Choose a public limited company from https://finance.yahoo.com/ 1. 2. Write a ca
ID: 2792753 • Letter: C
Question
Choose a public limited company from https://finance.yahoo.com/ 1. 2. Write a case study about the company highlighting the following a. What market structure does the company fall into? b. Make a table with last 3 year's pricing strategy, profit, share price, earnings c. Write one page summary based on the 3 years data from (b) d. Who are the competitors of the company you chose? e. What is their competitive advantage over the competitors f. Give some recommendations to improve company's profit, earningExplanation / Answer
Chosen Company: Infosys Limited
This company is an Information technologies service company of India.
I chose Information Technology Industry as it is a major sector of the country having a major contribution to the export of service.
Secondly, Due to the US presidential election and Visa norms by the USA, there is more fluctuation in the Share prices of the company.
It is a listed company and its share are listed in NYSE, NSE (India), EPA.
Profitability Analysis
Consolidated Profit & Loss Infosys Technologies Limited
(Rs in Cr)
Mar' 16
Mar' 15
Mar' 14
Income :
Operating Income
62,441.00
53,319.00
50,133.00
Expenses
Material Consumed
41.00
44.00
30.00
Manufacturing Expenses
6,101.00
3,855.00
3,656.00
Personnel Expenses
34,418.00
29,802.00
28,831.00
Selling Expenses
-
-
-
Administrative Expenses
4,761.00
4,747.00
4,235.00
Expenses Capitalized
-
-
-
Cost Of Sales
45,321.00
38,448.00
36,752.00
Operating Profit
17,120.00
14,871.00
13,381.00
Other Recurring Income
3,128.00
3,430.00
2,664.00
Adjusted PBDIT
20,248.00
18,301.00
16,045.00
Financial Expenses
-
-
-
Depreciation
1,266.00
1,017.00
1,317.00
Other Write-offs
-
-
-
Adjusted PBT
18,982.00
17,284.00
14,728.00
Tax Charges
5,301.00
4,911.00
4,072.00
Adjusted PAT
13,681.00
12,373.00
10,656.00
Non-Recurring Items
-
-
-
Other Non-Cash adjustments
-
-
-
Reported Net Profit
13,678.00
12,372.00
10,656.00
Earnings Before Appropriation
50,164.00
43,826.00
36,697.00
Equity Dividend
5,542.00
5,090.00
3,605.00
Preference Dividend
-
-
-
Dividend Tax
1,134.00
1,034.00
615.00
FY16
Gross profit margin has been dropped by0.45%, however, the margin band set by the company is between 24% to 26% and the Gross profit margin of the company is way above the standard set by the company. As per Mr. Ranganath D. Mavinakere (CFO Infosys Limited) the decline in the gross profit margin due to decline in the pricing, which is 1.1% in constant currency term on full year basis. This year company has increased its revenue by 17.11%.
FY15
Gross profit margin has been increased by merely 1.20%, however, the margin band set by the company is between 24% to 26% and the Gross profit margin of the company is way above the standard set by the company. This year company’s revenue growth was 6.36%
FY14
Gross profit margin was for the financial year 2013-14 was 26.69%, however, the margin band set by the company is between 24% to 26% and the Gross profit margin of the company is way above the standard set by the company.
Profitability Ratio
Infosys Limited
TATA Consultancy Services Limited
2016
2015
2014
2016
2015
2014
Gross Profit Margin
27.42%
27.89%
26.69%
28.16%
25.87%
30.75%
Net profit Margin
21.91%
23.20%
21.26%
22.36%
20.97%
23.43%
ROCE
27.61%
25.30%
24.21%
38.87%
42.20%
41.87%
Infosys Limited holds a major share in Indian IT Industry. However, its performance in the year 2016, 2015, and 2014 was good except few instances. In the year 2016, operating profit margin of the company dropped by 0.47% due to decrease in pricing by 1.1% on constant currency term. This shows that there is pressure for price decline in the industry to gain contract.
However, the Operating margin of Infosys Limited is around 29.05% for the quarter ended on Dec 2016 and it is expected to stay that way. Net profit margin for the quarter ended on Dec 2016 is around 22.84%. Both ratios is within the expected profit margin.
India’s software services industry, already facing pressures on profitability and revenue, has become the latest target of the Trump administration’s moves to protect American jobs.
Recently The US administration said that it had drafted an executive order to overhaul the H1B work-visa program that software services firms based in India use to send skilled workers to the US. Some of the proposed changes are:
These changes will have an impact on Indian IT companies like Infosys, which has around 30% of its workforce in Onsite and particularly more than 20% of total workforce in the US.
Recommendations:
Consolidated Profit & Loss Infosys Technologies Limited
(Rs in Cr)
Mar' 16
Mar' 15
Mar' 14
Income :
Operating Income
62,441.00
53,319.00
50,133.00
Expenses
Material Consumed
41.00
44.00
30.00
Manufacturing Expenses
6,101.00
3,855.00
3,656.00
Personnel Expenses
34,418.00
29,802.00
28,831.00
Selling Expenses
-
-
-
Administrative Expenses
4,761.00
4,747.00
4,235.00
Expenses Capitalized
-
-
-
Cost Of Sales
45,321.00
38,448.00
36,752.00
Operating Profit
17,120.00
14,871.00
13,381.00
Other Recurring Income
3,128.00
3,430.00
2,664.00
Adjusted PBDIT
20,248.00
18,301.00
16,045.00
Financial Expenses
-
-
-
Depreciation
1,266.00
1,017.00
1,317.00
Other Write-offs
-
-
-
Adjusted PBT
18,982.00
17,284.00
14,728.00
Tax Charges
5,301.00
4,911.00
4,072.00
Adjusted PAT
13,681.00
12,373.00
10,656.00
Non-Recurring Items
-
-
-
Other Non-Cash adjustments
-
-
-
Reported Net Profit
13,678.00
12,372.00
10,656.00
Earnings Before Appropriation
50,164.00
43,826.00
36,697.00
Equity Dividend
5,542.00
5,090.00
3,605.00
Preference Dividend
-
-
-
Dividend Tax
1,134.00
1,034.00
615.00
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