Infosys Limited – Powered by intellect, Driven by values

Date Published: February 15, 2021

Company Overview:

Infosys Limited was started in 1981 by seven people with $250. Today, are a global leader in the ‘next generation’ of IT and Consulting. Infosys defines, designs and delivers technology–enabled business solutions that help Global 2000 companies win in a Flat World. Infosys also provides a complete range of services by leveraging their domain and business expertise and strategic alliances with leading technology providers.Infosys’ offerings span business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, re–engineering, independent testing and validation services, IT infrastructure services and business process outsourcing. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk.Infosys takes pride in building strategic long–term client relationships. Infosys has global presence through its 50 offices and development centers spread across India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan.  Infosys’s Finacle is Universal banking solution that caters to core banking, e–banking, Islamic banking, treasury, wealth management and CRM requirements of retail, corporate and global banks. It is used by over 106 banks across 61countries,namely UK US, China, Taiwan, Hong Kong, India, Zimbabwe, Saudi Arabia, Maldives, Nepal,  etc. Software Engineering & Technology Labs (SETLabs) is the research arm of Infosys. it is at the forefront of anticipating and shaping the evolution of technology and its impact on business. Infosys SETLabs undertakes targeted R&D to address your business problems. Our researchers are engaged in cutting–edge research to share insights with clients. We focus on research areas such as Malleable Architecture, Pervasive Access, Flexible Processes and Personalized Information. These areas constitute the fundamental business technology components of a progressive, information–centered enterprise.

Infosys is an Indian multinational company that provides business consulting, information technology and outsourcing services. Globally, it has sales and marketing offices and 114 development centres. Evidently, it is a global leader in technology and consulting services. To point out, it enables 1045 clients in more than 50 countries to create and execute strategies for their digital transformation. Found in 1981, Infosys is a brainchild of seven engineers: N. R. Narayana Murthy, NandanNilekani, N. S. Raghavan, S.Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora. This was done in the aftermath of their resignation from Patni Computer Systems. Starting with a meager capital of Rs.10,000, it was incorporated as “Infosys Consultants Pvt Ltd.” Later in 1983, the company’s corporate headquarters was relocated from Pune to Bengaluru. Interestingly, it has seen quite a few name changes- each revolving around the base name: Infosys. Soon after a name change to Infosys Technologies Private Limited in April 1992, it was renamed to Infosys Technologies Limited in June 1992.

Industry Overview:

India is the world’s largest sourcing destination with largest qualified talent pool of technical graduates in the world. The country has the low-cost advantage, being 5-6 times inexpensive than the US. India is the second-fastest economy going for digitization among 17 leading economies in the world. According to Cloud Next Wave of Growth in India report, India’s cloud market is expected to grow three-fold to Rs. 49,621 crore (US$ 7.1 billion) by 2022, driven by the demand for Big Data, Data Analytics, Artificial Intelligence (AI) and Internet of Things (IoT).India’s IT industry contributed around 7.7% to country’s GDP (Gross Domestic Product) and is expected to contribute 10% to India’s GDP by 2025. As of FY20, the IT industry employed 4.3 million people. In FY20, the sector added 205,000 jobs, up from 185,000 jobs added in FY19. Total number of employees grew to 1.02 million cumulatively for four Indian IT majors (including TCS, Infosys, Wipro, HCL Tech) as on December 31, 2019. Indian IT industry employed 205,000 new hires and had 884,000 digitally skilled talent in 2019.

Company Operations:

Infosys Limited, incorporated on July 2, 1981, is engaged in consulting, technology, out-sourcing and next-generation services. The Company, along with its subsidiaries, provides business information technology (IT) services comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management; consulting and systems integration services comprising consulting, enterprise solutions, systems integration and advanced technologies; products, business platforms and solutions to accelerate intellectual property-led innovation, including Finacle, its banking solution, and offerings in the areas of Analytics, Cloud and Digital Transformation. The Company’s segments are Financial Services and Insurance (FSI), Manufacturing and Hi-tech (MFG &Hi-TECH), Energy & utilities, Communication and Services (ECS), Retail, Consumer packaged goods and Logistics (RCL), and Life Sciences and Healthcare (LSH). The Company operates in North America, Europe, India and Rest of the World.The Company offers various services, such as consulting services, business services, technology services and outsourcing services. The Company’s consulting services include enterprise applications, digital transformation, insights and analytics, and change and learning. Its business services include Data Analytics, Digital and Oracle. Its technology services include application management; cloud, infrastructure and security; engineering services; enterprise mobility; Internet of things (IoT) and testing. Its outsourcing services include application outsourcing, business process outsourcing, customer service, finance and accounting, human resources, and sourcing and procurement. Its subsidiaries include Infosys BPO Limited, Infosys Technologies (China) Co. Limited, Infosys Technologies S. de R. L. de C. V., Infosys Technologies (Sweden) AB., Infosys Technologies (Shanghai) Company Limited and Infosys Tecnologia DO BrasilLTDA.response to being declared a public limited company. Thereafter another name change in 2011 gives it the name of Infosys Limited.

Road ahead for IT companies:

IT & BPM industry revenue was estimated at around US$ 191 billion in FY20 at 7.7% growth y-o-y and is estimated that it will grow to US$ 350 billion by 2025. Moreover, revenue from the digital segment is expected to form 38% of the total industry revenue by 2025. Digital economy is estimated to reach Rs. 69,89,000 crore (US$ 1 trillion) by 2025. The domestic revenue of the IT industry was estimated at US$ 44 billion and export revenue was estimated at US$ 147 billion in FY20.Artificial Intelligence (AI) is expected to boost India’s annual growth rate by 1.3% by 2035, as per NITI Aayog. A substantial increase in AI by Indian firms can result in a 2.5% increase in India’s Gross Domestic Product (GDP) in the immediate term.Computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflow worth US$ 44.91 billion between April 2000 and March 2020. The sector ranked second in FDI inflow as per the data released by Department for Promotion of Industry and Internal Trade (DPIIT).PE (Private Equity) investment in the sector stood at US$ 11.8 billion across 493 deals in 2019. The Government of India has extended tax holidays to the IT sector for Software Technology Parks of India (STPI) and Special Economic Zones (SEZs). As of February 2020, there were 421 approved SEZs across the country, with 276 of them from IT & BPM and 145 as exporting SEZs.Further, the country is providing procedural ease and single window clearance for setting up facilities. On May 2019, the Ministry of Electronics and Information Technology (MeitY) launched the MeitY Startup Hub (MSH) portal.Also, the Government has identified IT as one of the 12 champion service sectors for which an action plan is being developed. It is setting up a Rs. 5,000 crore (US$ 745.82 million) fund for realizing the potential of these champion service sectors.

Our View:

Infosys pioneered the Global Delivery Model and became the first IT company from India to be listed on NASDAQ. The company is a global leader in consulting, technology, and outsourcing solutions. It enables clients in more than 30 countries to outperform the competition and stay ahead of the innovation curve. Infosys helps enterprises transform and thrive in a changing world through strategic consulting, operational leadership, and the co-creation of breakthrough solutions, including those in mobility, sustainability, big data, and cloud computing.As India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India. The industry is expected to grow to US$ 350 billion by 2025 and BPM is expected to account for US$ 50 55 billion of the total revenue.For the quarter ended September 2020, Infosys has posted a net profit of Rs 49 bn (up 20.3% YoY). Sales on the other hand came in at Rs 246 bn (up 8.6% YoY).

As per the mean estimates of earnings projections made by brokers at Bloomberg, the estimated EPS for FY2021 and FY2022 stands at Rs.44.32 and  Rs.49.53 respectively as compared to EPS of Rs.42.14 for FY 2020. The stock is trading at a PE of 29.62. Therefore, taking into consideration that this recommendation of Infosys Ltd is being given for 1-2years’ time horizon.

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