A Summer Internship Project Report

On

Equity Research of Indian IT Sector using Fundamental Analysis

At

IIFL Securities Limited, Pune

By

Aaditya Gupta
MBA (Finance)

Batch - 2021-23

Under the guidance of

Dr. Rupali Gupta

Submitted to

In partial fulfilment of the requirement for the award

of Degree of Master in Business Administration
(MBA)

Submitted Through

MIT-WPU School of Management (PG), Pune.

 CERTIFICATE

This is to certify that Mr. Aaditya Gupta Of MIT-WPU School of Management (PG) has
successfully completed the project work titled Equity Research of Indian IT Sector using
Fundamental Analysis_ in partial fulfilment of requirement for the award of MBA prescribed by
the MIT World Peace University, Pune, from 10 May 2022 to 10 August 2022.

This project is the record of authentic work carried out by him/her during the academic year.

Dr. Rupali Gupta Prof. Dr. Dhanashree Tharkude Prof. Dr. P. Srinivas Subbarao

Internal Project Guide A-Head of School Dean

School of Management (PG) School of Management (PG) School of Management

2
 CERTIFICATE

This is to certify that Mr. Aaditya Gupta Of MIT-WPU’s School of Management (PG) has
successfully completed the project work titled Equity Research of Indian IT Sector using
Fundamental Analysis.

This project is the record of authentic work carried out by him from 10 May 2022 to 10 August 2022.

Authorized signature with stamp

3
 DECLARATION

I, Mr. Aaditya Gupta hereby declare that this project is the record of authentic work carried out
by me during the academic year 2021-2023. This project is plagiarism free and has not been
submitted to any other University or Institute towards the award of any degree.

Signature of the student

(AADITYA GUPTA)

4
 TABLE OF CONTENTS

S.No. Component Page No.

Executive Summary 06

1 Industry & Company Profile 07-14

2 Introduction (Project) 15

Review of Literature 16-17

Theoretical Background 18-26

3 Objectives (Project) 27

4 Scope 28

5 Project Methodology 29-31

6 Task Analysis 32-55

7 Observations / Findings 56

8 Limitations 57

9 Learning Outcomes 58

10 Bibliography 59

5
 EXECUTIVE SUMMARY

In the global economy, the health and development of any nation's stock market are influenced by its
financial system and underlying economic conditions. The well-established financial system offers
the capital inputs required for manufacturing and service provision. The people's level of living is
supported by sound economic indicators and policies, which also have an impact on the expansion of
an economy.
Since the last decade, the Indian economy has grown at an accelerating rate. Introduction to
In this period of rising fintech and various awareness programs, people have become more financially
literate. This has led to a drastic change in their investment, saving, and expenditure patterns. People
are focusing upon more and more diversification of funds in their portfolios to get safe and better
returns. With an extent to trading in financial markets, one should consider what strategies to be
adopted in the long run. One of the most important among them is the concept of fundamental
analysis.

The project report is based on the effective application of fundamental analysis of a company’s overall
financial position. The study helps us in identifying the various methodologies an investor can adopt
while trading in the equity market. A security's inherent worth is assessed utilizing economic,
financial, qualitative, and quantitative variables in fundamental analysis. Both macroeconomic and
microeconomic factors are thought to have an impact on a company’s stock value. These variables
may include the state of the economy, business environment, financial situation, and management
skills. When performing fundamental analysis, the primary goal should be to determine if a security
is undervalued or overvalued by determining its intrinsic worth and comparing it to its current stock
price.

This report on “Equity Research of Indian IT Sector using Fundamental Analysis” uses various
factors like different tables, charts and ratios to do the analysis part for the clients and to suggest
them the best stock based on analysis.

6
 CHAPTER 1
INDSUTRY & COMPANY PROFILE

1.1 Industry Profile

Introduction to Financial Services Industry

India's financially diverse industry is rapidly growing, with both new market entrants and established
financial services companies experiencing significant development. Mercantile banks, insurance
firms, NBFIs, cooperatives, retirement funds, mutual funds, and other smaller financial organizations
make up the sector. The banking regulator recently permitted the creation of new organizations, like
payment banks, expanding the variety of organizations operating in the market. Commercial banks
make up more than 64% of the total assets held by the financial system, making the Indian financial
sector primarily a banking sector. With the presence of several financial services providers and
increasing financial literacy

For this industry's liberalization, regulation, and improvement, the Indian government has
implemented several changes. The government and Reserve Bank of India (RBI) have collectively
structured many steps to make it easier for MSMEs (micro, small, and medium-sized enterprises)
businesses to receive financing. These efforts include launching the Micro Units Development and
Refinance Agency, giving instructions to banks regarding collateral requirements, and establishing
the Credit Guarantee Fund Scheme for Micro and Small Enterprises (MUDRA). Due to the combined
efforts of the public and private sectors, India undoubtedly has one of the most active capital markets
in the world. To provide access to finance for Micro, Small, and Medium Enterprises (MSMEs), the
Small Industries Development Bank of India (SIDBI) introduced a new website in 2017. (MSMEs).

7
1.2 Company Profile

With an aim to provide quality financial services, Mr. Nirmal Jain & Mr. R. Venkataraman founded
IIFL Holdings (Formerly India Infoline Limited), in 1995 headquartered in Mumbai. IIFL and its
group companies are backed by Canadian investor Prem Watsa, private equity firm General
Atlantic and CDC Group, the UK Government's private equity arm.

One of the largest integrated financial services companies in India, IIFL Holdings Limited, provides
a basket of offerings such as Wealth and Asset Management, Financial Advisory and Broking, Mutual
Funds and Financial Product Distribution, Non-Banking and Housing Finance, Investment Banking,
Institutional Equities, Realty Broking as well as Advisory Services. On January 31, 2018, had
approved the reorganization of the IIFL Group, which resulted in three listed entities – IIFL Finance,
IIFL Wealth, and IIFL Securities.

IIFL Securities Limited is amongst the immense autonomous full-service retail and institutional
broking house In addition to offering a wide variety of Financial Business services and products to
firms, HNI investors, foreign portfolio investors, mutual funds, insurance companies, alternative
investment funds, trusts, and retail clients, IIFL Securities Limited is a well-known investment
advisory firm in India.

As of March 31, 2020, the company had served over 2.4 million consumers since its formation in
1996 through a network of roughly 2,500 points of presence, including branches and business partners
in more than 500 Indian cities.

IIFL is a corporation that always works to provide value for its clients through the goods and services
it provides.

The business has expanded its selection of goods and services through a mix of organic growth and
strategic transactions.

Financial planning, equity, commodities, and currency broking (both cash and derivatives),
depository participant services, portfolio advisory, investment banking, distribution of mutual funds,

8
bonds, portfolio management services, substitute investment funds, and other investments are
included in the retail brokerage and financial products businesses. These products and services give
consumers access to the Indian financial capital markets while also giving them a streamlined
interface via which they can monitor various aspects of their portfolios, such as the success of their
assets.

The company's institutional equities division provides institutional clients with corporate access,
research, and brokerage services.

With the support of comprehensive technology platforms, seasoned management, and a wide network
of branches all over the nation, IIFL is well-positioned as a well-known brand in the business. With
meticulous planning for investments and superior offerings, the company continuously efforts to
deliver more value to its customers.

Fig :1 Offerings of IIFL Group

Mission

At IIFL, the company laid the right foundation for excellence under four pillars of Research,
Technology, Human Capital, and unflinching adherence to the strictest standards of Ethics and
Compliance to become the most respected financial services company in India.
9
Vision
To be the most respected financial services company in India, not necessarily the largest or
most profitable.

Values
• Fairness: Fairness in the transactions with all stakeholders including employees, customers,
and vendors, bereft or fear or favor.
• Integrity: Integrity, and honesty of the utmost nature, in the letter, in spirit, and in all the
dealings with people, internal or external.
• Transparency: Transparency in all the dealings with stakeholders, media, investors, and
the public at large.

Board of Directors of IIFL Securities

Ms. Rekha Warriar (Independent Director)

Mr. R. Venkataraman (Managing Director)

Mr. Narendra Jain (Whole-Time Director)

Mr. Shamik Das Sharma (Independent Director)

Mr. Anand Bathiya (Independent Director)

Mr. Visvanathan Krisnan (Independent Director)

Services Offered

In addition to being a top investment advisory firm in India, IIFL Securities Limited (Formerly India
Infoline Limited) is one of the largest independent full-service retail and institutional broking houses.
It offers a variety of financial services and products to corporate, institutional investors, foreign
portfolio investors, mutual funds, insurance firms, alternative investment funds, trusts, high net worth
individuals, and retail clients.

10
 Fig: 2 Services offered by IIFL Securities

IIFL offers an all-in-one user-friendly GUI-based trading platform ‘Trader Terminal’ available in
both desktop applications and a Web application that can be accessed through a browser Be it
corporate clients or personal accounts, it offers a vast variety of tools, charts, and figures to help in
trading and investment.

Fig: 3 Trader Terminal

11
 Fig: 4 IIFL Markets Mobile Application

Equity: One of India's leading stockbroking companies, IIFL offers brokerage services to both
private individuals and large institutions. The innovative trading programme from IIFL, Trader
Terminal, offers unparalleled trading simplicity. Both a desktop programme and an internet
application accessed through a browser are offered for the trading terminal.

Commodities: Through a terminal that may be used as a desktop application or a Web application
that can be used through a browser, IIFL offers simple access to currency trading. The terminal
delivers real-time streaming quotations and completes transactions at a breakneck pace to ensure that
all currency transactions are completed quickly.

Digital Gold: To overcome the hassle of holding physical gold, the company provides a platform in
a partnership with Safe Gold. It combines the advantage and precision of the internet with the safety
of a SEBI registered Custodian and more security than traditional gold purchases.

Wealth Management: For High Net worth individuals and corporate clients, IIFL offers private
wealth advisory services with an aim of retaining their funds

12
Financial Planning: The relationship management representatives at IIFL are trained in such a
manner that understand and suggest investments based on their requirements and future needs such
as buying a car, owning a house or planning their children’s future.

Mutual Fund: Managing Mutual Funds from various funds-houses could be done using the Trading
Terminal and the mobile-based application.

Fixed income instrument: Trader Terminal, the proprietary trading terminal of IIFL offers the
flexibility of trading fixed income instruments directly from the market and can be managed from an
application or through the web.

Peers of IIFL Securities:

Groww
UpStock
INDmoney
Zerodha
HDFC Securities
ICICI Securities
Sharekhan
Angel Broking
Motilal Oswal

Global Footprint

Fig: 5 IIFL’s global presence

13
Organizational Structure

The IIFL Group's reorganisation into three separate entities—IIFL Finance, IIFL Wealth, and IIFL
Securities—was approved by the Board of Directors of IIFL Finance Limited at its meeting on January
31, 2018. As of March 30, 2020, India Infoline Finance Limited and IIFL Finance Limited are one single
entity.
The IIFL Group's middle firms have reached a critical mass, therefore the corporation decided to
reorganise the business structure and create unbiased entities focused on their industry verticals. This
process is designed to help any business develop more quickly, attract the right talent, and become more
advanced and effective. In addition, the shift from close-knit conglomerate to split entities will make sure
less difficult regulatory compliance, superior cost for stakeholders together with extra synergistic benefits.

CHAIRMAN

PRESIDENT
(RETAIL
BROKING)

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

SENIOR MANAGER

BRANCH MANAGER

RELATIONSHIP MANAGER

Fig: 6 Organizational structure of IIFL Securities

14
 CHAPTER 2
INTRODUCTION TO PROJECT

Title: Equity Research of Indian IT Sector using Fundamental Analysis

Success does not come overnight. To earn a fortune in the stock market, a thorough study needs to be
done. The project is an overall compilation for assisting investors to identify and interpret potentially
strong stocks. Fundamental analysis demands analyzing a corporation’s financial records to
determine the fair value of the business. Considering a long-term perspective, an investor needs to
follow a Top to Bottom approach which is denoted as the EIC Analysis (Economy-Industry-Company
analysis).

The project covers the IT sector for evaluation but the same methodology can be implied for
evaluating multiple stocks of different sectors. Following the approach, Economic factors such as
GDP, Inflation rate and unemployment rates are taken into consideration. A thorough ratio analysis
needs to be done to understand what it takes to be a fundamentally strong company.

The project was completed while working at IIFL Securities, Pune as an intern. A stock can only be
suggested after understanding the clients’ preferences towards the stock market and knowing whether
they are more interested in day-to-day trading, or in making a big investment, their purpose and
expectation from the investment.

The project helped me to gain an insight into the mechanism by which the secondary market operates
and helped in the application of the theoretical knowledge into practical use.

15
2.1 Review of Literature

1. Bauman (1996) believes that the important start of the research studies in the stock valuation
using the fundamental analysis return for three main articles: The first study by Lev and
Ohlson (1982) who identified the need to "create a stock valuation models to complement and
expand the traditional correlation studies for accounting research based on the market".
2. Lev (1989) defines our understanding of the method of data in valuation stock, among his
suggestions for future research calling for more methodology modelling and studies that use
samples of firms within a specific industry or economic sector, thus allowing researchers to
take advantage of their knowledge of the detailed disclosures and institutions.
3. Venkatesh C K and Madhu Tyagi (2011) in their research paper titled, “Fundamental analysis
as a way of share valuation in comparison with technical analysis” detailed the different
movement of share prices in comparison with fundamental and financial statement analysis
"not exceeding much from the list of financial ratios, which is meant to be used by investors",
and discussed the necessity to change capital market research to measure and evaluate issues.
4. Bernard (1994) criticized the inquiry regarding the role of technical analysis. It also
emphasized on market capitalization and organizational structure.
5. Sugandharaj Kulkarni (2011) in his research paper titled, “A study on fundamental analysis
of ONGC” explains about the relevance of fundamental analysis together with the attempt to
find the intrinsic value of shares.
6. Shaveta Gupta (2011) examined the management concerns and factors that influenced
dividend decisions in the Indian engineering, FMCG, IT, and textile industries between 2004
and 2008. Shareholder wealth was calculated as the ratio of Market Value to Book Value.
With the exception of the textile industry, where the dividend payout ratio was only negatively
significant for the year 2006, all years and industries saw a negative correlation between
dividend pay-out ratio and shareholder wealth.
7. Pandya and Pandya (2013), discovered that while analysis aids within the decision-making
process for some investments, not all investments rely solely on analysis. a way for
determining intrinsic value is fundamental analysis, which looks at economic, financial,
qualitative, and quantitative elements also as company-specific factors.

16
8. Dr. Ganesh L., Dr. Madhu Tyagi, and Dr. Venkates CK (2012): The goal of this study was to
determine the association between the selected stocks' accounting information and returns
during a ten-year period, from 2001 to 2010, in the information technology, banking, and
pharmacy industries. Using F SCORE, they conducted their research to identify any short-
term changes in the firm's operational effectiveness, financial policy, and profitability
9. Kitloon, Jimmy Honga, and Eeliza Wu (2014) By using OLS and a state-space model,
conducted an empirical study on price-based technical indicator variables in relation to
accounting variables to explain cross-sectional stock returns. They discovered that accounting
variables have a long-term impact on small-cap stocks. This analysis is only applied to the
Russell 3000 index from 1999 to 2012.
10. Sahana Jaen, Afghan Jabeen (2017): The primary objective of this article is to evaluate the
performance of the pharmaceutical stock, which is traded on the National Stock Exchange
(NSE), and to assess the risk exposure that has been foreseen using the employed technical
indicators. It would be the researcher's job to analyze daily earnings if a potential investor's
pricing factors changed on a daily basis in the market. This effort is made to learn the average
daily moving price of each stock on the NSE.

17
2.2 Theoretical Background

The purpose of the stock exchange is to give investors a place to swap shares, funds, or other financial
items from unaffiliated companies. These interactions are made possible by the stock exchange's price
discovery mechanism, which is based on fundamental and technical analysis. Investors can buy or
sell financial goods they want to own due to fluctuations in stock prices.

Fundamental Analysis

The method of determining a security's inherent worth is known as fundamental analysis (FA) which
involves looking at relevant economic and financial elements. Fundamental analysts examine all
potential influences on a security's value, including microeconomic elements like managerial
efficiency and macroeconomic factors just like the status of the economy and market circumstances.

Every stock study aims to determine if security is fairly valued relative to the market. To determine
a fair market value for a firm, analysts often first assess the general health of the economy, followed
by the competitiveness of the industry in question, and eventually the performance of each company.

To determine the worth of a stock or any other kind of security, fundamental analysis examines
publicly available data. An investor, for instance, can do a fundamental analysis of a bond's worth by
keeping an eye on economic variables like interest rates and the status of the general economy, and
then examining details about the bond issuer, such probable changes in its credit rating.

To ascertain a company's underlying value and potential for future growth for stocks, the elemental
analysis considers statistics such as revenues, earnings, future growth, return on equity, profit
margins, and other factors. The financial accounts of an organization contain all of this information.

Fundamental analysis can examine financial data, management, business concepts, and
competitiveness at the corporate level, but it can also examine supply and demand dynamics for the
products being offered at the industry level. Fundamental analysis for the economy could focus on
economic data to evaluate the economy's existing and potential future growth.

Fundamental analysis integrates economic, industry, and corporate analysis to predict future stock
prices and determine a stock's current fair value. Fundamental analysts think that the stock is either

18
overvalued or undervalued if fair value and current stock price are not equal, then the market price
will eventually converge on fair value.. Fundamental analysts don't heed the advice of the random
walkers and believe that markets are weak-torn efficient.

The fundamental analysis of a stock aims to solve questions related to :

• Revenue growth of the enterprise

• Profit Earnings

• Its edge over its competitors in the segment

• How good is its debt repaying capacity.

Making money is everyone’s dream but people often get scared by the risks. The stock exchange is
one such field where a person knowing is prepared to take a calculated risk which in return gives him
a profit multiplied by manifolds.

Investing in many various stocks can help build your wealth by leveraging growth in different sectors
of the economy, leading to a profit even if some of your stocks lose value.

• Dividend Income

Some stocks provide income within the form of a dividend. These Payments are made whether or not
the stock has decreased in value and serve as income in addition to any future stock sale earnings. As
an investor's investment portfolio expands over time, dividend income might assist support a
retirement or purchase even more investments.

• Gain in Investment

One of the primary benefits of investing in the stock market is the chance to grow your money. Over
time, the stock exchange tends to rise in value, though the costs of individual stocks rise and fall
19
daily. Investments in stable companies which will grow tend to make profits for investors. Likewise,
investing in many various stocks will help build your wealth by leveraging growth in different sectors
of the economy, leading to a profit even if some of your stocks lose value.

• Diversification

For investors who put money into differing types of investment products, a stock exchange
investment has the benefit of providing diversification. stock exchange investments change value
independently of other types of investments, like bonds and real estates. The stock also adds risk to a
portfolio, also as the potential for large, rapid gains, helping investors avoid risk-averse or overly
conservative investment strategies.

• Ownership

Purchasing stock entails acquiring a share of the firm you choose to buy stock in. This shows that
there are additional advantages to stock market investing that come with running a business. On
corporate board members and specific business decisions, shareholders vote. Additionally, they get
yearly reports that provide information about the business. Possessing stock in the firm you work for
can be a method to show your commitment and link your money to the success of the company as a
whole.

The multitude of things affecting a company’s profitability can be broadly classified as:

1. Economy-wide factors:

All the macroeconomic factors that affect the companies’ overall profitability come under this head.
Ex: Inflation rate, foreign exchange rates, corporate tax rates, GDP growth rate, trade barriers, the
impact of war, etc.

2. Industry-wide factors:

Factors acting for or against an industry in which a company belongs are considered under this. Ex:
Change in trends, the seasonal shift of goods, the demand-supply gap in the industry, availability of
substitutes, Changes in government policies for a specific industry/commodity.
20
3. Company-wide factors:

These elements are unique to a company. the ability of the management to effect profitability, as well as
firm-specific elements including equipment, branding, and plant and machinery.
The main goal of purchasing a security is to receive dividends and then sell it for a profit. Therefore,
forecasts of the share's future prices are valuable to investors. These in turn will be influenced by the
performance of the sector to which the company belongs according to Fundamental and Technical Analysis
as well as the overall state of the nation's economy.

A 3-step evaluation process adopted for Fundamental Analysis

• Economy Analysis: Knowledge of macroeconomic trends and circumstances

• Industry Analysis: Examining the prospects for the sector that the company is a part of.

• Company Analysis: Evaluating the company's future success and the intrinsic value of its stock.

Company
Analysis
Economy
Analysis
Industry
Analysis

Fig: 7 Top to Bottom (EIC Analysis)

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ECONOMY ANALYSIS

An economy's strengths and shortcomings are examined through economic analysis. Understanding an
economy's current state requires conducting an economic study. Based on problems that keep them within
a certain economy, it can span a variety of significant economic parameters. The future company earnings
and the distribution of dividends and interest to investors could be predicted by analysing the economic
variables.

Factors considered in Economy Analysis:

Markers of an economy's future performance expectations are called economic indicators or business
indicators. Economic summaries, different indices, and earnings reports are available. These reports cover
topics such as housing, unemployment, bankruptcies, consumer price level (a measure of inflation), stock
exchange prices, industrial production, retail sales, and changes in financial resources.

Coincidental indicators are those that move at the same rate and in the same direction as the economy.
These offer details on this economic situation. Retail sales, GDP, industrial production, and personal
income are examples of coincident indicators. A coincident index is frequently used to pinpoint economic
cycle peaks and valleys.

Business cycles, a subfield of macroeconomics, is where these indicators are researched. Three key
characteristics of economic indicators are timing, frequency of data, and relationship to the business cycle
or economy. Indicators for the business cycle or economy can be classified as procyclical, countercyclical,
or acyclical.

• Economic procyclical indicators go in the same direction as the economy. It implies that this figure
rises when the economy is doing well. The gross domestic product is one instance (GDP).
• The economy and the countercyclical economic indicator move in opposition to one another. As the
economy deteriorates, the percentage rises.
• An economy's health is not mentioned in an acyclic economic indicator. An illustration would be a
sporting event that has no impact on the economy.

22
 Economic Factors:

Fig: 8 Economic factors influencing the stock market

INDUSTRY ANALYSIS

It is mechanism that provides a wide perspective in any industry. Factors such as Change in trends,
the seasonal shift of goods, the demand-supply gap in the industry, availability of substitutes, Changes
in government policies for a specific industry/commodity are taken into consideration

Porter’s Five Forces Model

1. Competitive rivalry
This force examines the degree of market competitiveness. It takes into account the number of
competitors there are today and what each one is capable of. When there are few companies selling a
good or service, the market is growing, and customers can switch to a competitor's good or service
quickly and affordably, competition is fierce. When there is fierce competition, advertising and
pricing wars break out, which can be detrimental to a company's bottom line.
23
2. The bargaining power of suppliers
This force looks at how much power and influence a supplier might have on the prospect of price
hikes, which would lower a company's profitability. It assesses the availability of additional resources
and the number of raw material providers. The fewer suppliers there are, the more they are in a
position to influence. When there are many suppliers, businesses are in a better position.

3. The bargaining power of customers

This force investigates consumer power and how it affects costs and product standards. When there
are fewer consumers, they have more influence. However, when there are many vendors, it is simple
for consumers to switch. In contrast, customers' purchasing power is limited when they make tiny
purchases of goods that are vastly different from those of rival companies.

4. The threat of new entrants

This force takes into account the potential for competitors to enter the market. The risk of an existing
company losing market share increases when new competitors find it simpler to enter the market.
Absolute cost advantages, the availability of materials, economies of scale, and strong brand identity
are a few examples of entry-level obstacles.

5. The threat of substitute products or services

This task group is looking into how simple it is for customers to switch from a company's product or
service to one offered by a rival. To determine whether they can cut their costs even further, it looks
at the number of rivals, how their prices and quality relate to the business under consideration, and
how much profit those competitors are making. The cost of switching affects both consumers'
propensity to shift and the danger of alternatives, both short- and long-term.

COMPANY ANALYSIS

Several qualitative and quantitative factors are used to judge a company’s current state. Some of
which are discussed below:

24
Quantitative factors:

The primary components of the investment research technique known as quantitative analysis are
data and precise figures. Instead relying on less reliable qualitative aspects, quantitative analysts
attempt to forecast outcomes using math and formulas. Quantitative analysts frequently assist
financial institutions in deciding how to value the assets or securities they seek to sell.

Ratio Analysis

1.Current Ratio

2.Debt to Equity Ratio

3.Net Profit Ratio

4.Earnings per Share

5. Dividend Per share

6. Return on Equity

7. Price/earnings to Growth Ratio

8. Intrinsic value

Qualitative factors:

• Business Model

The very first step an Investor should consider even before looking at the financials is: What
exactly does the company do'' This is referred to as a company's business model — it's how a
company makes money. One can check an overview of a company’s business model by
visiting the company’s website or going through the document that the company submitted to
the SEBI.

25
 To understand a company's business model and know what drives it for ensuring growth and
sustainability it is advised to understand its business model.
• Consumer Satisfaction

Consumer satisfaction refers to how happy a customer is with a product or service overall.
Customer opinion and the capacity to maintain their interest in a product can positively affect
the success and sales of a company or organization. Customers are more likely to purchase a
product or service in the future and experience a sense of loyalty toward a company if they
can more completely satisfy their demands.

• Management
Management teams are probably quite important in their interactions with other employees
and customers, depending on the organizational structure. Making ensuring that the target
market trusts the company leadership as much as they trust the company's product or service
can be done by maintaining positive relationships with both employees and customers.

• Investors
Investors are among the most important parties involved in running a business, thus their
opinions of the company or its products can influence the way it develops. The way they think
about business decisions, what they have done in the past in terms of business, and who they
are all have an impact on how an organization develops.

II. SWOT Analysis

SWOT analysis is a framework used to assess a company's competitive position and to create strategic
planning. It stands for strengths, weaknesses, opportunities, and threats. The SWOT analysis
evaluates internal and external variables as well as present and anticipated future situations.

A SWOT analysis intends to help take a practical, fact-based, and data-driven look at the advantages
and disadvantages of a company, its efforts, or its sector. The organization must avoid preconceived
notions or grey regions and concentrate on real-life settings to maintain the analyses' accuracy.

26
 CHAPTER 3
OBJECTIVES

1. To study the concept of fundamental analysis and its related components with special reference
to the Indian IT Industry.

2. To use qualitative analysis to analyze the strength and performance of selected firms.

3. To use different ratios to analyze the financial performance of selected companies in India.

4. To Determine the intrinsic value of a share for investment by evaluating the share's present and
future earnings based on industry, company, and economy fundamentals.

5. To predict the future price movement of a stock.

6. To recommend credible stocks to prospective investors.

 CHAPTER 4
SCOPE

The stock market is a vast study relatively complicated to understand due to its nature of volatility. It
responds to any changes In the social, economic, political or legal environment. The scope of this
study covers overall Economic-Industry-Company Analysis of NSE listed companies and is limited
to the IT sector. This study aims to provide assistance to prospective investors who wish to buy related
stocks.

The Task for 3 months of tenure were distributed in the following manner that the first two weeks,
were provided for exploring the various topics related to financial markets and understand how the
Indian stock market operates. The franchise trainer explained us the overall working of IIFL’s
proprietary software for opening Demat Accounts. With interactions form mentor, we came to know
about the various trends followed in such an environment. This also helped me develop my
confidence on contacting with potential customers, dealing with clients and understanding their needs
in accordance with stocks.

The corporate culture of the company, with its flawless unity of command visible throughout the
entire organisation, was also observed during this internship. An important lesson learned from this
internship is the disciple and code of conduct. distributing a range of financial goods to a range of
clients. Through this internship, I have developed my project and task management skills as well as
my professional demeanour. I gained a lot of experience and understanding of the working class from
my internship. It aided in the improvement of my communication abilities and helped me learn a great
deal about the stock market.

The study considers historical data of last 5 years because for understanding the trend for a security
it is a good period to cover. The overall purpose and the scope of this project is to learn how to carry
out fundamental analysis of potential stocks in the IT sector to suggest the clients based on its past
performance and predict its future movement.
 CHAPTER 5
PROJECT METHODOLOGY

This project is based upon conducting fundamental analysis of stocks. This project was completed
while I was working as an Intern at IIFL Securities. I was provided with IIFL AAA Advisor which
is basically the login portal for employees of IIFL Securities.

Fig: 9 AAA Advisor

From here we can check the portfolio of clients and then suggest them with their next move in the
Stock Market.

This study is completed on the basis of information collected from multiple sources, such as BSE,
Moneycontrol and Economic time. I have covered 8 companies from IT Sector and used secondary
source of Data collection for the period of 2017-18 to 2021-22.

Reason for selecting IT Sector

The selection of the period is done on the basis of the three factors.
Primarily, a Five-year study of investment is an acceptable time period to minimize the data
fluctuation. Second, in this period IT industry recorded notable growth. Third, a personal inclination
towards technology and innovation.
Source of Data Collection
For the purpose of digging out the data, the official websites and Annual reports of the companies
were used. For the assessment of the performance of these companies, statistical tools are used such
as Ratios, Table and Graph are used.

Sample Size
Sample Size: 8
For the evaluation, companies are selected from Indian IT sector that are listed in NSE.
1. HCL
2. Infosys
3. Mindtree
4. Coforge
5. Tata Elxsi
6. TCS
7. Tech Mahindra
8. Wipro

Methodology
Observation Method is way of gathering data by watching behaviour, events, or noting physical
characteristics in their natural setting.

Variables used for Economy Analysis

1. Inflation rate
2. Gross Domestic Product
3. Unemployment rate

Tools used for Industry Analysis

1. Porter’s Five Forces Model
Tools used for Company Analysis
A. Quantitative Analysis
Ratio Analysis

1.Current Ratio

2.Debt to Equity Ratio

3.Net Profit Ratio

4.Earnings per Share

5. Dividend Per share

6. Return on Equity

7. Price/earnings to Growth Ratio

8. Intrinsic value

B. Qualitative Analysis
1.SWOT Analysis
 CHAPTER 6

DATA/TASK ANALYSIS

Primary Tasks

Task 1: Economy-Industry-Company Analysis

My primary task was to evaluate the fundamentals of stocks for the company clients. For overall
evaluation of a stock, EIC (Top to Bottom) Approach is used. The same is explained below.

Economy Analysis

1. Inflation rate
Inflation is rise in the general level of prices which reduces the purchasing power of each unit of
currency. The annual inflation rate in India edged down to 7.01 percent in June of 2022 from 7.04
percent in the previous month, and below market expectations of 7.03 percent. However, it remained
above the RBI's target range of 2%-6% for the 6th straight month. Prices of food rose 7.56 percent,
particularly vegetables (17.37 percent), spices (11.04 percent), and oil and fats (9.36 percent).
Additional upward pressure came from costs of transportation & communication (6.9 percent), health
(5.47 percent), education (4.51 percent), and housing (3.93 percent). On a monthly basis, consumer
prices went up 0.52 percent, after a 0.94 percent gain in May.

Source : Indian inflation rate (Trading economics)

Fig: 10 Inflation rate in India

2. GDP growth rate

The Indian economy only expanded by 4.1 percent year over year in the first three months of 2022,
which was less than the market projection of 4 percent due to an increase in Omicron infections, high
energy costs, and ongoing supply chain problems. Mining and quarrying (6.7 percent vs. 9.2 percent
in Q4), communication (5.3 percent vs. 6.3 percent), and manufacturing output all fell (down from
+0.3 percent). On the other hand, utilities (4.5 percent vs. 3.7 percent) and the farm sector (4.1 percent
vs. 2.5 percent) both saw higher growth, while construction returned (2 percent vs -2.8 percent ).
While domestic expenditure fell sharply (1.8 percent vs. 7.4 percent in Q4), import and export growth
both slowed (16.9 percent vs. 23.1 percent and 18 percent, respectively). In contrast, government
spending increased more and gross fixed capital formation increased (4.8% vs. 3%) (5.1 percent vs
2.1 percent ). By the end of the fiscal year in March 2022, the GDP had increased by 8.7 percent. For
FY 2023, the RBI forecasts a GDP growth of 7.2%.e

Source: Ministry of Statistics and Programme Implementation (MOSPI)

Fig: 11 Indian GDP trend for past 5 years (in percentage)

3. Unemployment rate

The unemployment rate of India as in June 2022 is 7.80%. For urban population it is
7.30% whereas for rural population it is 8.03%.

Source : Unemployment India CMIE

 Fig: 12 Unemployment rate in India (in percentage)

Source : Trading economics

Industry Analysis
Information Technology Sector in India

Information technology is a major industry in India that includes consulting, outsourcing, and
information technology services. Revenue for the IT and BPM sector is predicted to reach US$194
billion in FY 2021, up 2.3 percent year over year. In FY 2021, the IT sector employed close to 2.8
million people. In total, 4.5 million people are employed in the IT-BPM sector as of March 2021. The
overall revenue of the IT-BPM business (excluding e-commerce) surpassed the $200 billion threshold
to reach $227 billion in FY2022.

Fig: 13 Market Size of Indian IT Industry

 • There are 7.705 million internet users and 1.23 billion mobile phone users in India. India
has one of the highest and most affordable rates of data consumption worldwide.
• In India, the IT-BPM sector accounts for 8% of the country's GDP. With 3.9 million
workers, the industry is the biggest employer in the private sector.
• It is believed that more than 500 million people in India use smartphones, and 75% of them
are online. The majority of people in the globe who download apps are from India.
• With a global unicorn market cap of USD 168 billion, India is the third-largest unicorn hub
globally.
• The output of IT hardware is anticipated to reach 3 trillion rupees in 4 years, and domestic
value addition is anticipated to increase from the present 5-10 percent to 20-25 percent in
coming 5 years.

Fig: 14 IT sector composition

Michael Porter’s five forces model for IT Industry

Threat of new entrants

Due of its quick expansion and desirable consumer base, the IT industry is comparatively alluring to
newcomers. The business is also not appealing to newcomers due to the high capital requirements
and the presence of well-known, established brands. Any newcomer may anticipate fierce
competition from the established firms, which is one of the main reasons this industry is not
particularly alluring. In order to succeed in business, newcomers must have creative ideas for products
or services. Although the IT industry is not particularly attractive, it is routine and lucrative enough
for many people to attempt to enter it. There are currently 58, 824+ businesses in India's IT sector.

Competitive Rivalry
The IT sector is renowned for its quick development, efficiency, and fierce rivalry. The fierce
competition amongst established firms is a major factor in why many new entrants fail. Economies
of scale help big businesses in this sector. The products in this sector typically have significant
customer bases and are strongly branded. Since the present participants in this market share are
distributed at random, there is fierce competition among IT sector companies.

Bargaining Power of Buyers

Everyone in the world is considered a buyer, as we are all aware. Customers are often not tied in to
one company because there are numerous companies in the industry and low switching costs, and the
majority of IT sales come from big, well-known organisations. Additionally, these well-known
businesses frequently offer incentives to persuade customers to choose their goods over those of
rivals. Customers are price sensitive, but they are willing to pay money because all businesses need
the IT products and services.

Threat of substitutes
The IT industry relies on research and innovation to develop new products or improve existing ones
in order to offer customers high-quality goods and services. As a result, there are no true alternatives
in this sector. As a result, the threat of alternatives in the IT sector is minimal.
SWOT Analysis : India IT Industry

Strength Weakness

• High quality and price performance • High dependence on foreign countries for
• Large pool of skilled workforce revenues
• High growth and strong market share • High rate of attrition
• Government initiatives and encouragement. • More dependent on BFSI sector for
• Global 24*7 delivery revenues.
• Digital transformation due to Impact of
COVID 19

Opportunities Threats

• Product innovation and diversification ▪ Increasing Competition

• Geographical expansion ▪ Global economic slowdown

Company Analysis

A. Quantitative Analysis

1.Current Ratio

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑹𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

Ideal Ratio is equal to 2:1

COMPANIES 2018 2019 2020 2021 2022
HCL 3.29 2.93 1.69 2.77 2.97
INFOSYS 3.78 3 2.88 2.74 2.1
MINDTREE 2.57 3.23 2.46 2.87 2.76
COFORGE 3.41 3.94 3.27 2.33 1.04
TATA ELXSI 4.23 5.39 5.53 5.26 4.13
TCS 4.85 4.18 3.3 2.92 2.49
TECH MAHINDRA 2.85 2.28 3.16 3.36 2.56
WIPRO 2.86 2.96 2.78 2.5 2.23

Table:1 Current ratio

Current Ratio
6
5
4
3
2
1
0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 15 Current ratio of Companies (2018-2022)

Interpretation:
• The above table shows Wipro have ideal ratio
• Tech Mahindra, Mindtree have sufficient current assets.
• Tata Elxsi, TCS indicate the company has more funds which are not utilized efficiently and
effectively. Infosys has improved their current asset utilization as they have reached near the
ideal current ratio.
• Coforge has depleted their current ratio during the last year.
 2.Net Profit Margin

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 =
𝑻𝒐𝒕𝒂𝒍 𝑹𝒆𝒗𝒆𝒏𝒖𝒆

COMPANIES 2018 2019 2020 2021 2022

HCL 33.35 31.46 27.5 24.5 26.75
INFOSYS 26.08 20.11 19.66 21 20.43
MINDTREE 11.73 10.73 8.12 13.93 15.7
COFORGE 13.74 14.95 18.93 9.94 19.45
TATA ELXSI 17.31 18.15 15.9 20.15 22.24
TCS 25.92 24.4 25.33 22.77 23.81
TECH MAHINDRA 16.9 16.09 15.51 14.3 14.14
WIPRO 17.27 15.82 17.22 20 20.36

Table : 2 Net profit Margin

Net Profit Margin

40
35
30
25
20
15
10
5
0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 16 Net Profit Margin of Companies (2018-2022)

Interpretation:
• The above graph shows that HCL has the highest Net profit Margin from the selected
companies. Mindtree and Coforge shows fluctuating results during the years.
• Tech Mahindra shows declining Profit margins y-o-y.
3.Earnings per share
 𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 − 𝑷𝒓𝒆𝒇𝒆𝒓𝒓𝒆𝒅 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔
𝑬𝑷𝑺 =
𝑶𝒖𝒕𝒔𝒂𝒕𝒏𝒅𝒊𝒏𝒈 𝑺𝒉𝒂𝒓𝒆𝒔

COMPANIES 2018 2019 2020 2021 2022

HCL 52.54 59.69 33.06 32.22 40.1
INFOSYS 71.28 33.66 36.34 42.37 50.27
MINDTREE 37.69 45.94 38.35 67.43 100.3
COFORGE 36.83 48.55 67.93 39.32 106.19
TATA ELXSI 38.54 46.56 41.12 59.11 88.26
TCS 131.15 79.34 88.64 82.78 103.24
TECH 40.84 44.58 46.89 43.76 50.48
MAHINDRA
WIPRO 16.26 12.67 14.88 17.81 22.2

Table: 3 Earnings per share

Earning per Share

150

100

50

0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 17 Earning per share (2018-2022)

Interpretation

• Among all Wipro is having the lowest EPS.

• In the year 2020-21, every company’s earnings have affected which resulted in a decline in the
earning per share.
• During the last year every company has improved their earnings.

4.Return on Equity
 𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆
𝑹𝑶𝑬 =
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔′ 𝑬𝒒𝒖𝒊𝒕𝒚

COMPANIES 2018 2019 2020 2021 2022

HCL 26.7 27.88 24.04 20.07 25.53
INFOSYS 25.44 23.44 24.97 25.23 30.63
MINDTREE 22.01 22.8 19.98 25.7 30.19
COFORGE 15.34 17.54 21.39 13.29 29.21
TATA ELXSI 32.5 30.75 23.49 27.22 34.33
TCS 33.27 38.1 44.72 41.39 49.48
TECH MAHINDRA 20.46 21.21 20.35 16.94 19
WIPRO 18.27 15.41 18.68 22.23 22.32

Table: 4 Return on Equity

Return On Equity
60
50
40
30
20
10
0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 18 Return on Equity (2018-2022)

Interpretation

• Tech Mahindra & Wipro are the poor performing stocks among all.
• Tata group of Companies like TCS and Tata Elxsi have increased their return on equity.
• Infosys has almost consistent ROE in the years 2018-2020 whereas a rise can be observed in
the year 2022.
 5.Dividend per share

𝑻𝒐𝒕𝒂𝒍 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅𝒔 𝑷𝒂𝒊𝒅

𝑫𝑷𝑺 =
𝑵𝒐. 𝒐𝒇 𝒐𝒓𝒅𝒊𝒏𝒂𝒓𝒚 𝒔𝒉𝒂𝒓𝒆𝒔 𝒊𝒏 𝒊𝒔𝒔𝒖𝒆

COMPANIES 2018 2019 2020 2021 2022

HCL 12 8 10 10 42
INFOSYS 43.5 21.5 17.5 27 31
MINDTREE 11 33 13 25 37
COFORGE 15 0 31 13 52
TATA ELXSI 11 13.5 16.5 48 42.5
TCS 50 30 73 38 43
TECH MAHINDRA 14 14 15 45 45
WIPRO 1 1 1 1 6

Table: 5 Dividend per share

Dividend Per share

80
70
60
50
40
30
20
10
0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 19 Dividend Per share (2018-2022)

Interpretation

• Wipro does not provide much dividends. Its dividend payout out of net profit is very low.
• HCL has improved Divided during the last year.
• Tech Mahindra and Tata Elxsi have improved their Dividend payout from the past 2 years.
• TCS is the best performer among all.
6.Interest Coverage ratio (Times Interest earned Ratio)

𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒃𝒆𝒇𝒐𝒓𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 & 𝒕𝒂𝒙

𝑰𝑪𝑹 =
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒆𝒙𝒑𝒆𝒏𝒔𝒆

COMPANIES 2018 2019 2020 2021 2022

HCL 397.74 621.69 47.96 71.11 146.72
INFOSYS 180.62 195.26 242.59
MINDTREE 48.28 431.24 16.67 35.88 49.86
COFORGE 40.44 69.59 63.47 49.86 15.97
TATA ELXSI 64.36 94.77 85.97
TCS 1065.37 240.44 57.52 85.12 110.56
TECH MAHINDRA 70.3 126.92 80.94 98.93 110.19
WIPRO 27.11 19.8 21.57 35.86 46.59

Table: 6 Interest Coverage ratio

Interest Coverage Ratio

1200

1000

800

600

400

200

0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 20 Interest Coverage ratio (2018-2022)

Interpretation

• Wipro and Coforge are the lowest perform among all.

• Except 2019, Mindtree has delivered poor interest coverage.
• TCS & HCL have shown a downward trend the following years.
• Infosys has consistently improved its interest coverage.
7.EV/ EBITDA

𝑴𝒂𝒓𝒌𝒆𝒕 𝑪𝒂𝒑𝒊𝒕𝒂𝒍𝒊𝒛𝒂𝒕𝒊𝒐𝒏 + 𝑵𝒆𝒕 𝑫𝒆𝒃𝒕

𝑬𝑽/𝑬𝑩𝑰𝑻𝑫𝑨 =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒃𝒆𝒇𝒐𝒓𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕, 𝒕𝒂𝒙, 𝑫𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏 & 𝑨𝒎𝒐𝒓𝒕𝒊𝒛𝒂𝒕𝒊𝒐𝒏

COMPANIES 2018 2019 2020 2021 2022

HCL 13.19 12.58 8.79 17.02 19.46
INFOSYS 10.84 14.3 11.4 20.99 25.44
MINDTREE 13.1 13.21 11.28 18.57 27.91
COFORGE 14.4 17.76 11.51 45.02 33.14
TATA ELXSI 14.75 11.96 8.12 28.31 77.76
TCS 16.1 17.4 14.94 25.65 25.21
TECH MAHINDRA 10.78 12.26 8.69 15.18 20.6
WIPRO 11.35 13.1 8.43 15.44 19.12

Table: 7 EV / EBITDA

EV/EBITDA
90
80
70
60
50
40
30
20
10
0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 21 EV/EBITDA (2018-2022)

Interpretation

• For the year, 2020 all the companies’ earnings have decreased drastically.
• In the last 2 years, all the companies have shown an uptrend.
• Tata Elxsi is the best performer among all in the year 2022
8.Price to earnings Ratio

𝑺𝒉𝒂𝒓𝒆 𝑷𝒓𝒊𝒄𝒆
𝑷𝑬 𝑹𝒂𝒕𝒊𝒐 =
𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆

Ideal range is between 10-30.

COMPANIES 2018 2019 2020 2021 2022

HCL 9.22 9.11 13.2 30.5 29.02
INFOSYS 7.94 22.1 17.65 32.29 37.93
MINDTREE 20.48 20.56 21.61 30.9 42.9
COFORGE 23.49 27.31 16.9 74.44 41.98
TATA ELXSI 25.57 20.69 15.3 45.56 100.16
TCS 10.86 25.23 20.6 38.39 36.23
TECH MAHINDRA 15.64 17.4 12.06 22.66 29.7
WIPRO 12.97 20.11 13.22 23.25 26.66

Table: 8 Price to earnings Ratio

Price to Earning Ratio

120

100

80

60

40

20

0
HCL Infosys Mindtree Coforge Tata Elxsi TCS Tech mahindra Wipro

2018 2019 2020 2021 2022

Fig: 22 Price to earnings ratio (2018-2022)

Interpretation

• Coforge has shown a down trend from the year 2021 to 2022.
• HCL & Wipro are in the range of ideal PE ratio.
• TCS & Infosys are slightly above the ideal Ratio.
• Coforge and Tata have their share overvalued because of relatively high PE ratio.
9.Price Earnings to Growth Ratio

Ideal ratio is less than or equal to 1.

COMPANIES 2022 PEG RATIO

HCL 29.02 2.902
INFOSYS 37.93 3.793
MINDTREE 42.9 4.29
COFORGE 41.98 4.198
TATA ELXSI 100.16 10.016
TCS 36.23 3.623
TECH MAHINDRA 29.7 2.97
WIPRO 26.66 2.666

Table: 9 Price earnings to growth ratio

Note : The figures are calculated considering the annual sectoral growth rate of 10% (statistics by
Government of India)

Interpretation

• As per the evaluation, all the companies have a higher Price earnings compared to the industry
growth.
10.Valuation of share price of the companies

COMPANIES 2018 2019 2020 2021 2022 AVERAGE

PE RATIO
HCL 9.22 9.11 13.2 30.5 29.02 18.21
INFOSYS 7.94 22.1 17.65 32.29 37.93 23.582
MINDTREE 20.48 20.56 21.61 30.9 42.9 27.29
COFORGE 23.49 27.31 16.9 74.44 41.98 36.824
TATA ELXSI 25.57 20.69 15.3 45.56 100.16 41.456
TCS 10.86 25.23 20.6 38.39 36.23 26.262
TECH 15.64 17.4 12.06 22.66 29.7 19.492
MAHINDRA
WIPRO 12.97 20.11 13.22 23.25 26.66 19.242

Table: 10 Average P/E ratio

Projected EPS

COMPANIES 2022 PROJECTED AT

10% GROWTH
HCL 40.1 44.11
INFOSYS 50.27 55.30
MINDTREE 100.3 110.33
COFORGE 106.19 116.81
TATA ELXSI 88.26 97.09
TCS 103.24 113.56
TECH MAHINDRA 50.48 55.53
WIPRO 22.2 24.42

Table: 11 Projected EPS

Note : The figures are calculated considering the annual sectoral growth rate of 10% (statistics by
Government of India)
Calculation of Intrinsic Value

Intrinsic Value = Projected EPS * Average P/E Ratio

COMPANIES 2022 PROJECTED EPS AT AVERAGE PE

10% GROWTH
HCL 40.1 44.11 18.21
INFOSYS 50.27 55.3 23.582
MINDTREE 100.3 110.33 27.29
COFORGE 106.19 116.81 36.824
TATA ELXSI 88.26 97.09 41.456
TCS 103.24 113.56 26.262
TECH MAHINDRA 50.48 55.53 19.492
WIPRO 22.2 24.42 19.242

Table: 12 Calculation of Intrinsic Value

COMPANIES INTRINSIC CURRENT RESULT

VALUE MARKET VALUE
AS ON 28.07.2022
HCL 803.2431 946.1 Overvalued

INFOSYS 1304.0846 1517.4 Overvalued

MINDTREE 3010.9057 3325.4 Overvalued

COFORGE 4301.41144 3846.05 Undervalued

TATA ELXSI 4024.96304 8560 Overvalued

TCS 2982.31272 3260.5 Overvalued

TECH MAHINDRA 1082.39076 1038 Undervalued

WIPRO 469.88964 416 Undervalued

Table: 13 Intrinsic value v/s Market value

NOTE : Intrinsic Value > Market Value, it is undervalued otherwise overvalued.

B. Qualitative Analysis

As the task continues, after interpreting the ratios, the next step is to provide the clients with
qualitative potential of the prospective stocks. This section deals with conducting SWOT and
Porter’s 5 forces model to the selected 8 companies.

1.HCL Technologies
2.Infosys

Strength Weakness

• Company with no debt • Declining Net cash flow

• Strong cash flow generation from • Declining QoQ profits
core business
• Increase in FII & Intuitional
investment

Opportunities Threats

• RSI Indicating price strength • Changes in US Immigration Laws

• Acquisition of New Startups • Intense Competition from peers
• Cloud-Based Computing

3.Mindtree

Strength Weakness

▪ Consistent Highest Return Stocks • Diminishing yearly Net Profit

over Five Years Nifty 500 • falling Profit Margin (QoQ)
▪ Mindtree has shown a high TTM • Subsequent Decrease in Net
Earning per share Growth. Cash Flow.
▪ Increase in Revenue figures from
the past 8 Quarters

Opportunities Threats

• Decreasing of the cost of new • Saturation in urban market and

product launches stagnation in the rural markets.
▪ Customers migrating to premium • Threat of Rival companies
products and ready to pay higher providing the same product
utility.
4.Coforge

Strength Weakness

▪ Company is effeciently utilizing its • Mutual Funds disinvested their

capital to generate profit - RoCE shown shareholding last quarter
uptrend in last 2 years • Falling Net Profit (QoQ).
▪ Effective Asset Management to generate
Profits
▪ Increasing Revenue every Quarter for
the past 4 Quarters

Opportunities Threats

• Highly recommended by analysts with a • High peer competition

least 20% upside rating
▪ RSI indicating postive price potential

5.Tata Elxsi

Strength Weakness

▪ Diverse Revenue models • Declining marginal revenue for Tata

▪ Wide geographic presence Elxsi
▪ Brands catering to diversified consumer • Declining MFs & Promoter shareholding
segments with specific demand for
Software and programming.

Opportunities Threats

• Highest Recovery from 52 Week Low • Trade Relation between US and China
▪ customers migrating to Premium • High PE
products.
6.TCS

Strength Weakness

▪ High cash generating potential from core • Declining Net Profit Margin (QoQ)
business - Improved Cash Flow from • High promoter stock pledges
operations during the past 2 years
▪ Increasing Revenue every Quarter for the
past 8 Quarters
▪ Efficient usage of capital to generate profit
- RoCE shows uptrend in past 2 years.

Opportunities Threats

• Drastic Demand of Cloud-Based • High Attrition rate

Computing • Company with high market cap, lower
▪ Digital Transformation in the economy public shareholding

7.Tech Mahindra

Strength Weakness

▪ Skilled human resource of over 40,000 • Decline in Net Profit with falling Profit
distributed in over 30 countries Margin (QoQ)
▪ Increasing Revenue every Quarter for the • Most of Tech Mahindra’s revenues come
past 8 Quarters from Europe and America
▪ Effective Asset Management to generate
Profits - Return On Assets improved since
last 2 year

Opportunities Threats

• Increasing demand for cloud-based • Potential negative impact of Satyam

solutions related litigation
▪ Expanding to more geographical locations • Economic slowdown and uncertainty in
USA and Europe.
8.Wipro

Strength Weakness

▪ Partnerships with conglomerates such as– • Mutual Funds declined their shareholding
Cisco, Oracle, EMC, Microsoft and SAP last quarter
▪ Workforce of over 130,000 employees • Diminishing Quarterly Net Profit with
▪ Consistent Highest Return Stocks over Five falling Profit Margin (YoY)
Years - Nifty500
• FII / FPI or Institutions increasing their
shareholding

Opportunities Threats

• can diversify in brand product category and • Attrition and Employee loyalty
consulting services • Stock with expensive valuation

Secondary Tasks

Task 2: Preparing portfolios

As a part of my task, I was asked to prepare fundamentally strong diversified portfolio (equity) with
the objective to provide the client gradual growth in upcoming years with a specified amount of Rs.
1000000.
After going through the quantitative aspects, BSE result and recent press releases, I came up with
the following portfolio (as on 29.06.2022)

COMPANY SECTOR PRICE QTY AMT

L&T Infrastructure 1541 200 308200
ESCORTS Automobile 1468.4 220 323048
HINDALCO Iron & Steel 342.2 550 188210
BHARAT PETROLEUM Petroleum 315.2 600 189120
Total 1008578
Task 3: Leads Calling

I did lead calling for which the aim was to let the people know what services IIFL Securities exactly
provides with what all offers and benefits. So, my task was to call the lead and explain to them our
services (Demat Account) and let them know the benefits given by IIFL on opening Demat with them
like No maintenance charges for the first year, Relationship management services, and Negotiable
commission charges if the person is a regular trader.

Task 4: Demat Account Opening

My task was also to open Demat accounts in the IIFL’s software for the leads generated and for
opening those accounts we had to collect some important documents from the leads like a latest photo
of the person, Aadhar card on both sides, PAN card, Bank account number, IFSC code, Branch name,
signature on white paper and Email id.

Fig: 23 IIFL Fankyc Software

The above image shows the software of IIFL Securities where the current status of new Demat
accounts is shown for any customer whether it’s incomplete, rejected, or in the verifiers’ queue.
Incomplete shows that if anything is left in the process to open the Demat account then it comes under
the incomplete column.

Rejected shows that if any document is not as per the need of the system, then the system rejects that
person’s Demat account, and rejected column shows the count.
Verifiers Queue shows that the documents are under the verification process and if any fault is found
then it will go under rejected or incomplete column depending on the fault.
Lead Tracker is the last step when the Demat account opening is completed we can check its status
in the lead tracker.
 CHAPTER 7
OBSERVATIONS

In fundamental analysis, the determinant of fair value of a security is scrutinized. In the company
analysis, the future yielding potential is investigated through the use of financial ratios and other
allied factors. Caution needs to be exercised as a multitude of factors work in tandem to influence the
market price.

Through the Economic Analysis it can be observed that after COVID-19, the Indian economy faced
challenges which is clearly visible in the stock market. Variables such as inflation rate and GDP
shows a slow growth as a correction to the pandemic.
From the Industry Analysis it can be interpreted that Indian IT sector is subsequently growing but has
a huge impact from the foreign customer base. Also there exists a lot of opportunities in the coming
future with introduction to 5G spectrum to the integration of AI and ML in a broad extent.

The results have revealed a clear comparison after a thorough investigation of the chosen companies.
Wipro, Tech Mahindra, and Coforge are all undervalued because their inherent worth exceeds their
market value. In this case, it suggests purchasing shares because they might go up in price in the
future. Infosys, Mindtree, TCS, HCL Technologies, and TATA Elxsi, on the other hand, are
overvalued since their market value is greater than their intrinsic value, which suggests selling a share.
According to the fundamental premise, the market price tends to rise to its intrinsic or fair worth over
time..
The pandemic drastically affected the market; although the companies have tried their best to
overcome these losses by implementing various strategies.

The international current affairs has a huge impact on the stock market. Any news related to a specific
industry can create a surge or dip in the stock prices. Press releases and corporate statements provide
useful information, but they should be studied critically to distinguish the truth from spin.
 8. LIMITATIONS

• The stock market analysis is a vast field of study with a variety of instruments to invest in.

• The project report concentrates only on equity research.

• The scope of this project report is limited to stocks from only the Indian IT sector listed in
NSE.

• There are several prescribed methods/ tools available for analysis of companies however in
this project 9 of the most important ratios are considered.

• Fundamental analysis is applicable for a long-term stability perspective of a share but

technical analysis needs to be implied while trading.

• Even after the analysis, the market can react to several external factors thus there exists no
ensurity that the advised companies would be profitable in the future.

• Many ratio analysis tools have different formulas for calculating the same.
 9. LEARNING OUTCOME

The overall project has given a detailed insight and served as a opportunity to learn the volatility in
the stock market. I came the know about the factors that affect the IT sector in the international
market. For a successful analysis of a security a wide range of variables needs to be used. One can
just reply upon a single factor to evaluate the growth as it could mislead the performance and the
future growth. As a benchmark, the industry average could be compared with the companies to have
a clear insight.

An investor must be aware about the companies he invest in and thus understand any changes that
take place in the financial, management or organizational structure. Not only this, global economics
could be considered and how it would impact a company. For e.g. a rise in the government taxation
on steel products would increase its final price. Before even considering the financials of a company,
an investor needs to understand what is the ultimate product/ service of the enterprise and what could
definitely affect its share price movement.

Ratio analysis is an extremely important tool for understanding and comparing a company with its
peers but sometimes could mislead if seen on a macro scale. Press releases are a crucial PR (Public
relations) strategy for businesses; they don’t just happen by mistake. Investors should become skilled
readers to evaluate out the important information and ignore the hype.

Financial analysts use a number of trading and investing techniques to provide the maximum possible
returns. Although, this does not always guarantee to be necessarily accurate.
 10. BIBLIOGRAPHY

• Fundamental Analysis for Dummies

• https://www.researchgate.net/publication/340816426_A_Research_Paper_on_Impact_of_Di
vidend_Payout_on_Shareholders_Wealth_in_Indian_Industries
• https://www.moneycontrol.com/financials/hcltechnologies/ratiosVI/HCL02
• https://www.investopedia.com/financial-ratios-4689817
• https://corporatefinanceinstitute.com/resources/ebooks/financial-ratios-cheat-sheet/
• https://www.screener.in/company/TCS/consolidated/
• https://trendlyne.com/equity/1358/TATAELXSI/tata-elxsi-ltd/
• https://www.iifl.com/finance/about-us/iifl-brand?redirect=menu-bar
• https://www.indiainfoline.com/
• https://economictimes.indiatimes.com/wipro-ltd/stocks/companyid-12799.cms
• https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=IN
• https://www.business-standard.com/article/companies/indian-it-to-earn-300-bn-in-revenue-
in-five-years-mckinsey-report-
121021801393_1.html#:~:text=The%20Indian%20information%20technology%20(IT,in%2
0the%20last%20five%20years.
• https://en.wikipedia.org/wiki/Wikipedia
• http://www.bseindia.com/SensexView/SensexView.aspx
• https://economictimes.indiatimes.com/markets/stocks/news/global-uncertainty-and-its-
impact-on-indian-stock-
market/articleshow/92467246.cms?utm_source=contentofinterest&utm_medium=text&utm
_campaign=cppst
• https://www.bseindia.com/corporates/Forth_Results.html
• https://www.forbes.com/advisor/investing/intrinsic-
value/#:~:text=Intrinsic%20value%20measures%20the%20value,of%20its%20actual%20fin
ancial%20performance.