FINANCIAL MANAGEMENT

(SM-725)

NATIONAL INSTITUTE OF TECHNOLOGY KARNATAKA

SCHOOL OF MANAGEMENT

FINANCIAL ANALYSIS OF INFOSYS LTD. FOR

THE YEAR 2016-20
By

DIVYA BHADANI
205SM007
MASTER OF BUSINESS ADMINISTRATION
2020-2022

SUBMITTED TO:

SUPRABHA K R
ASSISTANT PROFESSOR
NITK (SOM)
DECLARATION

I hereby declare that the Analysis of IT Industry Report entitled "Financial

Analysis of Infosys Ltd." submitted under the valuable guidance of Dr.
Suprabha K R, Assistant Professor, School of Management, National Institute of
Technology Karnataka, Surathkal, on the partial fulfillment for the completion
of the course 'Financial Management SM-725' in the 'School of Management, is
a bonafide report of the work carried out by me. The material contained in this
report has not been submitted to any University or Institution for the award of
any degree.

Place: NITK, Surathkal DIVYA BHADANI (205SM007)

Date: 24-05-2021 School of Management, NITK
CERTIFICATE

This is to certify that the Project Report entitled “Financial Analysis of Infosys
Ltd.” submitted by DIVYA BHADANI (205SM007) under the guidance of Dr.
Suprabha K R, Assistant Professor, SOM, NITK. As the record of the work
carried out by her is accepted as the Financial Management Project Report
submission in the partial fulfillment of the requirements for the award of the
degree of Master of Business Administration in School of Management,
National Institute of Technology Karnataka.

Dr. Suprabha K R

ASSISTANT PROFESSOR

SOM, NITK
ACKNOWLEDGEMENT

First and foremost, I sincerely thank the Almighty for his grace for the
successful and timely completion of the report on the topic “Financial Analysis
of Infosys Ltd.." I wish to express my gratitude and thanks to my professor Dr.
Suprabha K. R, Assistant Professor, School of Management, National Institute
of Technology Karnataka, Surathkal, for her support, valuable and countless
suggestions, and timely guidance. Finally, I would like to thank my family and
friends, who are inevitable for the successful completion of this report. I am
greatly indebted to all those who helped me to make this seminar a successful
one.

DIVYA BHADANI

205SM007
Table of Contents
S.no contents Page no
1 History of the Company 1
2 Vision & Mission 2
3 Company overview 3
4 SWOT Analysis 4
5 Financial Statements
5.1 Profit & Loss account 6
5.2 Balance sheet 7
5.3 Cash flow statement 8
6 Financial Analysis (Ratio analysis & interpretation)

6.1 Current Ratio 9

6.2 Quick Ratio 10
6.3 Net Profit Margin 11
6.4 Operating Profit Margin 12
6.5 Asset turnover ratio 13
6.6 Debt-equity ratio 14
6.7 Return on Capital Employed 15
6.8 Earnings Per Share 16
6.9 Return on investment (ROI) 17
7 Leverage introduction 18
7.1 Operating leverage 19
7.2 Financial leverage 20
7.3 Combined leverage 21
8 Cash Flow analysis 22
9 Industry Analysis 24
Comparing Infosys with top 25 IT Companies 25

10 Conclusion 26
11 Reference 27
HISTORY OF INFOSYS

Infosys Limited is an Indian multinational IT company that furnishes business

consulting, information technology, and outsourcing services. It is the third-largest India-
based IT services company by 2012 revenues and the second-largest employer of h-1b visa
professionals in the United States. The Company is headquartered in Bangalore. Infosys is
the second-largest Indian IT company after Tata Consultancy Services by 2020 revenue
figures and the 602nd largest public Company in the world according to Forbes Global 2000
ranking. On 31 December 2020, its market capitalization was $71.92 billion. Infosys is the
incredible story of the success and successful execution of the business model. The Company
has entered the red ocean market with an Insignificant stake and power in the market.
Business models proposed by Infosys redefined market needs, improved service time and
quality, and conceptually change the game rules that more prominent players were following.

In 1981
• Infosys is settled by N. R. Narayana Murthy and 6 engineers in Pune, India, with an
initial capital of US$ 250.
• Signs up its first client, Data Basics Corporation, in New York

In 1983
• Relocates corporate headquarters to Bangalore

In 1987
• Opens first international office in Boston, US

In 1993
• Introduces Employee Stock Options (ESOP) program
• Acquires ISO 9001/Tick IT certification
• Goes public

In 1996
• The Infosys Foundation is established

In 1998
• Starts Enterprise Solutions (packaged applications) practice

1
Company Overview

INFOSYS LTD.
Infosys Ltd. was incorporated in the year 1981. It is a worldwide technology
services firm that characterizes, designs, and delivers information technology
(IT)- empowered business solutions for its customers. The organization gives
end-to-end business arrangements that influence technology for their customers,
including specialized consulting, design, product engineering, maintenance,
systems integration, package-enabled consulting, and implementation and
infrastructure management services. The Company has a presence in 191
locations across 46 nations.
It is listed on the BSE with a BSE Code of 500209, NSE with an NSE Symbol
of INFY, and ISIN of INE009A01021. Its Registered office is in Bengaluru,
Karnataka. Their Registrars are ACC Ltd. Its examiners are Bharat S Raut and
Co, BSR and Co, BSR and Co LLP, Deloitte Haskins and Sells LLP

Infosys Mission Statement

Infosys International Inc. is dedicated to providing the people, services, and
solutions our clients need to meet their information technology challenges and
business goals. Infosys International Inc. is dedicated to providing the people,
services, and solutions our clients need to meet their information technology
challenges and business goals.
Infosys Vision Statement
To help our clients meet their goals through our people, services, and solutions
Infosys Values
• Understanding
• Quality
• Trust
2
In 1999
• Touches revenues of US$ 100 million. Listed on NASDAQ
• Infosys becomes the 21st Company in the world to achieve a CMM Level 5 certification

In 2006
• Infosys celebrates 25 years. Revenues cross US$ 2 billion. Employees grow to 50,000+
• N. R. Narayana Murthy retires from the services of the Company on turning 60.

In 2009
• Infosys selected as a member of The Global Dow
• Employee strength grows to over 100,000 2011
• N. R. Narayana Murthy hands over the chairmanship to K.V. Kamath
• Infosys crosses the US$ 6 billion revenue mark, and employee strength grows to
over 130,000

In 2012
• Listed on the NYSE market
• Forbes ranks Infosys among the world's most innovative companies
• Infosys among top 25 performers in Caring for Climate Initiative
• Infosys crosses the US$ 7 billion revenue mark

In 2013
• Infosys Board appoints N. R. Narayana Murthy as Executive Chairman of the
Board
• Infosys begins trading on NYSE Euronext London and Paris markets
• Infosys Edge wins the NASSCOM Business Innovation Award for 2013

Vision
"To be a globally respected corporation that provides best-of-breed business solutions,
leveraging technology, delivered by best-in-class people.”

Mission
"To achieve our objectives in an environment of fairness, honesty, and courtesy towards
our clients, employees, vendors, and society at large."

3
Its current market capitalization remains at Rs 301225.4 Cr. In the most recent
quarter, the organization has detailed Gross Sales of Rs. 0 Cr and Total Income
of Rs.0 Cr. Its present share price is 706.
The organization's management incorporates:
Punita Kumar Sinha, D Sundaram, DN Prahlad, Michael Gibbs, Salil S Parekh,
UB Pravin Rao, Kiran Mazumdar Shaw, Nandan M Nilekani.

SWOT ANALYSIS OF INFOSYS

Strength
• Cost advantage – The presence of Infosys in India is key to its success
• The breadth of service offering – end to end solutions including high-end services like
IT consultancy and KPO
• Quality and maturity of the process – Infosys has quality standards such as CMM
Level 5i to differentiate from other competitors
• Global and 24/7 delivery capability – excellent internet backbone and
telecommunications facilities enabling companies to develop 24/7 delivery
capabilities from India itself

Weakness
• Excessive dependence on the USA for revenues – US Companies are cutting down
the IT budget, raising revenues for Infosys.
• Excessive dependence on the BFSI sector for revenues – The banking sector is
facing a crisis globally and is going to spend less on IT.
• High rates of attrition – Although the slowdown in the global economy has
lowered the attrition rate, the industry still faces high attrition rates as compared to
other sectors.
• Decreasing competitive advantage – rising salary expenses are taking away the
cost advantage enjoyed by Indian companies (including Infosys).

4
Opportunity 
• Greater scope for product innovation
• Increased focus on high-end work like consulting and KPO
• Domestic demand for IT services is to grow at 20 %
• Greater scope to service domains other than BFSI such as Transportation,
Infrastructure, etc.
• Satyam fiasco – Likely to have a positive impact on business considering corporate
governance, possibility of shifting of business, getting higher incremental business
from overlapped clients, and winning new business from new clients

Threat
• The global economic slowdown may continue for several years
• US Govt. against outsourcing
• Shrinking margins due to rising wage inflation
• Rupee-dollar movement affects revenue and hence margins
• Increased competition from foreign firms like Accenture, IBM, etc.
• Increased competition from low-wage countries like China, Indonesia, etc.

5
FINANCIAL STATEMENTS
Profit & Loss Account

Particulars Mar '20 Mar '19 Mar '18 Mar '17 Mar '16

Rs. (in Crores)

12 months 12 months 12 months 12 months 12 months

Income
Sales Turnover 79,047.00 73,107.00 61,941.00 59,289.00 53,983.00
Net Sales 79,047.00 73,107.00 61,941.00 59,289.00 53,983.00
Other Income 2,700.00 2,852.00 4,019.00 3,062.00 3,006.00
Total Income 81,747.00 75,959.00 65,960.00 62,351.00 56,989.00
Expenditure
Power & Fuel Cost 0.00 171.00 162.00 180.00 179.00
Employee Cost 42,434.00 38,296.00 32,472.00 30,944.00 28,207.00
Other Manufacturing Expenses 0.00 12,633.00 9,399.00 8,592.00 5,466.00
Miscellaneous Expenses 16,578.00 3,333.00 2,611.00 2,366.00 4,422.00
Total Expenses 59,012.00 54,433.00 44,644.00 42,082.00 38,274.00

Mar '20 Mar '19 Mar '18 Mar '17 Mar '16

12 months 12 months 12 months 12 months 12 months

Operating Profit 20,035.00 18,674.00 17,297.00 17,207.00 15,709.00

PBDIT 22,735.00 21,526.00 21,316.00 20,269.00 18,715.00
Interest 114.00 0.00 0.00 0.00 0.00
PBDT 22,621.00 21,526.00 21,316.00 20,269.00 18,715.00
Depreciation 2,144.00 1,599.00 1,408.00 1,331.00 1,115.00
Profit Before Tax 20,477.00 19,927.00 19,908.00 18,938.00 17,600.00
Tax 4,934.00 5,225.00 3,753.00 5,120.00 4,907.00
Reported Net Profit 15,543.00 14,702.00 16,155.00 13,818.00 12,693.00
Total Value Addition 59,012.00 54,433.00 44,644.00 42,082.00 38,274.00
Equity Dividend 0.00 13,768.00 7,500.00 6,980.00 5,570.00
Corporate Dividend Tax 0.00 0.00 0.00 0.00 1,273.00
Per-share data (annualized)
Shares in issue (lakhs) 42,580.00 43,562.79 21,841.14 22,969.45 22,969.45
Earnings Per Share (Rs) 36.50 33.75 73.97 60.16 55.26
Equity Dividend (%) 350.00 430.00 870.00 515.00 485.00
Book Value (Rs) 146.16 143.96 290.74 296.12 265.93

6
Balance sheet

Infosys Ltd.

Rs (in Crores)

Particulars Mar'20 Mar'19 Mar'18 Mar'17 Mar'16

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 2129.00 2178.00 1092.00 1148.00 1148.00

Reserves & Surplus 60105.00 60533.00 62410.00 66869.00 59934.00

Net Worth 62234.00 62711.00 63502.00 68017.00 61082.00

Secured Loan .00 .00 .00 .00 .00

Unsecured Loan .00 .00 .00 .00 .00

TOTAL LIABILITIES 62234.00 62711.00 63502.00 68017.00 61082.00

Assets

Gross Block 12114.00 20578.00 18079.00 16210.00 14709.00

(-) Acc. Depreciation .00 10081.00 8922.00 7605.00 6461.00

Net Block 12114.00 10497.00 9157.00 8605.00 8248.00

Capital Work in Progress .00 1212.00 1442.00 1247.00 934.00

Investments 17922.00 18139.00 17899.00 24977.00 11078.00

Inventories .00 .00 .00 .00 .00

Sundry Debtors 15459.00 13370.00 12151.00 10960.00 9798.00

Cash and Bank 13562.00 15551.00 16770.00 19153.00 29176.00

Loans and Advances 21984.00 20161.00 18458.00 14943.00 13498.00

Total Current Assets 51005.00 49082.00 47379.00 45056.00 52472.00

Current Liabilities 18301.00 15714.00 11939.00 11518.00 11214.00

Provisions 506.00 505.00 436.00 350.00 436.00

Total Current Liabilities 18807.00 16219.00 12375.00 11868.00 11650.00

NET CURRENT ASSETS 32198.00 32863.00 35004.00 33188.00 40822.00

Misc. Expenses .00 .00 .00 .00 .00

TOTAL ASSETS(A+B+C+D+E) 62234.00 62711.00 63502.00 68017.00 61082.00

7
Balance Sheet findings of Infosys Ltd.

 The Company's current liabilities during FY20 stood at Rs 18807 crore as compared
to Rs 16219 crore in FY19, thereby witnessing an increase of 16.04%.
 Current assets decline by 2% and stood at Rs 32198 crore, while fixed assets rose 15%
and stood at Rs 12114 crore in FY20.
 Overall, the total assets and liabilities for FY20 stood at Rs 62234 crore as against Rs
62711 crore during FY19, thereby witnessing a decline of 0.79%.

Cash Flow Statement

PARTICULARS MAR’2 MAR’1 MAR’1 MAR’1 MAR’1

0 9 8 7 6

(Rs - In
crore)

12 12 12 12 12
months months months months months

Net Profit Before Tax 15,543.00 14702.00 16155.00 13818.00 12693.00

Net Cash from Operating Activities 13989.00 12475.00 10478.00 9578.00

170030.00

Net Cash (used in) from Investing Activities -2390 -587.00 5684.00 -13494.00 -1207.00

Net Cash (used in)/from Financing Activities -175910 -14571.00 -20536.00 -6968.00 6908.0
0

Net (decrease)/increase In Cash and Cash -9190 -1454.00

-1219.00 -2383.00 -10023.00
equivalents

Opening Cash & Cash Equivalents 16770.00 19153.00 29176.00 27722.00

15551.00

Closing Cash & Cash Equivalents 15551.00 16770.00 19153.00 29176.00

13562.00

8
Cash Flow findings of Infosys Ltd.

 INFOSYS's cash flow from operating activities (CFO) during FY20 remained at Rs 155
billion, an improvement of 12.3% from the previous year.
 Cash flow from investing activities (CFI) during FY20 stood at Rs -2400 billion on a YoY
premise.
 Cash flow from financial activities (CFF) during FY20 stood at Rs -175 billion, an
improvement of 29% on a YoY premise.
 Overall, net cash flows for the Company during FY20 stood at Rs -3 billion from the Rs.
-28 billion net Cash flows seen during FY19.

9
FINANCIAL ANALYSIS

Ratio Analysis of Infosys Ltd.

Current Ratio

Years 2020 2019 2018 2017 2016

Current Assets 51005.00 49082.00 47379.00 45056.00 52472.00

Current Liabilities 18807.00 16219.00 12375.00 11868.00 11650.00
2.71 3.03 3.83 3.80 4.50

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
Current Ratio=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Current Ratio
5 4.5
4.5
3.83 3.8
4
3.5 3.03
3 2.71
Ratio

2.5
2
1.5
1
0.5
0
20162017 2018 2019 2020
Year

An ideal current ratio for IT Industry lies between 1.5 to 3. In this case,
CR is decreasing from last three years and moving towards ideal;
 The company has enough assets to pay short-term liabilities.
 Excellent use of Current Assets
 Moderate Ratios.

10
Quick Ratio

Year 2020 2019 2018 2017 2016

Quick Assets 49650.00 47870.00 45937.00 43809.00 51538.00

Current Liabilities 18807.00 16219.00 12375.00 11868.00 11650.00
Quick Ratio 2.64 2.96 3.72 3.70 4.47

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑡𝑜𝑟𝑖𝑒𝑠 (𝑤𝑜𝑟𝑘−𝑖𝑛−𝑝𝑟𝑜𝑔𝑟𝑒𝑠𝑠)

Quick Ratio= 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Quick Ratio
Ratio

5 4.47
4.5
3.72 3.7
4
3.5 2.96
3 2.64
2.5
2
1.5
1
0.5
0
20202019 2018 2017 2016
Year

An ideal quick ratio is 1 or higher. Here it is more than 1, which means the
Company has sufficient liquid assets to meet short term obligations. It
shows that the Company is highly liquid in Cash.

11
Net Profit Margin

Year 2020 2019 2018 2017 2016

Profit After Tax 15,543.00 14,702.00 16,155.00 13,818.00 12,693.00

Net Sales 79,047.00 73,107.00 61,941.00 59,289.00 53,983.00
Net Profit Margin 19.66 20.11 26.08 23.30 23.51
(%)

Net Profit Margin = (Profit after tax / Net sales) * 100

Net profit margin (%)

30

25

20

15

10

0
2020 2019 2018 2017 2016

It shows the overall profitability of the Company after deducting all indirect and
non-cash expenses. Net profit for the year declined by 0.45% YoY. It shows;

 Aggressive Selling by the Company

 Competitive Pressure in the Industry

12
Operating Profit Margin

Year 2020 2019 2018 2017 2016

Operating Profit 20,035.00 18,674.00 17,297.00 17,207.00 15,709.00

Net Sales 79,047.00 73,107.00 61,941.00 59,289.00 53,983.00
Operating Profit 25.34 25.54 27.92 29.02 29.09
Margin(%)

Operating Profit Margin = (operating profit / net sales) * 100

OPERATING PROFIT MARGIN (%)

30
29.02 29.09
29
27.92
28
PERCENTAGE %

27

26 25.34 25.54

25

24

23 2020 2019 2018 2017 2016

YEAR

It is used to determine the organization's integrity and its ability to pay short
and long-term debts. Operating profit margins witnessed a little fall and
remained at 25.3% in FY20 as against 25.5% in FY19. Comparing it from last 5
years, the ratio is decreasing year after year. The company can do better in
making a profit.

13
Asset Turnover ratio

Year 2020 2019 2018 2017 2016

Net Sales 79,047 73,107 61,941 59,289 53,983

Total current 51005 49082 47379 45056 52472
assets
Asset turnover 1.55 1.49 1.31 1.315 1.03
ratio

Asset turnover ratio = Net sales / total current assets

ASset turnover ratio

1.8
1.6 1.55 1.49
1.4 1.31 1.315
1.2
1.03
1
0.8
0.6
0.4
0.2
0
2020 2019 2018 2017 2016

Asset turnover ratio

Asset Turnover Ratio of this company has been decreasing over the five years
except the financial year 2017-18 because of the after effects of Demonetization
and GST. The asset turnover ratio measures a company's efficiency and
productivity. It has a low asset turnover ratio it indicates it is not efficiently
using its assets to generate sales.

14
Debt-Equity Ratio

Year 2020 2019 2018 2017 2016

Net Worth (equity) 62234.00 62711.00 63502.00 68017.00 61082.00

Debtors 15459.00 13370.00 12151.00 10960.00 9798.00
Debt-equity ratio 4.02 4.69 5.22 6.20 6.24

Debt-equity ratio = Debt / Equity

Debt-equity rati o
7

0
2020 2019 2018 2017 2016

A less than 1 ratio indicates that the portion of assets provided by stockholders
is greater than the portion of assets provided by creditors. Here, the company
was in a better position during FY 2015-16 and weak in FY 2019-20.

15
Return on Capital Employed

Year 2020 2019 2018 2017 2016

Profit Before Tax 20,477.00 19,927.00 19,908.00 18,938.00 17,600.00

Capital Employed 62234.00 62711.00 63502.00 68017.00 61082.00
Return on capital 33.08 31.77 31.35 27.84 28.81
employed (%)

Capital Employed = Total Equity + Long Term Borrowing + Short Term Borrowing

Return on capital employed

34 (%)
Return %

33
32
31
30
29 33.08
31.77 31.35
28
27 28.81
27.84
26
25
20202019 2018 2017 2016
Year

It is used to represent the Company's profitability with respect to the amount of

capital invested in the Company. A higher return shows a higher percentage of
the Company's value that can be returned as profit to shareholders.

16
As ROCE is increasing every year, that shows Company is able to pay a
good return on Shareholder’s investment.

Earnings Per Share

Year 2020 2019 2018 2017 2016

Net Profit 15,543.00 14,702.00 16,155.00 13,818.00 12,693.00

Outstanding Shares 425.80 435.63 218.41 229.69 229.69

Earnings Per 36.50 33.75 73.97 60.16 55.26

Share (Rs.)

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
Earnings Per Share =
𝑂𝑢𝑡𝑠𝑎𝑡𝑛𝑑𝑖𝑛𝑔 𝑆h𝑎r𝑒𝑠
YEAR

EARNINGS PER SHARE

2016 55.26

2017 60.16

2018 73.97

2019 33.75

2020 36.5

0 10 20 30 40 50 60 70 80
RUPEES

There is no hard and fast rule for Earnings Per Share of a company. The higher
the EPS value, the better it is. Although EPS has increased from last year but
comparing to 5 years, it is not at its best.

17
Return on Investment (ROI)

Years 2020 2019 2018 2017 2016

Sales 79,047 73,107 61,941 59,289 53,983

Expenses 59,012.00 54,433.00 44,644.00 42,082.00 38,274.00

ROI 33.95 34.3 38.74 40.88 41.04

ROI
45
40
35
30
25
20
15
10
5
0
2020 2019 2018 2017 2016

18
The return on investment ratio during the year 2017 is best for Infosys over the last five
years. On the other hand, 2019 is the worst performance year for the Infosys. It is
drastically decrease and come to a negative value.

LEVERAGE

 Leverage is a strategy that firms use to raise their assets, cash flows, and returns though it
can also magnify losses.

 In finance, the term 'leverage' describes the firm's capability to use fixed cost assets or
funds to raise the return to its owners, i.e., equity shareholders. In other words, the fixed
cost funds, i.e., debentures & preference share capital, act as the fulcrum, which assists
the lever, i.e., the firm to lift, i.e., to increase the earnings of its owner, i.e.,,, the equity
shareholders.

 Leverage is an investment technique in which we use a small amount of our own money
to make an investment of much bigger value. In that way, Leverage gives us outstanding
financial power.

 Leverage means the employment of assets or funds for which the Company pays a fixed
cost or fixed return. The concept that is used to study the effects of the different mix of
debt and equity on the Shareholder's return and risk in the capital structure of a firm is
called Leverage.

 There are three types of Leverage –

1) Operating Leverage
2) Financial Leverage
3) Combined Leverage
19
 The Leverage related to the employment of fixed cost assets is referred to as operating
Leverage. The Leverage resulting from the usage of fixed cost/return source of fund is
called financial Leverage. Combined leverage focus on the entire income of the concern.

OPERATING LEVERAGE

 Leverage associated with investment activities is called operating leverage.

 It measures the degree to which a firm or project can increase operating income by
increasing revenue.

 It may be defined as the firm’s ability to use fixed operating costs to magnify the effects of
changes in sales on its earnings before interest and taxes.

 It is determined by the relationship between the firm’s sales revenue and its earnings before
interest and taxes. It is caused due to fixed operating expenses in a firm.

Operating leverage = Contribution / EBIT

Degree of Operating Leverage = % Change in EBIT / % Change in Sales

where

 % Change in EBIT = (EBIT current year – EBIT previous year) / EBIT previous year 

 % Change in Sales = (Sales current year – Sales previous year) / Sales previous year

20
MAR’20 MAR’19 MAR’18 MAR’17 MAR’16

SALES 79,047.00 73,107.00 61,941.00 59,289.00 53,983.00

OPERATING PROFIT (EBIT) 20,035.00 18,674.00 17,297.00 17,207.00 15,709.00

DEGREE OF OPERATING 0.897 0.441 0.116 0.971 0.761

LEVERAGE
(%)

FINANCIAL LEVERAGE

 Leverage associated with financial activities is called financial leverage.

 It is the use of borrowed money (debt) to finance the purchase of assets with the
expectation that the income or capital gain from the new asset will exceed the cost of
borrowing.

 It is defined as the ability of a firm to use fixed financial charges to magnify the effects
of changes in EBIT on EPS.

 It is caused due to fixed financial costs to the firm. It represents the relationship between
the firm's operating profit and the earning available for ordinary shareholders.

Financial Leverage = EBIT/ EBT

Financial Leverage = EBIT/ (EBIT-Interest)

Degree of Financial Leverage = % Change in EPS / % Change in EBIT

21
MAR’20 MAR’19 MAR’18 MAR’17 MAR’16

EBIT 20,035.00 18,674.00 17,297.00 17,207.00 15,709.00

LESS: INTEREST 442.00 1253.00 2611.00 1731.00 1891.00

EBT 20,477.00 19,927.00 19,908.00 18,938.00 17,600.00

FINANCIAL LEVERAGE 1.00 1.07 0.88 0.91 0.89

COMBINED LEVERAGE
 It is the combination of operating and financial leverage.

 The combined leverage may be defined as the relationship b/w contribution and the taxable
income. 

 Both operating and financial leverage are closely concerned with firm’s capacity to meet its
fixed cost & their combined effect will measure the firm’s financial strength.

COMBINED LEVERAGE = CONTRIBUTION / EARNING BEFORE TAX

Degree of combined leverage = operating leverage * financial leverage

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MAR’20 MAR’19 MAR’18 MAR’17 MAR’16

OPERATING LEVERAGE 0.897 0.441 0.116 0.971 0.761

FINANCIAL LEVERAGE 1.00 1.07 0.88 0.91 0.89

COMBINED LEVERAGE 0.897 0.472 0.102 0.883 0.677

COMBINED LEVERAGE
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
MAR’20 MAR’19 MAR’18 MAR’17 MAR’16

CASH FLOW ANALYSIS

 Cash flow from operating activities: Infosys Ltd. has given us the Cash from
operations. The initial information talks about the P & L adjustment. The profits for 2016

were 15709.00, and for the year 2017, it has increased to 17207.00. The increase in profits is

primarily because of an increase in interest income from both long-term and current

investments. The profits are made from the sale of current investments and long-term
investments. Tentative and bad advances have also been reduced.

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 Cash flow from investing activities: The Firm or Company has invested in the

'purchase of fixed assets.' This amount has been financed partly by the sale of fixed assets

and from the equal proceeds of investments. The Company again has acquired investments

maybe at the end of the year because the interest received has reduced by half compared to

2016. It has also purchased long-term investments. Finally, the amount used in investing
activities has decreased substantially from 3542 to 616.

 Cash flow from financing activities: This gives us information about the amount of

money either increased or used, which can be equity or debt. For Infosys, it can be observed

that the Company has chosen to finance itself through share capital. Hence, we notice an

increase since last year, from 720 to 903. The Company has tried to reduce its long-term
borrowing from 1.85 to 1.40. There also has been

 a decrease in repayment of long-term borrowings. We notice that Infosys has extended credit

facilities completely to quiet to some range.

Finally, we can say that the Company has invested mainly in the purchase of fixed assets.

This amount has been increased by funds from operating activities, from financing activities,

as well as the availability of Cash in hand, with scheduled banks and FDs. This shows that

the Company is planning for enlargement, and so, the positives or negative impact of this
enlargement should be evaluated in the future cash flow statements.

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From all the analysis we can see that company is growing at steady rate
and remarkable points are:

We can see below that company’s capital is increased more than by 100%, this
is because of issue of bonus shares in the year 2020-2016. This shows that the
company’s owned fund is increasing.

 Reserve and Surplus is constantly increasing which shows that the

company accumulated.
 Profits are increasing at a growing rate. It shows that company is making
more profit.
 By analyzing sources of fund, we can state that, company is more
dependent on owner’s fund rather than borrowed fund.
 Investment is also growing at increasing rate. In last 4 years it has
increased by 90 %.
 Current asset is increasing by 45%. This is due to increase in cash and
bank balance and other current assets.
 Net income and expenses are increasing by 50 % and 48 % respectively.
This shows that the income of the company is 4 % higher than its
expenses.

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INDUSTRY ANALYSIS

Comparing financials of Infosys Ltd. with Industry financials. The global IT

company's earnings ratio is 16.55 as compared to 29.80 of industry. Whereas
its cash flow is 14.09 and the industry's cash flow is 10.53. Net Profit Margin
of Company is 18.24% compare to 3.81% of the industry.

India's Information Technology and back-office sector are expected to grow

7.7% in fiscal 2020 to $191 billion, with exports touching $147 billion.

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COMPARISON OF INFOSYS LTD. WITH TOP 25
COMPANIES OF ITS SECTOR

In comparison with other IT companies, Infosys stood at 2 nd Rank with Market

Capitalization of Rs. 2,94.304 Crore and Ne profit of Rs. 15,543 Crore in the
Financial year 2019- 2020.

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CONCLUSION

Infosys Ltd. key Products/Revenue Segments incorporate Software

Development Charges which contributed Rs 72845.00 Crore to Sales Value, i.e.,
99.64 % of Total Sales Rs 73107.00 Crore for the year ending 31-Mar-2019.

For the quarter ended 31-03-2020, the organization has announced a Standalone
deal of Rs 20161.00 Crore, up 0.61% from last quarter Sales and up 6.61 %
from a year ago same quarter Sales. The company has a detailed net profit after
tax of Rs 15,520.00 Crore in FY20.

Latest Share Holding of Infosys Ltd.

Infosys climbed its FY20 income direction to 10-10.5 % from 9-10 % on

anticipated lines. The organization kept up its operating margin direction scope
of 21-23 % for the full financial.

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References

infosys.com
economictimes.com
macrotrends.com
zack.com
https://www.infosys.com/about/history.html
https://www.investopedia.com/terms/l/leverage.asp
https://www.slideshare.net/piyalidasgupta/leverage-2655057

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