FINANCIAL REPORTING AND ANALYSIS

CIA II
ANNUAL REPORT DISCLOSURE ANALYSIS

A Report submitted in partial fulfillment of the requirements for the degree of Master of
Business Administration

Submitted by
GEORGINA ELIZA GEORGE (2227322)
JOHNSEY ROY (2227327)
SRUTHI P (2227352)
SRUTHIKA L K (2227353)

Under the Guidance of

PROF. SRIKANTH P

MBA PROGRAMME
SCHOOL OF BUSINESS AND MANAGEMENT
CHRIST (DEEMED TO BE UNIVERSITY), BANGALORE

APRIL 2023
INTRODUCTION

In order to make well-informed decisions about a company's performance, it is important for

stakeholders and investors to go beyond just analyzing financial statements. They should also closely
examine the company's annual reports. Conducting a thorough fundamental analysis of a company
allows for a more comprehensive evaluation of its potential for investment, its potential for growth,
and its financial stability.
The analyst we interviewed is Mr. Aashish Benjamin, a Senior Analyst at Australia and New Zealend
Bank(ANZ Bank).
https://www.anz.com/institutional/global/india/en/

KEY LEARNINGS FROM THE ANALYST INTERVIEW

1. The annual report plays a vital role in making investment planning. As we are external stake
holders, we don’t know anything about the company’s performance and activities. In order to get an
detailed picture of the company we need to refer to the annual report.

2. Annual report is like a marketing statement, where the company prepare to attract more investors

3. According to the analyst its more important to look at the the market condition, what is happening
in the external environment, analyse the income trend, government laws and regulation, innovation
and wisely invest in the stocks.

4. The index page of the annual report is important and it is important to analyse the look the
financial statement of the company.

5. In order to analyse the valuation of stock whether it is over valued or under valued we have to
calculate earnings per share.

6. When we compare the earnings of the last year to the current year we can estimate the earnings.

7. Annual report alone cannot be the basis for choosing company for investment, we have to analyse
the projected cashflows, and sales, new products for market, should also be done.
About Infosys

Infosys is an Indian multinational corporation that provides business consulting, information

technology, and outsourcing services. The company was founded in 1981 by Narayana Murthy,
Nandan Nilekani, and six others, and it is headquartered in Bangalore, India.

Infosys offers a wide range of services to its clients, including application development and
maintenance, independent validation services, infrastructure management, engineering services,
business process outsourcing, consulting, and digital transformation services. The company operates
in several industries, including banking and finance, healthcare, retail, telecommunications, and more.

Infosys has a strong focus on innovation and technology, and it has made significant investments in
research and development to stay ahead of the curve. The company has several innovation hubs
across the globe, where it collaborates with clients, universities, and other stakeholders to develop
new technologies and solutions.

One of Infosys' key strengths is its highly skilled and diverse workforce. The company employs over
250,000 people from more than 80 countries, and it has a strong culture of learning and development.
Infosys offers extensive training and development programs to its employees, and it has a strong
focus on diversity and inclusion.

Infosys has received numerous awards and accolades for its performance and innovation. It has been
ranked among the top employers in several countries, including India and the United States. The
company has also been recognized for its corporate social responsibility initiatives, which focus on
education, healthcare, and sustainability.

In conclusion, Infosys is a leading global provider of technology and consulting services, with a
strong focus on innovation and a highly skilled and diverse workforce. The company's commitment
to excellence and its culture of learning and development make it a great place to work and a trusted
partner for its clients.
SHAREHOLDING PATTERN
Significant points that speak about the future of INFOSYS
1. Chairman’s statement
The image above is taken from the chairman’s
statement from the Annual Report 2022. It
states that the company’s future is full of
uncertainties and challenges for corporate
leaders, including rising interest rates,
geopolitical issues, and disruptions in supply
chains. However, digital acceleration presents
new opportunities for differentiation and
gaining market leadership. With its digital
expertise, empathy for clients, and investment
in employees, Infosys has the potential to
benefit clients and society, creating a sense of
optimism about the future. This also puts a
significant responsibility on Infosys to make it
happen, by leveraging its potential to create an
indelible mark with a renewed sense of purpose.
2. Research and Development
Their focused approach on energy efficiency, renewable energy and carbon offset projects over the
years culminated in Infosys achieving carbon neutrality for three years in a row since fiscal 2020,
across all emissions.
3. Market Share

Infosys has successfully increased market share in a highly competitive environment. The company
has more than doubled the share of digital revenue from 25.5% to 57.0%, establishing itself as a
leading digital company, with industry analysts rating it as a leader in 32 categories. Additionally,
Infosys has signed large deals worth ~US $39 billion for the four-year period from fiscal 2019 to
fiscal 2022. As part of its strategy execution, the company launched Infosys Cobalt, a set of services,
solutions, and platforms to accelerate the cloud journey for enterprises. The success of this strategy
demonstrates Infosys' ability to navigate uncertainties and leverage opportunities to create value for
its clients and society.
 IT INDUSTRY

The IT industry in India is a key driver of the country's economic growth. According to the National
Association of Software and Service Companies (NASSCOM), the IT-BPM (Business Process
Management) sector contributed 7.7% to India's GDP in the fiscal year 2020. The sector also employs
around 4.5 million people directly and supports around 10 million jobs indirectly, making it one of
the largest employers in the country.

One of the main factors driving the growth of the IT industry in India is its ability to provide cost-
effective services to global clients. The country has a vast pool of skilled IT professionals who can
offer high-quality services at lower rates than their counterparts in developed countries. In 2020,
India's IT services exports were valued at around $150 billion, making it the largest exporter of IT
services in the world.

The Indian IT industry has also been quick to adopt emerging technologies such as artificial
intelligence (AI), blockchain, and the Internet of Things (IoT), among others. According to
NASSCOM, the country's digital transformation market is expected to reach $1 trillion by 2025. The
government has also launched several initiatives to promote the adoption of emerging technologies,
such as the Digital India program and the National AI Strategy.

Despite the impressive growth of the IT industry in India, there are some challenges that need to be
addressed. For example, there is a shortage of skilled IT professionals in certain areas, such as data
analytics and cybersecurity. Additionally, there is a need to focus on innovation and research and
development to keep up with the rapidly changing technological landscape.
Overall, the IT industry in India is a significant contributor to the country's economy and has the
potential to continue growing in the coming years. With the government's support and the industry's
focus on innovation, India can continue to cement its position as a global leader in the IT sector.

Opportunities in IT Industry

India is a dominant player in the global outsourcing market for information technology (IT) services,
with a 67 percent market share. This is due to its skilled workforce, strong infrastructure, and
supportive government policies that attract investors. In addition to its early success in outsourcing,
India is now moving towards a value-added approach by providing cost-effective technology to
global clients and diversifying into new areas such as system integration, consulting, and SMAC
(Social, Mobile, Analytics, and Cloud) services.

Key challenges faced by IT Industry

The IT industry in India faces a number of challenges despite its global dominance. Here are some of
the key challenges:

Skills gap: While India has a large pool of technically skilled professionals, there is still a gap in
certain areas such as emerging technologies like artificial intelligence and blockchain. The industry
needs to address this gap through re-skilling and upskilling programs.
Cybersecurity: With the increasing threat of cyber-attacks, the IT industry in India needs to ensure
that it has robust cybersecurity measures in place to protect sensitive data and intellectual property.
This requires significant investment in security infrastructure and talent.

Infrastructure: While India has made significant progress in developing its infrastructure, there are
still gaps in connectivity and power supply that need to be addressed to support the growth of the IT
industry.

Policy uncertainty: The industry is also affected by regulatory uncertainty and changes in
government policies. This can create uncertainty for businesses and hinder long-term planning and
investment.

Competition: The IT industry in India faces intense competition from other outsourcing destinations
such as China and the Philippines. This puts pressure on companies to continuously innovate and
deliver high-quality services at a competitive price.
 ESSENTIAL HIGHLIGHTS

MANAGEMENT DISCUSSION AND ANALYSIS

The above table provides financial information for Infosys for the years ending March 31, 2021 and
March 31, 2022. The revenue from operations for 2022 was Rs. 1,03,940 crore, representing an
increase of 20.5% over the previous year. The cost of sales was Rs. 69,629 crore in 2022, compared
to Rs. 55,541 crore in 2021. The gross profit for the year 2022 was Rs. 34,311 crore, representing a
12.9% increase over the previous year.

In terms of operating expenses, selling and marketing expenses were Rs. 4,125 crore in 2022
compared to Rs. 3,676 crore in 2021, and general and administration expenses were Rs. 4,787 crore
in 2022 compared to Rs. 4,559 crore in 2021. The total operating expenses for the year 2022 were Rs.
8,912 crore, an increase of 8.3% over the previous year.

The operating profit for the year 2022 was Rs. 25,399 crore, an increase of 14.7% over the previous
year. The finance cost for the year 2022 was Rs. 128 crore, which was marginally higher than the
previous year. The other income, net was Rs. 3,224 crore, which was 30.8% higher than the previous
year. The profit before tax for the year 2022 was Rs. 28,495 crore, representing an increase of 16.4%
over the previous year.

The tax expense for the year 2022 was Rs. 7,260 crore compared to Rs. 6,429 crore in 2021. The
profit for the year 2022 was Rs. 21,235 crore, representing a 17.6% increase over the previous year.
Overall, the financial performance of Infosys was strong in the year 2022, with growth in revenue,
gross profit, and profit before tax.

The financial results of the company for the year ended March 31, 2022, indicate a significant
increase in revenue from operations, which amounted to INR 1,03,940 crores. The cost of sales was
INR 69,629 crores, resulting in a gross profit of INR 34,311 crores. The operating expenses,
including selling and marketing expenses and general and administration expenses, were INR 8,912
crores. The operating profit for the year was INR 25,399 crores, while the net profit after tax was INR
21,235 crores.

The company's revenue was divided into two categories, namely digital and core revenue. The digital
revenue for the year was INR 69,404 crores, representing a significant increase of 42.6% over the
previous year. The core revenue was INR 52,237 crores, reflecting a modest growth of 0.9%.

The company added 451 new customers during the year, and its export revenues constituted 97.1% of
its total revenues. The remaining 2.9% of its revenues were generated domestically. To account for
the impact of currency fluctuations, the company reported revenue growth in both reported and
constant currency terms. The company's reported revenues for fiscal 2022 were US$ 16,311 million,
representing a growth of 20.3%. In constant currency terms, the company's revenues grew by 19.7%.
The table shows various financial parameters for Infosys for the years 2021 and 2022. In terms of
revenue growth, both standalone and consolidated revenue increased significantly in 2022, with
growth rates of 20.9% and 21.1%, respectively. The operating margin and net profit margin decreased
slightly in 2022, both in the standalone and consolidated categories.

The table also shows that Infosys had cash and investments amounting to 30.1% and 31.7% of total
assets in the standalone and consolidated categories, respectively. Additionally, the company's market
capitalization to revenues ratio increased from 5.8 to 6.6 on a consolidated basis, and its price-to-
earnings ratio also increased from 30.0 to 36.3.

Days sales outstanding decreased from 71 to 67 in the consolidated category but was not reported in
the standalone category. Finally, basic earnings per share increased in both categories, with the
consolidated category having higher EPS compared to the standalone category. However, no data was
reported for market capitalization to revenues ratio and price-to-earnings ratio on a standalone basis.
ESG

The company's ESG (Environmental, Social, and Governance) ambitions are centered around its
Vision 2030, which aims to shape and share solutions that serve the development of businesses and
communities. In terms of the environment, the company is committed to preserving the planet by
shaping and sharing technology solutions that can help mitigate climate change and reduce its
environmental impact. Its social ambition is to enable community development by creating
meaningful opportunities for all, promoting diversity and inclusion, and empowering
underrepresented groups. Finally, the company's governance ambition is to serve the interests of all
stakeholders by leading through its core values of integrity, transparency, accountability, and fairness.
The company believes that by aligning its ESG ambitions with its Vision 2030, it can create a
sustainable and inclusive future for itself, its clients, and the communities it serves.
Infosys Value Proposition

Infosys' value proposition is built on a global IT services business model with several advantages.
The company is well-positioned to capitalize on the growing market for organization-wide
technology transformations that are impacting organizations across industries. Operating across
multiple geographies, Infosys mitigates the risk associated with geopolitical events and enables the
company to tap into diverse talent pools. Serving clients across a range of industries reduces Infosys'
exposure to industry-specific risks. The company's asset-light operations help to reduce energy
dependence and minimize the environmental footprint. Infosys has several advantages that set it apart
from its competitors, including a focus on digital, deep client relationships, a broad suite of services
and solutions, and an innovation ecosystem. The company has a localization strategy that enables it to
adapt its services and solutions to meet the specific needs of clients in different geographies. With a
strong focus on reskilling and refactoring its workforce to keep up with evolving market demands,
Infosys has a liquid and debt-free balance sheet supported by an articulated capital returns policy. The
company has strong governance credentials, including a wide shareholder base, an independent board,
and a US listing.
Credit Rating

Two of the major rating

agencies, Standard & Poor's
(S&P) and Moody's, have
revised their ratings and
outlook on Infosys. S&P has
upgraded Infosys' credit rating
to 'A' from 'A-', indicating an
improvement in the company's
creditworthiness. The agency
has also assigned a 'Stable' outlook, which implies that the rating is unlikely to change in the near
future.
Moody's, on the other hand, has changed its rating outlook on Infosys from 'Negative' to
'Stable', following a similar change in the sovereign outlook. The agency has affirmed the company's
long-term rating at 'Baa1', which is one notch above the investment-grade threshold. This rating
reflects a moderate credit risk and the company's ability to meet its financial obligations.
On the other hand, there has been no change in the credit ratings from Dun & Bradstreet and
CRISIL during the year. Dun & Bradstreet has assigned a rating of '5A1' to Infosys, indicating a
strong financial condition. CRISIL has assigned a rating of 'AAA', which is the highest credit rating,
indicating the highest degree of safety regarding the timely servicing of financial obligations.
Overall, the credit ratings and outlook from different rating agencies suggest that Infosys is a
financially strong and stable company with a moderate credit risk. These ratings and outlooks are
important for investors and stakeholders who want to assess the company's creditworthiness and
make informed investment decisions.

Future Plan of Action

The future plan of action outlined in
the statement suggests that Infosys is
committed to innovation and
collaboration to create business
solutions that are customized to the needs of their clients. By leveraging the expertise of their partners
and focusing on client-specific themes, Infosys can continue to deliver value to its clients and
maintain its position as a leader in digital services and consulting.
CORPORATE GOVERNANCE

At Infosys, corporate governance is an integral part of the company's value system, which
encompasses its culture, policies, and relationships with stakeholders. The company places a strong
emphasis on integrity and transparency in its corporate governance practices, as they are key to
gaining and retaining the trust of its stakeholders.
Corporate governance is a business process that is ethically-driven and committed to enhancing an
organization's wealth-generating capacity by making ethical decisions and conducting business with a
firm commitment to values while meeting stakeholders' expectations. For Infosys, it is imperative that
the company's affairs are managed in a fair and transparent manner to ensure the trust of its
stakeholders.

Infosys is committed to defining, following, and practicing the highest level of corporate governance
across all its business functions. The company's corporate governance guidelines are a reflection of
the values it stands by as it conducts business and engages with stakeholders. The company has been
a leader in adopting internationally-recognized corporate governance guidelines and has set the
highest standards in abiding by them.

The company's governance practices are based on its core value system of C-LIFE (Client Value,
Leadership by Example, Integrity and transparency, Fairness, and Excellence) and are guided by the
OECD (Organization for Economic Cooperation and Development) principles. Infosys believes that
by following these principles, it can ensure that its corporate governance practices are aligned with its
values and that it can continue to gain and retain the trust of its stakeholders.
Conclusion
Based on the financial report of Infosys, it can be concluded that the company has shown impressive
growth in revenue, both in digital and core areas. The company has also been able to add a significant
number of new customers during the year. However, the operating margin and net profit margin have
shown a slight decline compared to the previous year. The cash and investment percentage of total
assets has also shown a decline.

Investors looking to invest in Infosys should consider the company's financial position and its
commitment to corporate governance. While the company has shown strong growth in revenue,
investors should keep an eye on the operating margin and net profit margin, which could impact the
company's future financial performance. Overall, Infosys remains a sound investment option, with a
solid track record of growth and a strong commitment to ethical business practices.

References

www.infosys.com/investors/reports-filings/annual-report/annual/documents/infosys-ar-22.pdf
www.infosys.com/investors/investorpresentation/ir-presentation.pdf
www.infosys.com/investors/news-events/analyst-meet/2022/india/transcripts/next-digital.pdf
https://youtu.be/B6DzspdyWhA