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Valuation Group5

Infosys is a large global IT services company based in India with a market capitalization of over $100 billion. It faces competition from other major Indian IT firms like TCS, HCL Technologies, and Wipro. The analysis calculates Infosys' weighted average cost of capital and uses a discounted cash flow model to determine its intrinsic value is ₹873.5 per share, significantly below the current market price of ₹1,385.60, indicating the stock is overvalued by around 36%. A sensitivity analysis shows the valuation is most dependent on the expected future growth rate and terminal growth rate assumptions.

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rajan tiwari
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27 views18 pages

Valuation Group5

Infosys is a large global IT services company based in India with a market capitalization of over $100 billion. It faces competition from other major Indian IT firms like TCS, HCL Technologies, and Wipro. The analysis calculates Infosys' weighted average cost of capital and uses a discounted cash flow model to determine its intrinsic value is ₹873.5 per share, significantly below the current market price of ₹1,385.60, indicating the stock is overvalued by around 36%. A sensitivity analysis shows the valuation is most dependent on the expected future growth rate and terminal growth rate assumptions.

Uploaded by

rajan tiwari
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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DCF

VALUATIO
N
Group 5
ABOUT THE
COMPANY
Infosys is a global leader in next-generation digital services
and consulting. It is one of the largest IT services
companies in the world, with a market capitalization of
5,67,083 CR. Infosys is the second-largest IT services
company in India. In the last year, Infosys stock has
returned -11.79%, compared to a 5.81% return for the Nifty
50 index.
COMPETITORS
HCL Technologies Limited is an Indian Wipro Limited is a global
multinational information technology TCS stock is among the most information technology (IT) services
(IT) services and consulting company popular and heavily traded on the and consulting company
headquartered in Noida, Uttar Pradesh. Indian stock exchanges. It is a headquartered in Bangalore, India. It
HCL Tech is India's third-largest IT component of the Nifty 50 and is a part of the Wipro Group, one of
services company, with a market Sensex indices. TCS stock has India's largest conglomerates. Wipro
capitalisation of 3,44,825 CR and consistently stayed below and with is the fourth-largest IT services
revenue. It is also one of the leading IT the market over the past decade. In company in India by market
services companies in the world. HCL the last year, TCS stock has returned capitalization of 2,00,061 CR and
stock has consistently outperformed the 3.65%, compared to a 5.81% return revenue. It is also one of the leading
market over the past decade. In the last for the Nifty 50 index. It has a IT services companies in the world.
year, HCL stock has returned 21.83%, Market Capitalization of 12,29,478 In the last year, HCL stock has
compared to a 5.81% return for the CR returned -2.61%, compared to a
Nifty 50 index. 5.81% return for the Nifty 50 index.
SHAREHOLDING
INF HCLTEC S TC WIPR
Y H S O
RATIO ANALYSIS
ROIC
INTRINSIC
GROWTH
WACC

We have taken Tata Consultancy Services, Wipro Limited, and HCL Technologies Limited to get the Industry insights as they are the
closest competitors to Infosys Limited. We have calculated the Average and Median of Tax Rate, D/E Ratio, D/C ratio, Levered Beta
and Unlevered Beta to be used in calculating Weighted Average Cost of Capital (WACC).
WEIGHTED
AVERAGE
COST OF CAPITAL
FREE CASH FLOW
TO FIRM

The Reinvestement Rate is the Expected growth rate of the industry the company is operating in.
DISCOUNTED
CASH FLOW
36
DCF Value %
Overvaluation

Price

Summary of DCF Valuation for Infosys


• Current Market Price: ₹1,385.60
• DCF Valuation Price: ₹873.5
• The discounted cash flow (DCF) analysis of Infosys, a leading IT
services and consulting company, reveals a valuation price of
₹873.5 per share, significantly below the current market price of
₹1,385.60. This analysis is based on a rigorous examination of the
company's financials, future cash flow projections, and the
application of a discount rate.
Key Observations:
• Market Overvaluation: The DCF valuation suggests that Infosys is
currently overvalued by 41%. This means that the market price
exceeds what can be justified by the company's projected future
cash flows.
SENSITIVITY
Expected Growth

ANALYSIS Rate

Terminal Growth Rate

According to our calculations, the expected growth rate is


16.59% and terminal growth rate is 5.38%
In case the scenario changes, the values change according to
the above table
COMPARABLE
COMPANY
VALUATION
FINANCIAL
SUMMARY
DU-PONT
ANALYSIS
DU-PONT
ANALYSIS
DU-PONT
• The company's ROE is growing
consistently. From 20.81% in
FY17, the RoE has increased
SUMMARY • The growth in Equity Multiplier
from 1.15x in FY17 to 1.60x as
of FY23 suggests that the
close to 32% as of FY23. company is taking on more debt
• However, the company's Net to increase its asset base than
Profit margin is shrinking on a equity.
YoY basis from 20.96% in FY17 • This improvement in operational
to 16.42% in FY23. efficiency and debt-funded asset
• The increase in the company's acquisition strategy explains the
Asset Turnover ratio from 0.87x growth in the company's RoE
in FY17 to 1.22x in FY23 amid falling Net Profit margins.
indicates it is using its asset base
more efficiently.
THANK
YOU
Gauri Vig (F2022021)
Mansi Malpani (F2022030)
Preethi Pradeep (F2022036)
Rajan Kumar Tiwari (F2022037)
Satyam Pandey (F2022045)
Siddharth Gopal (F2022049)

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