Result Update August 2, 2016

Rating matrix Rating : Buy (TECMAH) | 529 Target : | 570 Target Period : 12 months Potential Upside : 16% Core communication – on path to recovery... What’s changed? • Tech Mahindra (TechM) reported Q1FY17 earnings, which were Target Changed from | 600 to | 570 largely in line with our estimates EPS FY17E Changed from | 36 to | 34 EPS FY18E Changed from | 40 to | 38.1 • US$ revenues grew 0.9% QoQ to $1,031.5 million, largely in line with Rating Unchanged our 1% growth and $1,033 million estimate. In constant currency, revenues grew 0.4% QoQ Quarterly performance • Rupee revenues grew 0.5% QoQ to | 6,921 crore and were above Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) our 0.3% QoQ growth and | 6,907 crore estimate Revenue 6,921 6,294 10.0 6,884 0.5 • At 14.9%, EBITDA margins declined 200 bps QoQ and were below EBITDA 1,029 907 13.5 1,153 (10.7) our 15.7% and 120 bps decline estimate led by higher visa fees EBITDA (%) 14.9 14.4 48 bps 16.7 -180 bps (down 100 bps) and seasonality of Comviva (down 170 bps) PAT 750 624 20.2 860 (12.8) • Reported PAT of | 750.1 crore was marginally above our | 731 crore Key financials estimate despite lower-than-expected EBITDA margin mainly due to | Crore FY15 FY16 FY17E FY18E higher other income (| 246 crore vs. | 166 crore in Q4FY16) Net Sales 22,621 26,494 29,256 32,710 Core communication reports marked improvement… EBITDA 4,192 4,277 4,740 5,397 TechM’s revenues grew 0.9% in dollar terms and 0.4% in constant Net Profit 2,628 3,073 3,265 3,660 currency terms. The enterprise division reported strong 4.2% sequential EPS (|) 26.7 34.5 34.0 38.1 growth partly supported by the Pinanfarina acquisition ($9 million for a Valuation summary month). Growth in the enterprise division was led by BFSI (11.3% of FY15 FY16 FY17E FY18E revenues, up 7.5% QoQ in $ terms) and retail, transport & logistics (6.5% P/E 18.3 14.2 14.4 12.9 of revenues, up 5.8% QoQ in $ terms). The key highlight for Q1FY17 was Target P/E 21.3 16.5 16.8 15.0 a marked improvement in core communication. Core communication EV / EBITDA 10.9 10.7 9.4 8.0 grew 3.5-4% sequentially after adjusting for LCC & Comviva acquisitions P/BV 3.9 3.3 3.1 2.7 following a sharp improvement in Top five client’s revenues after a muted RoNW (%) 21.5 23.1 21.4 20.9 performance for six consecutive. Revenues from Top five clients grew RoCE (%) 27.2 27.7 27.5 26.9 4.1% sequentially to $297.1 mn. The management also highlighted that

momentum is coming back in core communication division. Furthermore, Stock data the deal pipeline remains strong at $300 mn. Overall, we expect TechM’s Particular Amount Market Capitalization (| Crore) 48,152.5 $ revenues to grow 8.2%, 11% to $4367 mn, $4846 mn in FY17, FY18E, Total Debt (| Crore) 1,350.4 respectively. Cash and Investments (| Crore) 5,747.2 Margin to remain flat in FY17E… EV (| Crore) 43,091.9 At 14.9%, EBITDA margins declined 200 bps QoQ and were below our 52 week H/L 582 / 408 15.7% and 120 bps decline estimate led by higher visa fees (down 100 Equity capital 960.8 Face value | 5 bps) and more pronounced seasonality in Comviva acquisition (down 170 bps). In Q2FY17, there could be cross currency headwind, which would Price performance impact EBITDA margin by 40-50 bps. The management now expects 1M 3M 6M 12M margins to remain flat at FY16 level vs. earlier anticipation of TechMahindra (3.0) (8.3) (13.9) (25.4) improvement in margins trajectory. Going ahead, we build in EBITDA MindTree 7.6 (1.9) (0.5) 13.9 margin of 16.2%, 16.5% in FY17E, FY18E, respectively. KPIT Tech 5.2 8.3 27.8 (0.6) Core communication picking up; reiterate BUY… NIIT Tech (0.2) 3.6 (0.5) 32.4 We believe TechM is on the path to recovery in its core communication Research Analysts segment with a marked improvement in its top five client’s revenues after Deepak Purswani, CFA a muted performance for six consecutive quarters. Furthermore, the [email protected] enterprise division also showed strong growth (partly due to acquisitions). We expect TechM to report rupee revenue, PAT CAGR of Tushar Wavhal 11.1%, 9.1% in FY16-18E (average 16.4% EBITDA margins in FY17-18E), [email protected] vs. 40.5%, 36.9% reported in FY11-16 (average 19.3%), respectively, driven by enterprise business, a gradual pick-up in communication Deepti Tayal business, order bookings and large deal ramp-ups. We value TechM at [email protected] 15x its FY18E EPS of | 38.1 to arrive at our | 570 target price. We maintain our BUY recommendation.

ICICI Securities Ltd | Retail Equity Research

Variance analysis Q1FY17 Q1FY17E Q1FY16 YoY (%) Q4FY16 QoQ (%) Comments Revenue 6,920.9 6,906.5 6,293.8 10.0 6,883.7 0.5 Revenue growth was led by enterprise business Employee expenses 4,880.7 4,869.1 4,441.5 9.9 4,778.8 2.1

Gross Margin 2,040.2 2,037.4 1,852.3 10.1 2,104.9 -3.1 Gross margin (%) 29.5 29.5 29.4 5 bps 30.6 -110 bps SG&A expenses 1,011.2 953.1 945.8 6.9 952.0 6.2

EBITDA 1,029.0 1,084.3 906.5 13.5 1,152.9 -10.7 EBITDA margin decline was led by seasonality of Comviva and higher visa EBITDA Margin (%) 14.9 15.7 14.4 48 bps 16.7 -180 bps fees Depreciation & amortisation 201.9 221.0 172.4 17.1 217.4 -7.1 EBIT 827.2 863.3 734.1 12.7 935.5 -11.6 EBIT Margin (%) 12.0 12.5 11.7 29 bps 13.6 -164 bps Other income (less interest) 218.4 107.0 103.0 112.0 126.3 72.9 PBT 1,045.6 970.3 837.1 24.9 1,061.8 -1.5 Tax paid 246.8 230.0 214.2 15.2 180.6 36.7

PAT 750.0 731.3 624.1 20.2 860.0 -12.8 PAT was ahead of estimates mainly on account of higher other income

Key Metrics Closing employees 107,216 107,000 103,673 3.4 105,432 1.7 IT attrition (%) 21.0 20.0 19.0 200 bps 21.0 0 bps Utilisation incl trainees (%) 78.0 78.5 74.0 400 bps 77.0 100 bps Average $/| 67.0 66.9 63.6 5.4 67.5 -0.7 Source: Company, ICICIdirect.com Research

Change in estimates FY17E FY18E (| Crore) Old New % Change Old New % Change Comments Revenue 29,866 29,256 -2.0 33,059 32,710 -1.1 EBITDA 5,007 4,740 -5.3 5,538 5,397 -2.5 EBITDA Margin (%) 16.8 16.2 -56 bps 16.8 16.5 -24 bps PAT 3,456 3,265 -5.5 3,839 3,660 -4.7 EPS (|) 36.0 34.0 -5.6 40.0 38.1 -4.7 We have fine-tuned our estimates to reflect the Q1FY17 performance

Source: Company, ICICIdirect.com Research

Assumptions Current Earlier Comments FY15 FY16E FY17E FY18E FY17E FY18E Closing employees 103,281 105,432 112,454 118,212 110,499 118,212 IT attrition (%) 18.0 20.0 18.0 18.0 18.0 18.0 Utilisation incl trainees (%) 75.8 78.5 76.0 77.8 79.0 79.0 Average $/| 67.3 65.6 67.0 67.5 66.0 67.0 We have revised our $/| assumption

Source: Company, ICICIdirect.com Research

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Company Analysis Key highlights from earnings call… The management expects FY17E margins to be at the same levels as FY16 mainly due to the cross currency impact post Brexit. The company highlighted that margins of the Comviva business are expected to improve with improved sales from Q2FY17 onwards while no great improvement may be seen in Q2 in the LCC acquisition. The company completed the acquisition of on May 30, 2016 and expects a full quarter run rate between $18 million and $20 million. Also, the company closed the BIO Agency acquisition in the first week of July 2016. It is getting consolidated in Q2FY17 financials. According to the management, although the negative growth in telecom is on account of network services and on account of mobility business, the company expects the network tech business to continue to see more transactions and more spend happening in the long term. Core Communication showing signs of improvement… TechM reported steady Q1 earnings with 0.9% $ revenue growth and 0.4% in CC terms. Enterprise business grew 4.2% QoQ where growth was led by BFSI (11.3% of revenues, grew 7.5% QoQ growth in $ terms). Manufacturing (18% of revenues, grew 6.8% QoQ growth) and retail, transport & logistics (6.5% of revenues, grew 5.8% QoQ growth. However, the key highlight for Q1FY17 was marked by improvement in Core Communication. The Core Communication grew 3.5%-4% sequentially after adjusting for LCC & Comviva acquisitions following sharp improvement in top 5 clients revenues after muted performance for six consecutive quarters. Revenues from Top 5 clients grew 4.1% sequentially to $297.1 mn. The management also highlighted that momentum is coming back in core communication division. TechM signed deal worth $300 million in total contract value (TCV) in Q1 leading to LTM TCV of $1,175 million. Overall, we anticipate TechM $ revenues to grow 8.2/11% to $4367 mn/ $4846 mn in FY17/FY18E.

Exhibit 1: Dollar revenue may grow at 9.6% CAGR in FY16-18E

5500 4846 40 4367 4500 3686 4037 30 15.4 19.0 15.7 3500 3098 12.3 20 9.2 17.7 9.5 8.2 11.0 % 2500 2.6 10 $ million -0.8 9.8 3.9 4.3 1127 1156 1263 1500 977 989 1011 1015 1023 1032 0

500 -10 Q1 Q2 Q3 Q4 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Q1FY17

Dollar revenue Growth, YoY

Source: Company, ICICIdirect.com Research

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Exhibit 2: TechM growth vs. Nasscom guidance

40

30

18.7 17.7 19.0 20 15.4 16.5 13.0 13.0 13.0 11.0

% 10.2 9.2 9.5 8.2 10 5.5 2.6 0 -0.8 -10 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E

Growth, YoY NASSCOM guidance

Source: Company, ICICIdirect.com Research

Expect margins to remain flat vs. earlier expectation of improvement… At 14.9%, EBITDA margins declined 200 bps QoQ and were below our 15.7% and 120 bps decline estimate led by higher visa fees and seasonality of the Comviva and SG&A expenses. SG&A as a percentage of revenue increased 80 bps QoQ to 14.6% vs. 13.8% in Q4. The margin contraction was mainly due to the impact of ~180 bps because of Comviva seasonality and ~100 bps due to H- 1B visa hikes. The management expects the margin trajectory to remain at the same levels in FY17E as in FY16, post the GBP fall. Going forward, the management highlighted that margins may see an improvement in the Comviva business although no margin improvement is expected in Q2FY17 for LCC.

Exhibit 3: EBITDA margins may increase 10 bps YoY in FY17E

30.0% 24.5% 25.0% 22.2% 20.5% 21.4% 18.5% 20.0% 16.8% 16.5% 16.8% 16.7% 16.1% 16.2% 16.5% 14.4% 14.9% 15.0%

10.0%

5.0%

0.0% Q1 Q2 Q3 Q4 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Q1FY17

EBITDA margin S ource: Company, ICICIdirect.com Research

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Exhibit 4: Utilisation increases 100 bps QoQ

80 78.5 78.0 77.8 77.0 77.0 77.0 75.8 76.0 77 75.0 75.0 74.0 74.0 74 73.0

% 71 70.0

68

65 Q1 Q2 Q3 Q4 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E Q1FY17

Utilisation incl trainees

Source: Company, ICICIdirect.com Research

US leads growth while RoW declines… Growth across geographies was led by the US while both the RoW and Europe was weak. US revenues grew 5.6% QoQ. Europe grew 0.2% QoQ (vs. 0.6% decline in Q4) while RoW revenues declined 6.9% QoQ (vs. 7.3% growth in Q4 and 6.3% increase in Q3). Europe has been flat considering the environment in the UK. Top 5 revenue accounts grow 4% QoQ for first time in six quarters… Top 5 customer revenues grew robustly at 4.1% QoQ vs. 0.4% in Q4 and 12.2% decline in Q3 while top 6-10 customers revenues grew 1.8% QoQ (vs. -6.8%, 9.5%, 2.2%, -7.9%, QoQ in Q4, Q3, Q2, Q1FY16, respectively). Top 11-20 customer revenues declined 1.8% QoQ vs. 8.3%, -7.4%, 2.2%, 8.9% in Q4, Q3, Q2, and Q1FY16 respectively. According to the management, the growth was mainly on account of high amount of contribution largely from one or two customers in the mix. Active clients continue to increase… During the quarter, active clients rose by 11 to 818. Across categories, clients contributing >$50 million in revenues were flat QoQ in the last three quarters, $20-50 million increased by two, $10-20 million increased by one QoQ while $5-10 million increased by eight.

Exhibit 5: Sequentially, $1 million+ category clients declines by two

350 326 319 319 317 291 296 298 280 239

210

140 55 60 59 70 44

0 Q1 Q2 Q3 Q4 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Q1FY17

$1 million+ clients

Source: Company, ICICIdirect.com Research

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Outlook and valuation Tech Mahindra (TechM) reported Q1FY17 earnings, which were largely in line with our estimates. Growth during the quarter was led by the enterprise business, which grew 4.2% QoQ. Across geographies, growth was led by the US while Europe was soft on account of the UK environment while RoW declined. The management highlighted that top five customer revenues grew robustly at 4.1% sequentially after six quarters. According to the management, the deal funnel, which includes large and medium sized deals, has grown ~20% over the previous quarter while America has shown maximum growth.

We anticipate TechM will report rupee revenue, PAT CAGR of 11.1%, 9.1% in FY16-18E (average 16.4% EBITDA margins in FY17-18E), vs. 40.5%, 36.9% reported in FY11-16 (average 19.3%), respectively, driven by enterprise business, gradual pick-up in communication business, order bookings and large deal ramp-ups. We value TechM at 15x its FY18E EPS of | 38.1 to arrive at our | 570 target price and maintain our BUY rating.

Exhibit 6: One year forward rolling PE

1000

800

600

400

200

0 Jul-16 Jul-15 Jul-14 Jul-13 Jul-12 Jul-11 Jul-10 Jul-09 Jul-08 Nov-15 Nov-14 Nov-13 Nov-12 Nov-11 Nov-10 Nov-09 Nov-08 Mar-16 Mar-15 Mar-14 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09

Price 25 20 15 10 5

Source: Company, ICICIdirect.com Research

Exhibit 7: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 22,621 20.1 26.7 (16.0) 18.3 10.9 21.5 27.2 FY16 26,494 17.1 34.5 29.2 14.2 10.7 23.1 27.7 FY17E 29,256 10.4 34.0 (1.6) 14.4 9.4 21.4 27.5 FY18E 32,710 11.8 38.1 12.1 12.9 8.0 20.9 26.9

Source: Company, ICICIdirect.com Research

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Company snapshot

900 80.0

800 70.0 60.0 700 50.0 600 (|) 40.0 500 (%) 30.0 400 20.0 300 10.0 200 0.0 Jul-14 Sep-14 Dec-14 Mar-15 May-15 Jul-15 Oct-15 Dec-15 Mar-16 May-16 Aug-16

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Bloomberg, Company, ICICIdirect.com Research

Key events Date Event Mar-12 Buys Satyam in a stock deal that values the company at $1.8 billion. This would reduce dependency on BT, from 35% to 19% of total revenues Aug-12 BT group sells 14.1% stake in TechM at average | 778 per share to raise $ 250 million Sep-12 Acquires 51% stake in Comviva Technologies, a mobile value-added services player, for | 260 crore Dec-12 BT group sells its 9.1% stake in Tech Mahindra for at least $ 183 million, for a minimum price of | 855 per share Jun-13 Andhra court approves merger of Tech Mahindra and Mahindra Satyam. The merger concludes formally on July 8, 2013 Nov-13 Announces acquisition of Mahindra Engineering Services in a share swap deal. MES is an engineering company focused on automotive vertical Oct-14 Reports robust Q2FY15 performance as dollar revenues grow 5.2% QoQ led by communications while margins expand 180 bps QoQ to 20% Dec-14 Acquires US-based Lightbridge Communications for $240 million. The company generated $430 million revenues with 8% EBITDA margins during CY14 Jan-15 Acquires Geneva based SOFGEN holdings, a consulting company with presence in private wealth, commercial and retail banking solutions, for $30 million May-15 Reports disappointing Q4FY15 results as organic revenues declined sequentially led by weakness in telecom while margins declined 500 bps QoQ Jul-15 Reports generally better Q1FY16 earnings as US$ revenues grew 0.5% QoQ to $989 million vs. our $974.4 million estimate Nov-15 Reports encouraging set of Q2FY16 earnings with both revenue and margins ahead of our estimates. Constant currency revenues grew 3% QoQ

Source: Company, ICICIdirect.com Research

Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Dec-15 Mar-16 Jun-16 1 31-Mar-16 26.4% 256.2 0.0 Promoter 36.48 36.44 36.32 2 TML Benefit Trust 31-Mar-16 9.9% 96.0 0.0 Public 63.44 63.48 63.62 3 Capital World Investors 30-Jun-16 9.2% 88.9 1.1 Others 0.00 0.07 0.07 4 Capital International, Inc. 31-Mar-16 6.4% 61.8 4.2 Total 99.92 99.99 100.01 5 Stewart Investors 31-Mar-16 3.9% 38.1 23.6 6 Life Insurance Corporation of 31-Mar-16 3.2% 31.3 16.2 7 Capital Research Global Investors 31-Mar-16 1.8% 17.7 -41.6 8 ICICI Prudential Asset Management Co. Ltd. 30-Jun-16 1.5% 14.1 -1.4 9 The Vanguard Group, Inc. 30-Jun-16 1.3% 13.0 0.0 10 First State Investments (Singapore) 31-May-16 1.3% 12.4 0.0

Source: Reuters, ICICIdirect.com Research

Recent Activity Buys Sells Investor name Value ($m) Shares Investor name Value ($m) Shares Stewart Investors 169.37m 23.62m Capital Research Global Investors -298.00m -41.57m Life Insurance Corporation of India 116.45m 16.24m ICICI Prudential Asset Management Co. Ltd. -10.23m -1.36m Capital International, Inc. 30.29m 4.23m Nayyar (Vineet) -9.37m -1.25m Gurnani (Chander Prakash) 16.10m 2.20m Excel Funds Management Inc. -4.35m -0.58m Kotak Mahindra (UK) Ltd 11.91m 1.66m Birla Sun Life Asset Management Company Ltd. -3.78m -0.50m

Source: Reuters, ICICIdirect.com Research

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Financial summary

Profit and loss statement | Crore Cash flow statement | Crore FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E Net sales 22,621 26,494 29,256 32,710 Profit before Tax 3,618 3,923 4,435 4,948 Growth (%) 20 17 10 12 Add: Depreciation 611 759 805 900 (Inc)/dec in Current Assets (852) (1,805) (1,261) (1,577) COGS (employee expenses) 15,119 18,323 20,216 22,570 Inc/(dec) in CL and Provisions 3 679 649 731 Gross profit 7,503 8,172 9,040 10,140 Taxes paid (1,073) (818) (1,020) (1,138) S,G&A expenses 3,311 3,894 4,301 4,743 CF from operating activities 2,409 2,333 3,107 3,412 Total Operating Expenditure 18,429 22,217 24,517 27,313 (Inc)/dec in Investments (1,716) - - - EBITDA 4,192 4,277 4,740 5,397 (Inc)/dec in Fixed Assets (1,113) (1,000) (1,000) (1,000) Growth (%) 0 2 11 14 Others 217 502 600 550 CF from investing activities (2,092) (498) (400) (450) Depreciation 611 759 805 900 Issue/(Buy back) of Equity 58 - - - Interest 69 97 100 100 Inc/(dec) in loan funds (235) (100) (100) (100) Other Income 107 502 600 550 Dividend paid & dividend tax (550) (2,031) (1,320) (1,422) PBT 3,618 3,923 4,435 4,948 Inc/(dec) in debentures - - - - Total Tax 959 818 1,020 1,138 Finance charges (64) (97) (100) (100) Exceptional item - - - - CF from financing activities (790) (2,228) (1,520) (1,622)

PAT 2,628 3,073 3,265 3,660 Net Cash flow (473) (393) 1,187 1,341

Growth (%) (13) 17 6 12 Cash by acquistion 227 - - -

Opening Cash 1,452 2,405 2,011 3,199

EPS (|) 26.7 34.5 34.0 38.1 Cash carried to B/S 2,405 2,011 3,199 4,540

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

Balance sheet | Crore Key ratios

(Year-end March) FY15 FY16 FY17E FY18E (Year-end March) FY15 FY16 FY17E FY18E

Liabilities Per share data (|) Equity Capital 480 961 961 961 EPS 26.7 34.5 34.0 38.1 Share application money 0 0 0 0 Cash EPS 33.0 43.1 42.3 47.4 Reserve and Surplus 11,768 12,330 14,274 16,512 BV 124.6 149.4 158.5 181.8 Total Shareholders funds 12,249 13,291 15,235 17,474 DPS 6.0 20.0 13.0 14.0 Minority Interest 160 195 345 495 Cash Per Share 24.5 22.6 33.3 47.2 Debt - long term 46 46 46 46 Other long term liabilities 454 454 454 454 Operating Ratios (%) Total Liabilities 14,140 15,216 17,311 19,699 EBITDA Margin 18.5 16.1 16.2 16.5 Assets PAT Margin 11.6 11.6 11.2 11.2 Net Block 2,305 2,546 2,741 2,842 Capital WIP 568 568 568 568 Return Ratios (%) Investments 896 896 896 896 RoE 21.5 23.1 21.4 20.9 Deferred tax assets 390 390 390 390 RoCE 27.2 27.7 27.5 26.9 Goodwill on consolidation 1,728 1,728 1,728 1,728 RoIC 44.0 36.8 37.7 39.2 Debtors 5,206 6,097 6,733 7,528 Loans and Advances (short) 1,873 2,193 2,422 2,708 Valuation Ratios (x) Loans and Advances (long) 1,276 1,537 1,697 1,897 P/E 18.3 14.2 14.4 12.9

Cash 2,405 2,011 3,199 4,540 EV / EBITDA 10.9 10.7 9.4 8.0

Other current assets 3,838 4,491 4,956 5,538 EV / Net Sales 2.0 1.7 1.5 1.3 Total Current Assets 12,253 13,403 15,692 18,410 Market Cap / Sales 2.1 1.8 1.6 1.5 Short term borrowings 629 529 429 329 Price to Book Value 3.9 3.3 3.1 2.7 Trade payables 2,059 2,220 2,501 2,770 Current liabilities 1,223 1,432 1,581 1,768 Solvency Ratios Provisions 1,799 2,107 2,326 2,601 Debt/EBITDA 0.2 0.1 0.1 0.1 Net Current Assets 6,544 7,116 8,855 10,942 Current Ratio 2.1 2.2 2.2 2.2 Application of Funds 14,140 15,216 17,311 19,699 Quick Ratio 2.1 2.2 2.2 2.2 .

Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (IT)

CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%)

Sector / Company (|) TP(|) Rating (| Cr) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E Cyient (INFENT) 487 500 Hold 5,483 29.0 33.3 38.6 16.8 14.6 12.6 10.8 9.3 7.6 18.6 19.0 20.1 15.0 15.6 16.2 Eclerx (ECLSER) 1,463 1,250 Sell 5,776 87.7 93.3 104.9 16.7 15.7 13.9 10.8 9.8 8.5 43.3 39.3 37.3 33.7 30.4 28.8 Firstsource (FIRSOU) 48 54 Buy 3,203 12.2 9.7 8.6 12.2 9.7 8.6 9.4 7.1 5.6 10.3 12.5 14.6 12.7 14.2 13.9 HCL Tech* (HCLTEC) 718 950 Buy 105,764 53.0 59.0 63.0 13.6 12.2 11.4 9.9 8.7 7.3 30.4 28.7 27.1 25.0 23.4 21.8 Infosys (INFTEC) 1,073 1,290 Buy 245,144 59.0 64.7 71.8 18.2 16.6 14.9 12.2 10.5 9.2 30.3 30.1 29.9 21.9 21.4 21.3 KPIT Tech (KPISYS) 135 142 Hold 2,692 14.7 12.8 14.2 9.2 10.5 9.5 5.8 5.8 5.1 18.8 15.7 16.0 17.2 13.8 13.6 Mindtree (MINCON) 562 595 Hold 9,445 32.9 34.8 39.6 17.1 16.2 14.2 11.0 10.0 8.8 29.5 28.1 29.5 23.1 22.3 23.0 NIIT Technologies (NIITEC) 462 475 Hold 2,804 45.8 44.4 47.5 10.0 10.4 9.7 5.1 4.8 4.1 28.4 26.3 26.8 17.6 15.2 14.6 Persistent (PSYS) 689 690 Hold 5,511 37.2 40.0 47.0 18.3 17.0 14.5 11.2 9.3 7.4 27.9 27.3 28.1 21.2 20.4 20.7 TCS (TCS) 2,445 2,700 Buy 491,040 123.2 135.5 149.6 19.9 18.0 16.3 16.9 14.7 13.0 79.3 77.4 77.7 37.5 33.6 30.7 Tech Mahindra (TECMAH) 490 600 Buy 48,152 31.7 36.0 40.0 15.5 13.6 12.3 10.6 8.9 7.9 28.2 28.5 28.0 23.4 22.7 22.1 Wipro (WIPRO) 539 560 Hold 132,837 36.1 33.7 37.5 14.9 16.0 14.4 9.9 10.1 8.4 20.7 18.3 17.9 17.9 15.4 14.6 * June year end, Source: Company, ICICIdirect.com Research

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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]

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ANALYST CERTIFICATION We /I, Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA, Deepti Tayal, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of interest at the time of publication of this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

It is confirmed that Deepak Purswani, CFA MBA (Finance), Tushar Wavhal, MBA Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

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