Infosys Technologies IN F O IN

T E CH NO LOG Y /IT SE R VIC E S & SO FT WAR E | I ND I A Maintained

N O MU R A F I N AN C I A L A D V I S O R Y A N D
SEC U R IT I ES ( IN D I A) PR I VAT E L I MI TED
Harmendra Gandhi +91 22 4037 4181 harme ndra .ga ndhi@ nom ura .com
Pinku Pappan +91 22 4037 4360 pinku.pappan@ nom ura.com NEUTRAL

~ Action Closing price on 13 A pr Rs2,782

Infosys delivered another strong quarter, with 5.2% sequential revenue growth in P rice target Rs2,780
(set on 25 Mar 10)
4Q FY10, led by robust growth in services such as consulting, PI and SI. In our
Upside/downside -0.1%
view, this signals a recovery in discretionary spending, and we now look for Difference from consensus -6.8%
possible 25% revenue growth (US$) in FY11F. Earnings growth, however, will likely
lag revenue by a wide margin, as the company faces flat pricing, wage inflation, FY 11F net profit (R smn) 68,263
rupee appreciation and higher taxes. The stock appears fully valued to us, and we Difference from consensus -3.0%
Source: Nomura
maintain our NEUTRAL rating.
a Catalysts Nomura vs consensus
Large deal wins would be positive for the stock; sharp appreciation of the rupee
We think consensus estimates will
against the US dollar would be a negative for margins.
be adjusted downwards to take into
Anchor themes account rupee appreciation.

Tier-1 IT services companies will likely see earnings growth in FY11F dampened by
wage inflation, rupee appreciation and higher tax rates.

Step up in revenue growth Key financials & valuations

31 Mar (Rsm n) FY09 FY10F FY11F FY12F
Revenue 216,930 227,420 264,838 317,124
c Recovery in discretionary spending Reported net profit 59,880 62,660 68,263 81,224
Normali sed net profit 58,720 62,180 68,263 81,224
Infosys’ 4Q results show a clear uptick in discretionary spending, with Normali sed EPS (Rs) 102.6 109.0 119.3 141.8
services such as consulting, package implementation (PI) and system Norm. EPS growth (%) 29.5 6.3 9.5 18.8
Norm. P/E (x) 27.2 25.6 23.4 19.7
integration (SI) registering strong sequential growth of 17.4% and EV/EBITDA (x) 20.9 19.0 16.3 13.4
15.5%, respectively. Management commented that large deals were Price/book (x) 8.7 6.9 5.7 4.7
back on the table, with the company winning two such deals in the Dividend yield (%) 0.8 0.9 1.0 1.2
ROE (%) 37.4 30.3 26.8 26.4
quarter. The company also won four transformational projects,
Net debt/equity (%) net cash net cash net cash net cash
signalling to us that clients have started to invest for their growth. Earnings revisions
Previous norm. net profit 62,645 69,425 82,046
d FY11 US$ revenue guidance better than expectations Change from previous (%) (0.7) (1.7) (1.0)
Previous norm. EPS (Rs) 109.5 121.4 143.2
Infosys’ guidance of 16-18% US dollar revenue growth was higher Sourc e: Company, Nomur a es tim ates

than our expectation of 12-15% guidance. We believe the company

will be able to beat this guidance, and we also increase our FY11F Share price relative to MSCI India
growth estimate to 25%, from 21% previously. (Rs) Price
3,100 Rel MSCI India 130

e Offshore salary hike of 14% higher than expected 2,600 120

110
Infosys announced salary hikes of 14% at offshore and 2-3% at onsite, 2,100
100
which were higher than what we had expected. We believe this is a 1,600 90
step management has taken to retain good talent, as the job market 1,100 80
Apr09

Jun09

Aug09

Dec09

Feb10

for IT professionals is on an upswing.

Oct09

f Valuation not providing comfort; maintain NEUTRAL 1m 3m 6m

Absolute (Rs) 4.1 3.7 24.2
While we raise our revenue estimates on the back of the better-than- Absolute (US$) 6.3 6.4 29.8
expected revenue guidance and recovery in discretionary spending, Relative to Index 0.2 1.9 18.0
Market cap (US$mn) 35,883
the earnings growth picture does not change much, in our view. Our
Estimated free float (%) 80.0
margin assumptions are slightly lower given higher wage increases, 52-week range (Rs) 2,814/1,345
and our earnings CAGR forecast of 13.6% over FY10-12F trails our 3-mth avg daily turnover (US$mn) 73.0
revenue growth forecast by a wide margin. We believe the stock, Stock borrowability H ard
Major shareholders (%)
which trades at a one-year forward P/E multiple of 23x, is fully valued N R Narayana Murthy 4.5
and maintain our NEUTRAL rating and PT of INR2780. Nandan M Nilekani 3.5
Sourc e: Company, Nomur a es tim ates

Any authors named on this report are research analysts unless otherwise indicated.
See the important disclosures and analyst certifications on pages 11 to 15.

Nomura 1 14 April 2010

Infosys Technologies Harmendra Gandhi

Drilling down

Guidance beats Street expectations

Infosys’ guidance of 16-18% US dollar revenue growth for FY11 signals expectations US dollar revenue guidance of
of a recovery in global IT services spending. Results in 4Q FY10 also were indicative 16-18% growth better than our
and Street expectations
of this recovery, with management stating that large deals were coming back to the
table. During 4Q, Infosys won four large transformational deal (with two more than
US$50mn) and five large outsourcing deals (with two more than US$150mn).

Management guidance assumes flat pricing, which implies volume growth of 16-18%
for FY11. We had expected Infosys to guide for 12-15% growth. The INR revenue
growth guidance was lower at 9-11%, primarily owing to the 6% appreciation in the
rupee (guided rate of INR44.5 vs the FY10 average of INR47.3).The implied
compound quarterly growth rate (CQGR) for 2Q-4Q FY11F is 3.8%, slightly higher
than revenue growth guidance of 3.4% for 1Q FY11F, which leads us to believe that
the latter estimate is conservative.

Exhibit 1. Guidance and implied growth rates

2Q-4QFY11G
Implied Implied Implied
Guidance FY11G FY10A growth (% ) 1QFY11G 4QFY10A growth (% ) CQGR (% )
US$mn revenue (upper) 5,670 4,804 18.0 1,340 1296 3.4 3.8
US$mn revenue (lower) 5,570 4,804 15.9 1,330 1296 2.6 3.1

INRmn revenue (upper) 252,390 227,420 11.0 59,630 59,440 0.3 3.8
INRmn revenue (lower) 247,960 227,420 9.0 59,190 59,440 -0.4 3.1

INR EPS (upper) 111.3 109.0 2.1 24.8 28.0 -11.5 7.7
INR EPS (lower) 106.8 109.0 -2.0 24.3 28.0 -13.1 5.0

USD/INR rate 44.5 47.3 -6.0

Note: G indicates Infosys management guidance, A indicates actual reported figures; INR EPS (actual and guided) is based on IFRS
Source: Company data, Nomura research

EPS guidance disappoints

Despite strong revenue growth guidance, Infosys disappointed with muted INR EPS
growth guidance that ranged from a 2% decline to 2.1% growth for FY11. Management
factored in a 150bp decline in margins y-y for FY11 as a result of the following:

z Salary hikes — average 14% hike at offshore and 2-3% hike at onsite will have a
negative 300bp impact in 1Q FY11. That margin decline should be recovered in
subsequent quarters of FY11, according to management.

z Hiring of 30,000 employees — this will improve the employee cost pyramid and
help in recovering margins throughout the year as most employees will likely be
added at the bottom of the pyramid.

z Rupee appreciation of 6% — this should negatively impact margins by about

250bps.

z Improvement in utilisation by 200bps — this should contribute 100bps to margins.

z Cost cutting — should yield 100bps.

The EPS guidance also assumes an increase in the tax rate to 25% in FY11 from 21%
in FY10. As per management, 80% of revenues will likely be taxed in FY11 versus
70% in FY10, owing to the expiry of STPI benefits.

Nomura 2 14 April 2010

Infosys Technologies Harmendra Gandhi

4Q revenue growth better than expected

Infosys reported 4Q FY10 revenues of US$1,296mn, up 5.2% q-q. Volume growth was
strong at 5.2% and was led by BFSI (6.7% growth ccy), manufacturing (11.3% ccy)
and retail (4.8% ccy) among verticals. Telecom growth was muted at 1.2% in constant
currency terms (ccy).

Among geographies, Europe showed a robust increase with 11.8% sequential growth
in constant currency terms. The US, as in previous quarters, contributed the most to
incremental growth, with 4.5% ccy growth.

Among services, consulting and PI registered a strong uptick, growing 17.4% q-q and Consulting, PI and SI drove 4Q
signalling to us that discretionary spending by clients has returned. SI, another service growth
line that indicates discretionary spending, also grew strongly, up 15.5% q-q. The 1.5%
sequential decline in application development and maintenance was a bit surprising,
given the strong growth seen in other service lines. However, management
commented that it was only an aberration specific to the quarter.

Exhibit 2. Volume and pricing growth trend

q-q Volume growth q-q Constant currency pricing growth

8.0%
6.1%
5.2%
6.0%

4.0%
2.3%
2.0%

0.0% -1.1%
0.2%
-2.0% -0.9% -1.1% -0.7%
1QFY10 2QFY10 3QFY10 4QFY10

Source: Company data, Nomura research

Pricing decline of 0.7%

Pricing declined by 0.7% q-q in constant currency terms, with a 1.7% decrease seen in
offshore and a 0.2% decline at onsite. Management commented that this was the
tailwind effect of earlier pricing renegotiations with clients.

Product and BPO show good growth

After several quarters of flat growth, product revenues (from the sale of the core
banking solution Finacle) grew by 35% sequentially to US$65mn. Management
commented that the company won ten deals for Finacle in the quarter and had 31 wins
for the year.

BPO revenues (US$80mn) also increased, up 10.5% sequentially driven largely by

inorganic growth as a result of the McCamish acquisition in the previous quarter.

Hiring increase leads to margin decline

The primary reason for the 150bp decline in the EBITDA margin was the 6% Lateral hiring increased to 2,041
sequential increase in salary costs. We attribute the increase to strong hiring — both employees in 4Q from 1,420 in 3Q
lateral, as well as fresher. Laterals are usually hired at a premium, and Infosys
according to our channel checks, was forced to hire more experienced professionals
as a result of a pick-up in attrition.

Attrition at the consolidated level rose to 19.7% in 4Q from 16.3% in the previous
quarter. In 4Q, 5399 employees left the company versus 4,290 in 3Q.

Nomura 3 14 April 2010

Infosys Technologies Harmendra Gandhi

Exhibit 3. Lateral and fresher hiring trend

Laterals hired Freshers hired

10,000
9,000
8,000
7,000
6,000 7,272
5,000 7,299
4,000
5,005
3,000
2,000 3,148
1,000 1,420 2,041
390 1,064
-
Q1FY10 Q2FY10 Q3FY10 Q4FY10

Source: Company data, Nomura research

Net profit slightly below expectations

Net profit (before exceptional items) declined by 0.8% sequentially to INR15,690mn in
4Q owing to a lower EBITDA margin and a INR350mn forex loss. The tax rate
decreased to 21.9% in 4Q owing to the write back of INR3,160mn relating to
provisions that were earlier made for the SEZ units. However, this was partly offset by
a provision made for branch profit tax of INR2,320mn.

There was an exceptional gain of INR480mn in the quarter relating to the company’s
sale of 60% of its stake in OnMobile Systems Inc.

Other highlights
z DSO days increased by two days to 59 during 4Q

z Cash and equivalents at the end of 4Q was US$3.5bn

z 47 new clients were added in 4Q

z Capex guidance for FY11 is for INR12,000mn

Changes to our estimates

We increased our US dollar revenue growth forecast for FY11 to 25% from 21% on the Margin estimates lower due to
back of the better-than-expected revenue guidance and recovery in client discretionary change in rupee forecast and
salary hike
spending. In line with the Nomura FX team forecast, we have revised the US$/INR rate
to INR44.1 and INR43.7 in FY11F and FY12F, respectively, from INR45 previously.
Our margin estimates are lower in FY11F by 60bps primarily on account of the higher-
than-expected salary hike and the change in rupee forecast. As a result of these
changes, our EPS estimates for FY11F and FY12F decline marginally by 1.7% and
1.0%, respectively.

Exhibit 4. Change in estimates

New Old Change (% )
FY11F FY12F FY11F FY12F FY11F FY12F
Revenue (US$mn) 6,005 7,257 5,790 6,976 3.7 4.0
US$/INR rate 44.1 43.7 45.0 45.0 -2.0 -2.9
Revenue (INRbn) 264.8 317.1 260.5 313.9 1.6 1.0
EBITDA margin (%) 33.5 33.0 34.1 33.0 -60 bps 0 bps
Tax Rate (%) 24.0 25.0 24.0 25.0 0 bps 0 bps
EPS (INR) 119.3 141.8 121.4 143.2 -1.7 -1.0
Source: Nomura estimates

Nomura 4 14 April 2010

Infosys Technologies Harmendra Gandhi

Valuation fully captures growth prospects; maintain NEUTRAL

While we raise our revenue estimates on the back of the better-than-expected revenue Stock appears fully valued to us
guidance and recovery in discretionary spending, the earnings growth picture does not
change much. Our margin assumptions are slightly lower owing to higher-than-
expected wage increase and our earnings CAGR forecast of 13.6% over FY10-12F
trails our revenue growth forecast by a wide margin. We believe the stock, which
trades at a one-year forward P/E multiple of 23x, is fully valued and maintain our
NEUTRAL rating. Our price target is unchanged at INR2,780.

Exhibit 5. P/E trend for Infosys

32.0

26.0

20.0

14.0

8.0
02-Jan-07 02-Jul-07 02-Jan-08 02-Jul-08 02-Jan-09 02-Jul-09 02-Jan-10

Source: Bloomberg, Nomura research

Valuation methodology and risks

Our 12-month price target of INR2,780 is based on DCF, assuming a terminal growth
rate of 5% and an 11% cost of equity in rupee terms. Downside risks include: 1) a
sharp appreciation of the rupee against the US dollar; and, 2) a double-dip recession
in the US. Upside risks include an increase in discretionary spending by clients, fuelled
by higher-than-expected economic growth in the US and Europe.

Nomura 5 14 April 2010

Infosys Technologies Harmendra Gandhi

4Q results in detail

Exhibit 6. 4Q FY10 consolidated quarterly result (in INRmn)

4Q FY09 3Q FY10 4Q FY10 4Q FY10F
Revenues 56,350 57,410 59,440 58,398
Software Development & BPM expenses 30,450 30,090 31,840 30,779
Gross Profit 25,900 27,320 27,600 27,619
Selling & Marketing Expenses 2,700 3,140 3,330 3,212
General & Admin expenses 4,290 3,800 4,050 4,088
EBITDA 18,910 20,380 20,220 20,319
Depreciation 2,280 2,310 2,200 2,382
Other income, net 2,520 2,310 1,980 2,257
Forex gain/(loss) -150 200 -350 0
Profit Before Tax 19,150 20,370 20,100 20,194
Provision for Taxation 3,020 4,550 4,410 4,039
PAT 16,130 15,820 15,690 16,155
Minority Interest & Exceptional items 0 0 480 0
PAT after MI and Exceptional items 16,130 15,820 16,170 16,155
EPS (INR) 28.2 27.7 28.3 28.3
Margins (%)
Gross margins 46.0 47.6 46.4 47.3
EBITDA margins 33.6 35.5 34.0 34.8
Net profit margins 28.6 27.6 26.4 27.7
Tax Rate 15.8 22.3 21.9 20.0
Sequential Growth (%)
Revenues -2.6 2.8 3.5 1.7
EBITDA -6.9 5.4 -0.8 -0.3
Profits -1.7 2.7 -0.8 2.1
Y-Y Growth (%)
Revenues 24.1 -0.8 5.5 3.6
EBITDA 27.9 0.3 6.9 7.5
Profits 29.1 -3.6 -2.7 0.2
Source: Company data, Nomura research

Exhibit 7. Revenues by geography

Revenue share (% ) 3Q FY10 4Q FY10
North America 66.6 66.1
Europe 21.9 22.5
India 1.2 1.4
ROW 10.3 10.0
Q-Q growth (% ) 3Q FY10 4Q FY10
North America 7.9 4.4
Europe 0.8 8.1
India 6.8 22.7
ROW 13.4 2.1
Source: Company data, Nomura research

Nomura 6 14 April 2010

Infosys Technologies Harmendra Gandhi

Exhibit 8. Revenues by vertical

Revenue share (% ) 3Q FY10 4Q FY10
Insurance, Banking and Financial services 34.6 34.8
Insurance 8.5 7.7
Banking & Financial services 26.1 27.1
Manufacturing 19.3 20.2
Retail 13.1 13.0
Telecom 16.2 15.3
Energy and Utilities 6.1 5.8
Transportation & Logistics 1.8 1.8
Services 5.1 4.9
Q-Q growth (% ) 3Q FY10 4Q FY10
Insurance, Banking and Financial services 10.3 5.8
Insurance 22.6 -4.7
Banking & Financial services 6.8 9.2
Manufacturing 6.8 10.1
Retail -0.8 4.4
Telecom 6.8 -0.6
Energy and Utilities 10.4 0.0
Transportation & Logistics -16.4 5.2
Services 8.9 1.1
Source: Company data, Nomura research

Exhibit 9. Revenues by services

Revenue share (% ) 3Q FY10 4Q FY10
Application development and maintenance 42.3 39.6
Application development 17.8 16.8
Application maintenance 24.5 22.8
Business Process Management 5.9 6.2
Consulting Services and Package Implementation 23.3 26.0
Infrastructure Management 7.1 7.2
Product Engineering Services 2.4 1.8
System Integration 4.1 4.5
Testing Services 6.5 6.6
Product revenues 3.9 5.0
Q-Q growth (% ) 3Q FY10 4Q FY10
Application development and maintenance 10.7 -1.5
Application development 5.0 -0.7
Application maintenance 15.2 -2.1
Business Process Management 1.6 10.5
Consulting Services and Package Implementation 4.5 17.4
Infrastructure Management -2.8 6.7
Product Engineering Services 11.4 -21.1
System Integration -0.5 15.5
Testing Services 11.9 6.8
Product revenues 1.6 34.9
Source: Company data, Nomura research

Nomura 7 14 April 2010

Infosys Technologies Harmendra Gandhi

Exhibit 10. Revenues by client group

Revenue share (% ) 3Q FY10 4Q FY10
Top client 4.7 4.6
Top 5 client 17.6 15.8
Top 10 client 27.5 25.8
Q-Q growth (% ) 3Q FY10 4Q FY10
Top client 9.1 3.0
Top 2-5 client 15.7 -8.7
top 5 13.9 -5.6
top 6-10 client 9.0 6.3
top 10 12.1 -1.3
Ex-top 10 4.9 7.7
Ex-top client 6.6 5.3
Source: Company data, Nomura research

Exhibit 11. Constant currency revenue growth by geography

3Q FY10 4Q FY10
North America 7.7 4.5
Europe 0.0 11.8
ROW 7.9 2.3
Source: Company data, Nomura research

Exhibit 12. Constant currency revenue growth by vertical

3Q FY10 4Q FY10
Insurance, Banking and Financial services 9.4 6.7
Manufacturing 5.8 11.3
Retail -0.9 4.8
Telecom 4.2 1.2
Source: Company data, Nomura research

Nomura 8 14 April 2010

Infosys Technologies Harmendra Gandhi

Financial statements
Incom e statement (Rsmn)
Year-end 31 Mar FY0 8 FY09 FY10 F FY11F FY12F
Revenue 166 ,920 216,930 227,420 264,838 317,1 24
Cost of goods sold (96,85 4) (12 3,73 8) (127 ,950) (150 ,828) (178,794 )
Gross profit 70 ,066 93,192 99,470 114,010 138,3 31
SG&A (23,66 6) (2 8,85 2) (29 ,910) (34,982) (43,876 )
We estimate 16.5% revenue
Employee share expen se (13 0) (8 0) - - -
growth in FY11F
Opera ting profit 46 ,270 64,260 69,560 79,028 94,4 54

EBITDA 52 ,250 71,870 78,610 88,682 104,7 44

Depre ciation (5,98 0) (7,61 0) (9 ,050) (9,653) (10,290 )
Amortisation - - - - -
EBIT 46 ,270 64,260 69,560 79,028 94,4 54
Net in terest e xpense 6 ,920 9,140 9,040 10,792 13,8 45
Associate s & JCEs - - - - -
Othe r incom e 120 (4,41 0) 390 - -
Earnings before tax 53 ,310 68,990 78,990 89,820 108,2 99
In co me tax (6,85 0) (9,19 0) (16 ,810) (21,557) (27,075 )
Net profi t after tax 46 ,460 59,800 62,180 68,263 81,2 24
Minority interests - - - - -
Othe r items (1,21 0) (1,08 0) - - -
Preferred dividends - - - - -
Normalised NPAT 45 ,250 58,720 62,180 68,263 81,2 24
Extrao rdinary items 1 ,340 1,160 480 - -
Reported NPAT 46 ,590 59,880 62,660 68,263 81,2 24
Dividends (22,25 0) (1 5,73 0) (16 ,740) (19,967) (23,758 )
Trans fer to reserves 24 ,340 44,150 45,920 48,296 57,4 66

Valuation and ratio analysis

FD n orma lise d P/E (x) 35. 2 27. 2 25.6 23.4 19.7
FD n orma lise d P/E at pric e targ et (x) 35. 2 27. 1 25.5 23.3 19.6
Reported P/E (x) 34. 1 26. 6 25.3 23.3 19.6
Dividend yie ld (%) 1. 2 0. 8 0.9 1.0 1.2
Price/cas hflow (x) 32. 8 26. 6 20.6 19.4 16.2
Price/bo ok (x) 11. 5 8. 7 6.9 5.7 4.7
EV/ EBITDA (x) 29. 2 20. 9 19.0 16.3 13.4
EV/ EBIT (x) 33. 0 23. 3 21.4 18.3 14.8
Gross ma rgin (%) 42. 0 43. 0 43.7 43.0 43.6
EBI TDA m argin (%) 31. 3 33. 1 34.6 33.5 33.0
EBI T ma rgin (%) 27. 7 29. 6 30.6 29.8 29.8
Net m argin (%) 27. 9 27. 6 27.6 25.8 25.6
Effective tax rate (%) 12. 8 13. 3 21.3 24.0 25.0
Dividend payout (%) 47. 8 26. 3 26.7 29.3 29.3
Capex to sales (%) 9. 0 6. 1 3.0 4.4 4.9
Capex to depreciation (x) 2. 5 1. 7 0.7 1.2 1.5
ROE (%) 37. 2 37. 4 30.3 26.8 26.4
ROA (pretax %) 49. 8 54. 8 47.0 44.0 48.2

Growth (%)
Reven ue 20. 1 30. 0 4.8 16.5 19.7
EBI TDA 19. 3 37. 6 9.4 12.8 18.1
EBI T 19. 7 38. 9 8.2 13.6 19.5
Norm alised EPS 18. 7 29. 5 6.3 9.5 18.8
Norm alised FDEPS 21. 0 29. 7 6.3 9.4 18.8

Per share
Reported EPS (Rs) 82 105 110 119 1 42
Norm EPS (Rs) 79 103 109 119 1 42
Fully dilu ted norm EPS (Rs) 79 102 109 119 1 42
Book value per share (Rs) 241 319 404 488 5 88
DPS (Rs) 32 23 24 29 34
Source: Nomura estimates

Nomura 9 14 April 2010

Infosys Technologies Harmendra Gandhi

Cashflow (Rsmn)
Year-end 31 Mar FY0 8 FY09 FY10 F FY11F FY12F
EBI TDA 52 ,250 71,870 78,610 88,682 104,7 44
Change in working capital (3,77 0) (1 2,02 0) (1 ,470) (6,744) (6,458)
Othe r operating cashflow
Cashflow from operations 48 ,480 59,850 77,140 81,937 98,2 86
Capita l e xpenditure (14,94 0) (1 3,27 0) (6 ,750) (11,750) (15,510 )
Free cashflow 33 ,540 46,580 70,390 70,187 82,7 76
Reductio n in inves tments (47 0) 720 (37 ,120) - -
Net acquisitions
Reductio n in o ther L T asse ts (27 0) (7 0) (3 ,060) (796) (1,073)
Addition i n other LT liabilities - - 2,320 - -
Adjustme nts
Cashflow after i nvesting acts 32 ,800 47,230 32,530 69,392 81,7 04
Cash divi dends (22,25 0) (1 5,73 0) (16 ,740) (19,967) (23,758 )
Equity issue
Debt issue
Conve rtible d ebt issue - - - - -
Othe rs 240 (4,05 0) (7 ,180) (8,186) (10,486 )
Cashflow from financ ial acts (22,01 0) (1 9,78 0) (23 ,920) (28,153) (34,244 )
Net c ashflow 10 ,790 27,450 8,610 41,239 47,4 60
Beginning cash 58 ,710 69,500 96,950 105,560 146,7 99
Ending ca sh 69 ,500 96,950 105,560 146,799 194,2 58
Ending n et debt (69,50 0) (9 6,95 0) (105 ,560) (146 ,799) (194,258 )
Source: Nomura estimates

Balance sheet (Rsm n)

As at 31 M ar FY0 8 FY09 FY10 F FY11F FY12F
Cash & equivalents 69 ,500 96,950 105,560 146,799 194,2 58
Ma rketable securit ie s 720 - 37,120 37,120 37,1 20
Accounts receivable 32 ,970 36,720 34,940 45,753 55,3 47
In ven torie s - - - - -
Othe r current assets 27 ,710 32,790 41,870 45,564 50,1 13
Total current a ssets 130 ,900 166,460 219,490 275,235 336,8 39 Cash levels are increasing
LT investm ents - - - - -
Fixed assets 40 ,880 46,650 44,390 44,438 46,9 13
Good will 6 ,890 6,890 9,160 9,160 9,1 60
Othe r intangible assets
Othe r LT assets 1 ,190 1,260 4,320 5,116 6,1 88
Total assets 179 ,860 221,260 277,360 333,949 399,1 00
Short-term deb t - - - - -
Accounts payable 19 ,120 16,660 17,280 23,757 28,7 38
Othe r current liab ilities 22 ,790 22,060 27,270 28,556 31,2 60
Total current l iabili ties 41 ,910 38,720 44,550 52,312 59,9 98
Lo ng-term debt - - - - -
Conve rtible d ebt - - - - -
Othe r LT liabilities - - 2,320 2,320 2,3 20
Total liabilitie s 41 ,910 38,720 46,870 54,632 62,3 18
Minority interest - - - - -
Preferred stock - - - - -
Comm on sto ck 31 ,370 32,110 33,130 34,130 34,1 30
Retain ed earnings 106 ,300 150,440 196,890 245,186 302,6 52
Proposed dividend s - - - - -
Othe r equity and reserve s 280 (1 0) 470 - -
Total sha reholde rs' e qui ty 137 ,950 182,540 230,490 279,316 336,7 82
Total equity & liabilities 179 ,860 221,260 277,360 333,949 399,1 00

Liquidity (x)
Current ratio 3.1 2 4.3 0 4.93 5.26 5.61
In terest c over na na na na na

Leverage
Net debt/EBI TDA (x) net cash net cas h net cash net cash net ca sh
Net debt/eq uity (%) net cash net cas h net cash net cash net ca sh

Activity (days)
Days receivable 62. 9 58. 6 57.5 55.6 58.3
Days inve ntory - - - - -
Days pa yable 57. 9 52. 8 48.4 49.7 53.7
Cash cyc le 5. 0 5. 9 9.1 6.0 4.6
Source: Nomura estimates

Nomura 10 14 April 2010

Infosys Technologies Harmendra Gandhi

Any Authors named on this report are Research Analysts unless

otherwise indicated
ANALYST CERTIFICATIONS
Each of the research analysts referenced on page 1 hereof with regard to the section of this research
report for which he or she is responsible certifies that all of the views expressed in this report
accurately reflect his or her personal views about any and all of the subject securities or issuers
discussed herein. In addition, each of the research analysts referenced on page 1 hereof hereby
certifies that no part of his or her compensation was, is, or will be, directly or indirectly related to the
specific recommendations or views that he or she has expressed in this research report, nor is it tied to
any specific investment banking transactions performed by Nomura Securities International, Inc.,
Nomura International plc or by any other Nomura Group company or affiliates thereof.

ISSUER SPECIFIC REGULATORY DISCLOSURES

Issuer Ticker Price Closing Price Date Rating Disclosures
(as at last close)
Infosys Technologies INFO IN 2782.35 INR 13 Apr 2010 Neutral

Previous Ratings
Issuer Previous Rating Date of change
Infosys Technologies Reduce 10 Sep 2009

Online availability of research and additional conflict-of-interest disclosures:

Nomura Japanese Equity Research is available electronically for clients in the US on NOMURA.COM,
REUTERS, BLOOMBERG and THOMSON ONE ANALYTICS. For clients in Europe, Japan and
elsewhere in Asia it is available on NOMURA.COM, REUTERS and BLOOMBERG.
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The analysts responsible for preparing this report have received compensation based upon various
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activities.
Distribution of Ratings:
Nomura Global Equity Research has 1,818 companies under coverage.
44% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as
a Buy rating; 31% of companies with this rating are investment banking clients of the Nomura Group*.
39% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified
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15% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified
as a Sell rating; 11% of companies with this rating are investment banking clients of the Nomura
Group*.
As at 31 December 2009.

*The Nomura Group as defined in the Disclaimer section at the end of this report.
Explanation of Nomura's equity research rating system in Europe, Middle
East and Africa, US and Latin America for ratings published from 27 October
2008:
The rating system is a relative system indicating expected performance against a specific benchmark
identified for each individual stock. Analysts may also indicate absolute upside to price target defined
as (fair value - current price)/current price, subject to limited management discretion. In most cases,
the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an
appropriate valuation methodology such as discounted cash flow or multiple analysis, etc.
Stocks:
• A rating of "1", or "Buy", indicates that the analyst expects the stock to outperform the Benchmark
over the next 12 months.
• A rating of "2", or "Neutral", indicates that the analyst expects the stock to perform in line with the
Benchmark over the next 12 months.
• A rating of "3", or "Reduce", indicates that the analyst expects the stock to underperform the
Benchmark over the next 12 months.
• A rating of "RS-Rating Suspended", ” indicates that the rating and target price have been
suspended temporarily to comply with applicable regulations and/or firm policies in certain
circumstances including when Nomura is acting in an advisory capacity in a merger or strategic
transaction involving the company.
Benchmarks are as follows: United States/Europe: Please see valuation methodologies for
explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura

Nomura 11 14 April 2010

Infosys Technologies Harmendra Gandhi

Disclosure web page: http://www.nomura.com/research); Global Emerging Markets (ex-Asia): MSCI

Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology.
Sectors:
A "Bullish" stance, indicates that the analyst expects the sector to outperform the Benchmark during
the next 12 months.
A "Neutral" stance, indicates that the analyst expects the sector to perform in line with the Benchmark
during the next 12 months.
A "Bearish" stance, indicates that the analyst expects the sector to underperform the Benchmark
during the next 12 months.
Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX® 600; Global
Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.

Explanation of Nomura’s equity research rating system for Asian companies

under coverage ex Japan published from 30 October 2008 and in Japan from
6 January 2009:
Stocks:
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Price
Target – Current Price) / Current Price, subject to limited management discretion. In most cases, the
Price Target will equal the analyst’s 12-month intrinsic valuation of the stock, based on an appropriate
valuation methodology such as discounted cash flow, multiple analysis, etc.
• A "Buy" recommendation indicates that potential upside is 15% or more.
• A "Neutral" recommendation indicates that potential upside is less than 15% or downside is less than
5%.
• A "Reduce" recommendation indicates that potential downside is 5% or more.
• A rating of "RS" or "Rating Suspended" indicates that the rating and target price have been
suspended temporarily to comply with applicable regulations and/or firm policies in certain
circumstances including when Nomura is acting in an advisory capacity in a merger or strategic
transaction involving the subject company.
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coverage.
Sectors:
A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a positive absolute recommendation.
A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a neutral absolute recommendation.
A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a negative absolute recommendation.

Explanation of Nomura's equity research rating system in Japan published

prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US
and Latin America published prior to 27 October 2008):
Stocks:
• A rating of "1", or "Strong buy", indicates that the analyst expects the stock to outperform the
Benchmark by 15% or more over the next six months.
• A rating of "2", or "Buy", indicates that the analyst expects the stock to outperform the Benchmark by
5% or more but less than 15% over the next six months.
• A rating of "3", or "Neutral", indicates that the analyst expects the stock to either outperform or
underperform the Benchmark by less than 5% over the next six months.
• A rating of "4", or "Reduce", indicates that the analyst expects the stock to underperform the
Benchmark by 5% or more but less than 15% over the next six months.
• A rating of "5", or "Sell", indicates that the analyst expects the stock to underperform the Benchmark
by 15% or more over the next six months.
• Stocks labeled "Not rated" or shown as "No rating" are not in Nomura's regular research coverage.
Nomura might not publish additional research reports concerning this company, and it undertakes no
obligation to update the analysis, estimates, projections, conclusions or other information contained
herein.
Sectors:
A "Bullish" stance, indicates that the analyst expects the sector to outperform the Benchmark during
the next six months.
A "Neutral" stance, indicates that the analyst expects the sector to perform in line with the Benchmark
during the next six months.
A "Bearish" stance, indicates that the analyst expects the sector to underperform the Benchmark
during the next six months.
Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World
Technology Hardware & Equipment; Europe, by sector — Hardware/Semiconductors: FTSE W Europe
IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto &
Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware;
Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI
Emerging Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies

under coverage ex Japan published prior to 30 October 2008:
Stocks:

Nomura 12 14 April 2010

Infosys Technologies Harmendra Gandhi

Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair
Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair
Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an
appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if
the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack
of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases,
therefore, our recommendation is an assessment of the difference between current market price and
our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless
specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or
downside based on the prevailing market price to differ from the upside or downside implied by the
recommendation.
• A "Strong buy" recommendation indicates that upside is more than 20%.
• A "Buy" recommendation indicates that upside is between 10% and 20%.
• A "Neutral" recommendation indicates that upside or downside is less than 10%.
• A "Reduce" recommendation indicates that downside is between 10% and 20%.
• A "Sell" recommendation indicates that downside is more than 20%.
Sectors:
A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a positive absolute recommendation.
A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a neutral absolute recommendation.
A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of
the stocks under coverage is) a negative absolute recommendation.
Price targets
Price targets, if discussed, reflect in part the analyst's estimates for the company's earnings. The
achievement of any price target may be impeded by general market and macroeconomic trends, and
by other risks related to the company or the market, and may not occur if the company's earnings differ
from estimates.

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