on the basis of excluding India PSU and India Government
business which translates to global IT services revenue of $2007
million in Q2FY19. However, on reported number basis in Q2FY19
($2041 million), growth guidance for Q3FY19E would translate to (-
0.6%) to 1.3%. Two-month consolidation of Alight acquisition
would support the growth in Q3FY19E

 Margins outlook: Adjusting for one-off settlement of | 514.1 crore,

IT services EBIT margins reported strong performance and
expanded 240 bps QoQ to 18.0% (from adjusted margin of 15.6% in
Q1FY19). For FY19E, the management expects IT services EBIT
margins to be in the range of ~18% with Q3FY19E margins to be in
narrow band of Q2FY19

 BFSI & Communication momentum: BFSI (30.7% of revenue)

continued its growth trajectory for yet another quarter and grew
4.4% QoQ and 16% YoY (in CC terms). The management reiterated
its positive outlook for BFSI on the back of the segment being an
early adopter of digital and its execution capability of digital
transformation for clients. On the communication segment, after six
quarters of weakness, segment grew 4.2% sequentially in cc terms.
Management cited at increasing traction driven by enterprise core
spend and higher spending on the back of 5G roll out

 Healthcare: With 12.8% of revenue, weakness persisted in the

vertical as it declined 3% QoQ in the quarter. Management stated
that headwinds and uncertainty pertains in the segment due to HPS
weakness. By Q3FY19E, it would be clearer of how the segment
pans out in the year ahead. With new leadership in the vertical and
company making investments in the adjacent areas, management
expects healthcare business coming back to industry-level growths
in next two to three quarters

 Digital revenues: Digital revenues contribution to revenues

accelerated and accounted for 31.4% of services revenue (vs 24.1%
in Q2FY18) and grew 13% QoQ and 32% YoY in reported terms

 Realignment in IT services business: Effective Q3FY19, India PSU

and India government business would be carved out of IT services
segment while enterprise business in India will continue to be part
of IT Services segment. This is done mainly on account of volatile
nature of carved our business and leveraging its portfolio offerings
in terms of areas witnessing good traction

 Employee details: The company’s closing employee count was at

175,346 vs. 164,659 in Q1FY19. Jump in employee addition QoQ is
on account of 9000 employee addition from Alight deal. Net
utilisation (ex-trainees) increased 30 bps QoQ to 85.5%. In terms of
attrition rate, voluntary attrition (TTM) increased 40 bps QoQ for
another straight quarter to 17.4%. In terms of visa concerns, HCL
has limited onsite risk as more than 60% of its workforce in US are
locals

ICICI Securities Ltd | Retail Equity Research Page 3

 Company Analysis
Exhibit 1: Geography wise break-up
Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19
Revenue by geography (%)
Americas 54.5 53.6 53.1 52.7 54.9 55.2
Europe 24.2 25.1 25.9 27.0 25.6 25.3
India & Middle East business 10.4 9.9 10.0 9.4 8.6 8.1
Americas and APAC led growth with management APAC and Other Emerging Markets 10.9 11.4 11.0 10.9 10.9 11.4
indicating America seeing pick up in growth from across
segments. Little uncertainty persists in UK Growth QoQ (%)- Constant currency
Americas 0.2 -0.1 -0.7 1.6 2.9 3.7
Europe -2.6 1.3 4.7 2.7 -3.0 0.9
India & Middle East business 5.1 -3.4 1.4 -2.9 -7.5 -2.8
APAC and Other Emerging Markets 2.6 3.4 -0.5 -1.2 1.1 7.9
Source: Company, ICICI Direct Research

Exhibit 2: Vertical wise break-up

Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q1FY19
Revenue by strategic business units (%)
Growth was broad based across verticals except healthcare Communications 6.8 6.5 6.4 5.8 5.6 5.7
business. BFSI 26.7 27.6 28.5 29.2 30.0 30.7
Manufacturing 9.0 8.7 8.6 8.7 8.3 8.2
Technology 13.5 14.1 14.1 14.3 14.2 13.7
Health Business Unit 14.8 13.7 14.0 13.9 13.4 12.8
Consumer Business Unit 15.8 15.9 16.0 15.6 16.0 16.3
Energy,Natural Resources & Utilities 13.4 13.5 12.4 12.5 12.5 12.6

Healthcare still weak on account of HPS weakness while Growth QoQ (%)- Constant currency
core health of the business is good as per management Communications -2.6 -4.4 -0.7 -8.1 -1.3 4.2
BFSI 3.2 3.3 4.4 3.0 3.0 4.4
Manufacturing -0.9 1.9 0.0 2.9 -5.4 1.7
Technology 0.0 0.0 0.0 0.0 -1.3 1.8
Health Business Unit -3.1 -5.9 2.5 0.6 -4.7 -3.0
Consumer Business Unit 0.1 1.7 1.2 -1.0 2.6 4.8
Energy,Natural Resources & Utilities 2.2 -1.3 -6.1 1.6 1.7 4.0
Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 4

 Exhibit 3: Service line wise break-up
Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q1FY19
Revenue by service lines (%)
Cloud Infrastructure Services 28.1 28.4 28.2 28.8 27.4 26.5
Data, Analytics & AI 7.1 7.1 7.0 7.0 7.1 7.8
Digital operations and Platforms 12.0 12.1 12.6 12.1 12.1 12.7
Growth was broad based among service lines. Industrial & Engineering Services 7.0 6.9 6.9 7.3 7.3 7.3
Management indicated that pipeline looking strong for
Modern Application Services 45.8 45.5 45.3 44.8 46.1 45.7
cloud migration

Growth QoQ (%)- Constant currency

Cloud Infrastructure Services 0.2 1.5 0.4 3.4 -4.6 2.6
Data, Analytics & AI 3.6 -1.3 -0.4 1.7 1.5 11.1
Digital operations and Platforms -1.6 1.7 4.7 -2.5 -0.6 6.2
Industrial & Engineering Services -1.8 1.2 -0.3 7.4 -1.1 1.9
Modern Application Services 0.6 -0.8 0.6 -0.3 3.3 1.0
Source: Company, ICICI Direct Research

Exhibit 4: Client & human resource metrics

Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q1FY19
Client metrics
$1 mn Clients 624 627 635 631 624 612
In terms of client engagements, clients contributing
$10 mn Clients 163 170 167 171 173 180
>$100 million category increased by one to 9
$50 mn Clients 36 39 41 39 40 39
$75 mn Clients 18 16 17 20 19 19
$100 mn Clients 9 9 9 8 8 9

Headcount, Utilization & Attrition

Closing employee count 166790 163759 162553 163827 164659 175346
Net utilisation (ex-trainees) expanded 30 bps QoQ to Net Utilization (Excluding trainees) 82.1 82.5 81.9 83.4 85.2 85.5
85.5%, multi quarter high Voluntary Attrition LTM 15.9 15.7 15.9 16.6 17.0 17.4
Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 5

 Financial story in charts

Exhibit 5: Digital contribution trend

40.0
31.4
26.7 28.0
30.0 24.1 25.0
21.7 22.1 22.5
19.6
20.0

%
Digital revenues now account for 31.4% of services
revenue (vs 24.1% in Q2FY18) and grew strongly by 13.0
10.0 11.2 9.9
13% sequentially and 32% YoY 9.4 9.4
4.6 3.7
2.7 3.1
0.0
Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19

Digital as a % of revenue Growth, QoQ

Source: Company, ICICI Direct Research

Exhibit 6: Dollar revenues may grow at 4.9% CAGR in FY18-20E

20

8861
10000

8263
8060
7704
7346
7082

7000
$ million

7.6 7.2 10
5.5

%
7.0 5.1 5.8
4.6 3.9 4.9 2.1 4.6
4000 3.7 3.5 2.8
2.5
2062

2027

2041
2014

2013
1955

1971
1931

1916

1903

1.4

1000 0

FY19E

FY20E
FY15

FY16

FY17

FY18
Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Dollar revenue Growth, YoY Q2FY19

[

Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 6

 Exhibit 7: Barring one-off, IT services margin expanded 240 bps to 18%

24
22.1
20.5
21
18.3
17.8 17.8 17.6 17.9 17.3 17.5 17.7

%
18 16.8 16.8
15.8
14.8 14.4 14.4
15

12

FY19E

FY20E
FY15

FY16

FY17

FY18
Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19
EBIT margin (IT services)

Source: Company, ICICI Direct Research

Exhibit 8: PAT may grow at 15.7% CAGR in FY18-20E

10721

10000 8653 8886 9088

8490
8008

7000
| crore

4000
2052 2067 2168 2261 2076 2191 1937 1803 2121 1889

1000

FY19E

FY20E
FY15

FY16

FY17

FY18
Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19
PAT

Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 7

 Outlook and valuation
Wipro reported Q2FY19 results were above our expectations, excluding
one-offs. Good growth in BFSI (grew 4.4% QoQ in cc terms) for
consecutive seventh quarter and strong growth in digital business (13%
QoQ in reported terms) were the highlights of Q2FY19 results. Among
verticals, constant currency revenue growth was broad based except
healthcare which declined 3% QoQ in constant currency terms.
Geography-wise, besides India & Middle East, every other geography
grew led by Americas (3.7% QoQ) and APAC (7.9% QoQ). Adjusted for
one-off settlement of | 514.1 crore, IT services EBIT margin stood at 18%
in Q2FY19.

Wipro reported a strong quarter on all fronts. Further, positive guidance

in the wake of seasonal Q3 along with optimistic commentary across
most verticals with continued strength in BFSI and digital prompt us to be
constructive on Wipro’s growth trajectory. This coupled with
sustainability of higher margins in coming quarters will further boost
profitability. Hence, we maintain our BUY recommendation on the stock
with a revised target price of | 360 per share (15x FY20E EPS).

Exhibit 9: One year forward rolling PE

1000

800

600
|

400

200

0
Apr-09

Apr-10

Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

Apr-16

Apr-17

Apr-18
Oct-08

Oct-09

Oct-10

Oct-11

Oct-12

Oct-13

Oct-14

Oct-15

Oct-16

Oct-17

Oct-18
Price 24 20 16 12 8

Source: Company, ICICI Direct Research

Exhibit 10: Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY16 51,244 9.1 22.6 (35.7) 17.6 11.1 19.1 19.6
FY17 55,040 7.4 17.5 (22.7) 18.2 10.6 16.3 16.9
FY18 54,636 (0.7) 16.8 (3.6) 18.8 12.1 16.6 16.9
FY19E 60,171 10.1 20.1 19.6 15.7 9.9 16.2 16.9
FY20E 65,306 8.5 23.8 18.0 13.3 8.2 16.6 17.5
Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 8

Recommendation History vs. Consensus
1,000 100.0

800 80.0

600 60.0
(|)

400 40.0

(%)
200 20.0

0 0.0
Sep- Nov- Dec- Feb- Mar- May- Jun- Aug- Sep- Nov- Jan- Feb- Apr- May- Jul- Aug- Oct- Nov- Jan- Feb- Apr- Jun- Jul- Sep- Oct-
15 15 15 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 18 18 18 18 18 18 18

Price Idirect target Consensus Target Mean % Consensus with SELL

Source: Bloomberg, Company, ICICI Direct Research

Key events
Date Event
Wipro wins a five year IT applications management contract from Outokumpu, global leader in stainless steel. Wipro would provide applications management services
Sep-17 for Outokumpu SAP landscape along with legacy applications support
Sep-17 Wipro bags a seven year contract from European energy company, innogy SE to manage the data centre and cloud services
Wipro enters into a partnership with CloudGenix, a leading provider of Software defined Wide Area Networking (SD-WAN) products. Under the partnership, Wipro
Sep-17 would offer its customers end to end managed WAN services.
Wipro Digital signs a definitive agreement to acquire Cooper, design and business strategy consultancy. Wipro Digital is the digital business unit of Wipro. Acquisition
Oct-17 is expected to be closed in Q3FY18.

Mar-18 Wipro announces it would pay $8.8 million for a 33% stake in application security company Denim Group, to boost its cybersecurity offerings to clients
Wipro sells 63% of its stake in Wipro Airport IT to Antariksh Softtech for a consideration of ₹ 3.15 crore. Wipro Airport IT Services is a joint venture between Wipro
Apr-18 (74%) and Delhi International Airport Limited (DIAL) (26%).
Wipro selected by Nokia to accelerate its supply chain digital transformation. Wipro would help design, digitalise and run Nokia's sales order management operations
Jun-18 from multiple centres, globally. Financial details of the deal were undisclosed
Wipro has entered into a settlement of the lawsuit filed by National Grid US for $75 million (~| 500 crore). The lawsuit was filed by National Grid US in 2017 seeking
Aug-18 damages amounting to US$ 140 million plus additional costs related to an ERP implementation project.
Wipro has been awarded a multi-year business process services contract from Denmark based Falck, a leading international supplier of ambulance services, employee
health care and roadside assistance. Falck is active in 35 countries and has over 37,000 employees. As part of the contract, Wipro will help transform Falck’s finance
Aug-18 operations through its enterprise operations transformation model
Source: Company, ICICI Direct Research

Top 10 Shareholders Shareholding Pattern

Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Mar-18 Jun-18 Sep-18
1 Premji (Azim Hasham) 30-Jun-18 60.5% 2,722.8 0.0 Promoter 74.32 74.31 74.31
2 Azim Premji Trust 30-Jun-18 13.7% 618.5 0.0 Public 25.17 25.19 25.21
3 Life Insurance Corporation of India 30-Jun-18 3.1% 138.7 0.0 Others 0.51 0.49 0.48
4 ICICI Prudential Asset Management Co. Ltd. 30-Jun-18 2.0% 90.0 7.6 Total 100.00 100.00 100.00
5 Stewart Investors 20-Dec-17 1.3% 57.8 -4.0
6 BlackRock Institutional Trust Company, N.A. 30-Sep-18 0.9% 42.0 0.8
7 The Vanguard Group, Inc. 30-Sep-18 0.5% 24.1 -0.1
8 Norges Bank Investment Management (NBIM) 31-Dec-17 0.4% 19.5 4.2
9 Dimensional Fund Advisors, L.P. 30-Sep-18 0.4% 17.7 0.0
10 SBI Funds Management Pvt. Ltd. 30-Sep-18 0.4% 16.4 -0.9
Source: Reuters, ICICI Direct Research

Recent Activity
Buys Sells
Investor name Value Shares Investor name Value Shares
ICICI Prudential Asset Management Co. Ltd. 28.9m 7.6m T. Rowe Price International (UK) Ltd. -41.1m -9.2m
Mirae Asset Global Investments (India) Pvt. Ltd. 7.4m 1.7m T. Rowe Price Hong Kong Limited -20.8m -4.7m
Reliance Nippon Life Asset Management Limited 5.9m 1.3m Kotak Mahindra Asset Management Company Ltd. -11.7m -2.8m
UTI Asset Management Co. Ltd. 4.7m 1.0m SBI Funds Management Pvt. Ltd. -4.2m -0.9m
BlackRock Institutional Trust Company, N.A. 3.6m 0.8m IDFC Asset Management Company Private Limited -3.9m -0.9m
Source: Reuters, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 9

Financial summary
Profit and loss statement | Crore Cash flow statement | Crore
FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E
Total Revenues 55,040 54,636 60,171 65,306 PAT before minority int. 8,514 8,008 9,058 10,689
Growth (%) 7.4 (0.7) 10.1 8.5 Depreciation 2,311 2,112 1,805 1,959
COGS 39,154 38,558 41,738 45,305 (inc)/dec in Current Assets 1,269 (717) 688 (1,802)
Other Expenditure 5,214 5,537 6,703 6,672 (inc)/dec in current Liabilities (815) 623 1,500 1,900
EBITDA 11,458 10,542 11,763 13,361 Taxes paid (2,548) (2,811) (2,555) (3,015)
Growth (%) 2.6 (8.0) 11.6 13.6
Depreciation 2,070 2,112 1,805 1,959 CF from operations 9,277 8,423 11,396 10,445
Other Income 2,242 2,400 2,294 2,941 Other Investments (10,014) 5,628 2,294 5,234
Exchange difference 28 - - - (Purchase)/Sale of Fixed Assets (1,965) (2,070) 85 (2,482)
Net interest expense (594) (583) (636) (636)
Pft. from associates - 1 (3) (3) CF from investing Activities (11,628) 3,558 2,379 459
PBT 11,036 10,247 11,613 13,704 Inc / (Dec) in Equity Capital - 2 - -
Growth (%) (3.8) (7.1) 13.3 18.0 Inc / (Dec) in sec.loan Funds 1,312 (1,098) - -
Tax 2,521 2,239 2,555 3,015 Dividend & Divendend tax (1,073) (854) (1,999) (4,779)
PAT before Minority int, 8,514 8,008 9,058 10,689
Minority int. 25 0 (30) (32) CF from Financial Activities (2,275) (12,998) (1,999) (2,780)
PAT 8,490 8,008 9,088 10,721 Exchange rate differences (141) 38 - -
EPS 17.5 16.8 20.1 23.8 Opening cash balance 9,905 5,271 4,493 16,268
EPS (Growth %) (22.7) (3.6) 19.6 18.0 Closing cash 5,271 4,493 16,268 24,392
Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

Balance sheet | Crore Key ratios

FY17 FY18 FY19E FY20E FY17 FY18 FY19E FY20E
Liabilities Per share data (|)
Equity 486 905 905 905 EPS 17.5 16.8 20.1 23.8
Reserves & Surplus 51,544 47,389 55,114 63,690 BV 107.0 101.5 124.1 143.1
Networth 52,030 48,294 56,019 64,595 DPS 2.0 2.0 2.0 2.0
Minority Interest 239 241 211 179 Operating Ratios
Debt - long term 1,961 4,527 4,527 4,527 EBIT Margin 17.1 15.4 16.5 17.5
Debt - short term 12,280 9,299 10,269 11,146 PAT Margin 15.4 14.7 15.1 16.4
Deffered Tax Liability 661 306 306 306 Debtor days 66 70 70 70
Other liabilities & provisions 1,505 1,346 1,354 1,354 Creditor days 43 46 46 46
Source of funds 68,677 64,012 72,686 82,107 Return Ratios (%)
RoE 16.3 16.6 16.2 16.6
Assets RoCE 16.9 16.9 16.9 17.5
Goodwill 12,580 11,758 11,758 11,758 RoIC 28.3 24.4 31.7 34.9
Intangible Assets 1,592 1,811 1,679 1,716 Valuation Ratios (x)
PPE 6,979 6,444 4,687 5,172 P/E 18.2 18.8 15.7 13.3
O.non current assets 3,201 4,102 4,102 4,102 EV / EBITDA 10.6 12.1 9.9 8.2
Investments 710 887 884 881 EV / Net Sales 2.2 2.3 1.9 1.7
Debtors 9,884 10,544 11,547 12,608 Market Cap / Sales 2.6 2.6 2.4 2.2
Cash & Cash equivalents 5,271 4,493 16,268 24,392 Price to Book Value 2.9 3.1 2.5 2.2
Investments - short term 30,178 25,033 25,033 25,033 Solvency Ratios
O.current assets 8,957 10,992 9,300 10,041 Debt/EBITDA 1.2 1.3 1.3 1.2
Trade Payable 6,549 6,813 7,595 8,293 Debt / Equity 0.3 0.3 0.3 0.2
OCL & Provisions 4,126 5,239 4,978 5,303 Current Ratio 1.8 1.8 1.7 1.7
Application of funds 68,677 64,012 72,686 82,107 Quick Ratio 1.8 1.8 1.7 1.7
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities Ltd | Retail Equity Research Page 10

ICICI Direct Research coverage universe (IT)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE(%)
Sector / Company (|) TP(|) Rating (| Cr) FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY20E
Cyient (INFENT) 616 720 Hold 7,532 36.0 42.7 46.5 18.6 15.7 14.4 12.2 9.5 8.7 21.4 21.6 20.9 17.3 18.2 17.6
Eclerx (ECLSER) 1,048 1,120 Hold 4,522 72.9 72.2 80.3 15.1 15.2 13.7 10.7 9.8 8.6 28.2 28.4 28.9 24.1 20.9 21.2
Firstsource (FIRSOU) 58 87 Buy 5,332 4.8 5.1 6.1 16.0 14.8 12.4 12.9 11.1 9.2 13.0 16.4 17.5 13.9 13.7 14.9
HCL Tech (HCLTEC) 978 1,090 Buy 138,064 62.6 74.7 80.5 15.6 13.1 12.2 11.8 9.3 8.1 27.4 32.0 31.0 23.8 26.5 24.8
Infosys (INFTEC) 651 800 Buy 307,518 32.3 38.2 44.2 21.9 18.5 16.0 14.8 12.6 10.9 30.9 31.6 33.2 22.5 23.1 24.5
KPIT Tech (KPISYS) 205 300 Hold 6,168 12.9 17.8 21.1 24.1 17.4 14.7 15.4 11.3 9.4 15.5 19.4 20.2 13.9 16.7 16.8
MindTree (MINCON) 802 880 Hold 13,552 34.3 44.6 51.9 23.5 18.1 15.5 17.3 11.6 9.9 24.9 29.5 30.5 20.8 23.3 23.8
NIIT Technologies (NIITEC) 1,212 1,365 Buy 7,237 45.6 67.1 75.9 26.1 17.7 15.7 12.9 9.8 8.0 19.4 24.5 24.5 15.8 20.3 20.1
Persistent (PSYS) 567 605 Hold 4,455 40.5 45.5 48.7 13.8 12.3 11.4 7.7 5.8 5.2 19.8 20.8 20.0 15.2 15.3 14.7
TCS (TCS) 1,856 1,880 Hold 720,731 67.4 85.6 95.1 14.2 22.4 20.2 20.9 16.2 14.2 37.6 45.1 40.4 29.6 35.1 31.3
Tech Mahindra (TECMAH) 663 770 Buy 75,079 42.7 44.7 51.3 17.9 17.1 14.9 14.9 11.2 9.3 21.5 20.3 20.1 20.2 18.3 17.7
Wipro (WIPRO) 317 360 Buy 142,763 16.8 20.1 23.8 18.8 15.7 13.3 12.1 9.9 8.2 16.9 16.9 17.5 16.6 16.2 16.6
Source: Company, ICICI Direct Research

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RATING RATIONALE
ICICI Direct Research endeavours to provide objective opinions and recommendations. ICICI Direct Research
assigns ratings to its stocks according to their notional target price vs. current market price and then
categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and
the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research Page 12

ANALYST CERTIFICATION
We /I, Devang Bhatt, PGDBM, Deepti Tayal, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect
our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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ICICI Securities Ltd | Retail Equity Research Page 13