Zensar technologies Ltd.(Zensar)

Initiating Coverage Zensar technologies Ltd.(Zensar) Zensar the growth October 30,2015 BUY CMP (`) Target (`) 960 1,166 Potential Upside Absolute Rating 21% BUY Market Info (as on October 30, 2015) BSE Sensex 26,656.83 Nifty S&P 8,065.80 Stock Detail BSE Group B BSE Code 504067 NSE Code ZENSARTECH Bloomberg Code ZENT.IN Market Cap (`bn) 43.92 Free Float (%) 29% 52wk Hi/Lo 1020 / 563.90 Avg. Daily Volume (NSE) 156503 Face Value / Div. per share (`) 10.00 / 6.50 Shares Outstanding (mn) 44.4 Company Snapshot Zensar Technologies Ltd. (Zensar) is the part of the RPG group of companies. The RPG group is one of the largest groups of companies in India. Zensar is a midsized IT company for global organizations looking to strategically transform, grow, and lead in today s challenging business environment. The Company has a services portfolio that ranges from the traditional to the transformational - across service lines of Management Consulting, Business Application Services, Enterprise Solutions, Enterprise Collaboration Services, Testing and Assurance Services, BPM and Infrastructure Management Services. Investment Rationale Robust Services portfolio makes company strong player in Digital services Wide range of vertical coverage like e-commerce, Enterprise Application, custom application, infrastructure management, product engineering etc. This also helps to improve the productivity of the business which helps to empower people with right information at right time. Digital space is the key revenue driver for the zensar. The company has developed strong resources and specializing applications. Zensar help their clients to improve e- commerce, helping them to manage their recourses, also help to manage their infrastructure. This provides edge to Zensar over other IT services company and makes more lucrative company in terms of robust business structure. Shareholding Pattern (in %) Promoters FIIs DII Others 48.03 13.93 0.59 37.45 Financial Snapshot (`mn) Y/E Mar FY14 FY15 FY16E FY17E Net Sales 23,349 26,557 29,361 33,471 EBITDA 3,580 3,917 4,446 4,778 PAT 2,375 2,646 2,961 3,126 EPS 52.9 59.0 65.7 69.4 ROE (%) 25% 23% 21% 20% ROCE (%) 33% 31% 30% 29% P/E 17.45 15.86 14.61 13.83 EV/EBITDA 10.16 9.57 7.53 6.68 Share Price Performance 170 160 150 140 130 120 110 100 90 80 Oct-14 Nov-14 Dec-14 Dec-14 Jan-15 Feb-15 Mar-15 Mar-15 Apr-15 May-15 May-15 Jun-15 Jul-15 Jul-15 Aug-15 Sep-15 Sep-15 Oct-15 Zensar Technologies Ltd BSE SENSEX Rel. Perf. 1Mth 3 Mths 6Mths 1Yr Zensar (%) 26.7 12.6 44.0 60.8 Sensex (%) 4.1 (2.6) (1.4) (1.0) Industry focus solutions makes business structure more robust Zensar have strong solution base which provide a different IT solution for their business. This niche business structure provides an edge to zensar which makes them more lucrative for longer run horizon. This also makes company a different IT company from the other IT companies. Zensar have specialized business solutions among different sector. The company provides IT solutions among different business process which makes their client to refine the business process and makes its business more efficient. The company has different process solution in the manufacturing sector like service opportunity management, customer experience management, connected shop floor etc. Strong business strategy to attain the top line Zensar has strong domain focus among the sectors like manufacturing, retail and insurance sector. The company has larger revenue coming from these sectors. This niche segmentation of the revenue makes zensar a different IT service company than other traditional IT companies. Zensar has also a strategy to focus on three different areas of business viz. Digital Enterprise, Infrastructure management and Application management. However now company is now focusing on high realization service offerings like digital services. Long term contracts gives the guarantee to the revenue over longer run horizon makes Zensar more sustainable in the adverse conditions or economic slowdown. Valuation At the CMP of `960, Zensar is trading at 14.6x, and 13.6x its FY16E, and FY17E EPS of `65.7 and `69.4. Compared to its peers; Zensar is trading at a discount P/E multiple, although its margins are better than or comparable to peers. We initiate coverage on Zensar Technologies Ltd with a BUY rating and attach a multiple of 16.8 xs to Zensars FY17E earnings (EPS) to arrive at the target price of `1,166, indicating a potential upside of 21%. Analyst Omkar Tanksale +91-22- 6614 2692 omkar@geplcapital.com Institutional Research 1

Index & Content Sr. No. Topic Page No. 1 Company Background... 3 2 Business Model... 4 3 Key Management Personnel... 5 4 Investment Rationale... 6 5 Financial Overview... 10 6 Key Risks... 14 7 SWOT Analysis... 15 8 Michael Porter s Five Force Analysis... 16 9 Valuation & Outlook... 17 10 Financials... 18 11 Disclaimer... 19 Institutional Research Initiating Coverage 2

Company Background Zensar Technologies Ltd. is the part of the RPG group of companies. The RPG group is one of the largest group of companies in India. RPG group has presence over 100 companies. They hold one of the biggest brands like CEAT, KEC Infrastructure, and also have strong presence in the field of the pharmaceutical, power etc. Zensar Technologies is a midsized IT company for global organizations looking to strategically transform, grow, and lead in today s challenging business environment. The Company has a services portfolio that ranges from the traditional to the transformational - across service lines of Management Consulting, Business Application Services, Enterprise Solutions, Enterprise Collaboration Services, Testing and Assurance Services, BPM and Infrastructure Management Services. Zensar s experience across industries of Retail, Manufacturing, Insurance, Banking, Healthcare and others translate into a differentiated value proposition and faster time-tomarket for clients. Company capability in infrastructure-oriented services ranges from remote infrastructure management to end user computing to data centre services and security and compliance. Zensar is now leading the way in powering next-generation enterprises with its cloud, mobility and social media solutions. Zensar is the world's first enterprise-wide SEI CMM Level 5 Company. Zensar operates in the US, Europe, Africa, Middle East, Singapore and Australia regions and has delivery centers in India (Pune, Hyderabad and Bangalore), China, UK, Amsterdam and US (Westborough) Company is backed by a strong track-record of innovation, over 8000 associates and footprint in 29 global locations, comprehensive range of software services and solutions enable its 400+ forward-looking customer to cross new threshold of business performance. Institutional Research Initiating Coverage 3

Business Model Zensar tech operates under the three main verticalsof IT services, Application Management services, Infrastructure Management & Digital Enterprise. IT services is the segment from which major revenue come from. Company has rich experience in the application management. The company provides variety of services to its clients and makes its client more efficient in its business. Zensar specialized in Business application services, Enterprise solutions, process consulting, product engineering, Cloud services, Business intelligent and data warehousing etc. These specialized services make Zensar a strong player in the field of IT enabled services. The contribution from Application management revenue has increased from 63% in FY12 to 71% in FY15. Infrastructure Management is another segment from which company is having decent amount of revenue. Company has the capability of onsite as well as remote IT infrastructure management & technical support for the companies. IT infrastructure services include data center management, Multivendor support services, Network infrastructure etc. However, revenue contribution has declined from 37% in FY12 to 20% in FY15. We believe that in the upcoming period contribution from the segment will likely to improve. Company has entered into a new segment i.e. Digital enterprise solution in last couple of years. Revenue from this business has grown from 5% in FY14 to 13% in FY15. Company expects contribution from this business to touch 20% by FY17 end. The Company has a services portfolio that ranges from the traditional to the transformational across service lines of Management Consulting, Business Application Services, Enterprise Solutions, Enterprise Collaboration Services, Testing and Assurance Services, BPM and Infrastructure Management Services. Zensar s experience across industries of Retail, Manufacturing, Insurance, Banking, Healthcare and others translate into a differentiated value proposition and faster time-to-market for clients. Institutional Research Initiating Coverage 4

Key Management Personnel Zensar Tech has sound management personnel which helps company to attain desire growth over the period of time Dr. Ganesh Natarajan: Dr. Ganesh Natarajan is Vice Chairman & CEO of Zensar Technologies, a leading firm that optimises technology and processes for Fortune 500 companies. He was Chairman of NASSCOM in 2008 and is a member of the Chairmen s Council of NASSCOM. He is also a fellow of the Computer Society of India. Vivek Gupta: Vivek has a B.Tech degree from India's premier engineering college, the Indian Institute of Technology, Delhi. He joined Zensar in 1984 as a management trainee and holds the unique distinction of being the longest serving campus recruit in the company. Vivek has performed a number of roles around the globe, including heading all delivery operations, before taking over his current role as Chief Executive and Head, Global Infrastructure Management Services Nitin Parab : Nitin is the Chief Executive and global head of Zensar s Manufacturing, Retail, Insurance, Banking and Health care Industry vertical businesses. Whilst based in US for almost 2 decades, Nitin has deep experience in managing operations (Business Development, Marketing, Solution Design, Service Delivery, Technology Practices, Alliances and Partnerships) in several countries across all continents. Pinak Kar: Pinaki Kar who joined Zensar as the Infrastructure Business Unit Head. In his last role, Pinaki was CEO & President of Wipro Infocossing. His responsibilities included transformation of the business to a higher growth path, incubating Cloud Computing, expanding into Europe and APAC. Institutional Research Initiating Coverage 5

Investment Rationale Robust Services portfolio makes company strong player in Digital services Service portfolio E-Commerce Enterprise Applications Custom Applications Infrastructure Management Product Engineering Digital Enterprise The company has technical expertise that also understands business and makes company more efficient in its business. Wide range of vertical coverage like e-commerce, Enterprise Application, custom application, infrastructure management, product engineering etc. This also helps to improve the productivity of the business which helps to empower people with right information at right time. Digital space is the key revenue driver for the zensar. The company has developed strong resources and specializing applications. This enables zensar a key player in the digital space. Majority of the companies from different verticals are now focus on digital infrastructure which makes them more efficient in the business. Zensar help their clients to improve e-commerce, helping them to manage their recourses, also help to manage their infrastructure. This provides edge to Zensar over other IT services company and makes more lucrative company in terms of robust business structure. We believe that digital services will likely to improve with the greater momentum than other services. This will also help to improve their man hour billing charges in the upcoming period. Improvement in the realization will likely to impact on the operating margins positively. This also makes Zensar a more efficient company. Institutional Research Initiating Coverage 6

Industry focus solutions makes business structure more robust Zensar have strong solution base which provide a different IT solution for their business. This niche business structure provides an edge to zensar which makes them more lucrative for longer run horizon. This also makes company a different IT company from the other IT companies. Industry focus solutions Industry Focused Solutions Manufacturing Retail Insurance Banking Service Opportunity Omni-Channel Consumer Social Listening Omni-channel Banking Management Experience Reinsurance and Analytics Customer Experience Omni-Present Predictive Analytics Lending and Payments Management Commerce Modernization Online Banking and Connected Shop Floor Flexible Supply Chain Mobile Banking Zensar have specialized business solutions among different sector. The company provides IT solutions among different business process which makes their client to refine the business process and makes its business more efficient. The company has different process solution in the manufacturing sector like service opportunity management, customer experience management, connected shop floor etc. These process solutions are more clients. The company also help manufacturing companies to manage and improve supply chain agility to sustain in the global competitive market. Zensar's business benefit driven framework coupled with its deep domain expertise, service offerings, business & edge solutions, and strong IT capabilities helps customers in addressing specific requirements, gaps and challenges and enable them to achieve targeted business performance while keeping total cost of ownership at optimum level. Zensar s business benefit driven service and solution. Distribution strategy and value chain dynamics are becoming integrated with existing capabilities to drive business growth. By enabling the most trustworthy, efficient, and effective processes, company help retailers achieve higher service levels while reducing costs, thereby growing customer loyalty and brand strength. Institutional Research Initiating Coverage 7

Strong business strategy to attain the top line Zensar has strong domain focus among the sectors like manufacturing, retail and insurance sector. The company has larger revenue coming from these sectors. This niche segmentation of the revenue makes zensar a different IT service company than other traditional IT companies. Zensar has also a strategy to focus on three different areas of business viz. Digital Enterprise, Infrastructure management and Application management. 3X3X3 Focus Industry Manufacturing Retail Insurance Geographical Segment USA Europe Africa Service Offering Application Management Infrastructure Management Digital Enterprise More than 70% of its revenue coming from manufacturing industry. Strong process driven solutions and unique tools make company more efficient in its business. Majority of large cap IT services companies in India have banking and NBFC s as a majority of revenue contributors. This also can create a Zensar a great business opportunity and will make Zensar a strong player in longer run. Retail and Insurance sector are also among top revenue generating sectors for the the company. This unique business strategy makes company more robust in terms of business structure. North America remains the major revenue contributor to the top line even in the case of Zensar. More than 75% of the revenue coming from the same region, Europe contributes around 10% and Africa contributes around 8%. The company has more dependence on the American region which also provides a advantage to grow with the higher momentum. Slowdown in the European region will not affect significantly on the top line of the company as lesser dependence on the region. Majority of the revenue coming from the application maintenance and services (AMS). Around 70% of the revenue comes from the services. These are services consider to be low realization services. However now company is now focusing on high realization service offerings like digital services. Long term contracts gives the guarantee to the revenue over longer run horizon makes Zensar more sustainable in the adverse conditions or economic slowdown. Institutional Research Initiating Coverage 8

Consistent employee addition help company to maintain higher efficiency Strong employee support makes IT service company stronger. Higher the employees higher the projects can IT company can take. Employee addition increases the efficiency of the company. This will ultimately help to attain higher top line growth and also help company to grow. As shown in the above chart, Zensar has consistent employee addition which ensures timely completion of the project. Higher efficiency ensures lower operating cost which will help Zensar to produce better operating margins. Moderate addition in the employees also helps to add active clients. This will also help to attain desire top line growth. From the above chart we can see that, Zensar has stable utilization levels also show the efficient use of its manpower to generate revenue. This enables company to acquire new projects easily as compared to its peers, and also ensures the timeline based delivery of the project. Employee Addition 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 Technical- onsite Technical-offshore Technical BPO/Others Marketing Support As we can see from the above chart that consistent employee addition makes company more efficient in terms of the new contracts to be taken. Currently company has around 8050 employees and have utilization rate of 79%.This consider being higher as compared to its peers. Higher utilization rate signifies higher pretax margins and greater operational efficiency. We believe that continuous employee addition with sustainable utilization rate makes company more robust. Lower attrition rate will also help to improve the efficiency of the human resource and makes a operational functions more smooth. Institutional Research Initiating Coverage 9

Financial Overview Pretax Margin EBITDA Margins As shown in the graph below, Zensar has shown consistent EBITDA growth over the past few quarters. This shows that Zensar has been successful in managing the operating expenses efficiently with the rise in the top line. After the slight decline in the EBITDA margins in 4QFY14 company has started regaining the desire operating efficiency over last two quarters and will also likely to continue in the upcoming period. EBITDA Margins 1200 20% 1000 18% 16% 800 14% 12% 600 10% 400 8% 6% 200 4% 2% 0 0% 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 EBITDA Margin Operating Margins As shown in the graph below, Zensar has become successful in increasing the operating margins over past few years. Consistent rise in the operating profit indicates that, Zensar has become successful in transferring the operating cost to its customers. This also indicates rising efficiency in the business. We believe that Zensar will deliver better operating margins as they focus more on the segments where they have higher realizations. Operating Margins 1,200 20% 1,000 18% 16% 800 14% 12% 600 10% 400 8% 6% 200 4% 2% - 0% 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 EBIT Margin Institutional Research Initiating Coverage 10

Net Profit Margin Zensar has become successful in delivering consistent and high growth in the net profit and also margins are showing consistent growth. This shows that the business of the company has become more robust over the period of time. Large multiyear contracts, strong client addition makes company more lucrative. We believe that Zensar will likely to report higher bottom line growth in the upcoming future. This also makes Zensar a safer bet. NPAT Margin 800 14% 700 12% 600 500 400 300 200 10% 8% 6% 4% 100 2% - 0% 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 NPAT margin Return Margin ROE performance As shown in the diagram below, we can see that ROE of the company has increasing consistently over last four years. This shows that Zensar has produced better results on the invested equity. This also shows that, Zensar is a better investment opportunity and can produce better return in the future. RoE 3000 2500 2000 1500 1000 500 0 FY11 FY12 FY13 FY14 FY15 35% 30% 25% 20% 15% 10% 5% 0% NPAT ROE Institutional Research Initiating Coverage 11

Return on the capital Employed (ROCE) Return on the capital employed (ROCE) is also one of the major important aspect while investing. Zensar has zero or marginal debt on their balances sheet. So that the company has produce the strong growth in terms of ROCE as net profit is growing. We believe that Zensar will show a strong growth for the upcoming period. RoCE 3000 2500 2000 1500 1000 500 0 FY11 FY12 FY13 FY14 FY15 35% 30% 25% 20% 15% 10% 5% 0% NPAT RoCE Payout Ratio Dividend Payout Ratio Zensar is one of the highly dividend paying company. As shown in the graph below Zensar has strong payout ratio. This also makes stock very lucrative. We believe that in the upcoming period Zensar will likely to maintain the payout ratio of 20% in the upcoming period. Dividend Payout Ratio 600 25% 500 400 300 200 100 20% 15% 10% 5% - FY11 FY12 FY13 FY14 FY15 0% Dividend Dividend payout Institutional Research Initiating Coverage 12

Net Profit to Payout Ratio Zensar has history of paying dividend to its share holder. As shown in the diagram below we can see that company had given dividends as proportion to the net profit. We believe that payout ratio to net profit ratio will likely to remain same. This also makes stock more lucrative. Investor can also take privilege of higher payout ratio. Net Profit to Payout Ratio 3,000 25% 2,500 2,000 1,500 1,000 500 20% 15% 10% 5% - FY11 FY12 FY13 FY14 FY15 0% NPAT Dividend payout Institutional Research Initiating Coverage 13

Key Risks Investment Risk : Fluctuations in the US$-INR and GBP-INR and GBP-US$. As majority of the revenue comes from international territories. Fluctuation in the currencies will impact the revenue of the company Change in the economic climate / legislation against Indian offshore development in the countries where the company provides its services. Fluctuation in world s largest economy will affect the IT services business on substantial front. Increase in Visa fees will increase the cost. Rise in the visa fees will lead to rise in the operating cost (Employee expenses) to IT industry. So it plays a major role in the IT industry. Salary hikes i.e. wage inflation may cause a spoil sport. Rising economic growth will create more jobs in the country. This will ultimately give rise to wages hikes. Wage hikes will affect the operating margins of the company. So fluctuation in the wages is considered to be significant risk in IT service Industry. Institutional Research Initiating Coverage 14

SWOT Analysis Strengths Strong domain focus Diversification of business. North America is the main area of operations Strong management and Employee workforce Opportunities Further penetration in US Mining the existing and the new clients Zensar Technologies Ltd. Weaknesses High client concentration High geography concentration Single domain dependence Threats Slowdown in the European economy Slowdown in the IT spending Loss of top client INR appreciates vis-a-vis Source: Institutional Research Institutional Research Initiating Coverage 15

Michael Porter s Five Force Analysis Threat of new entrants Increasing MNCs are entering the offshore business heavily. Bargaining Power of Suppliers High Intense competition in the recruitment market puts higher wage pressure and increasing trend of attrition is witnessed. Inter-firm Rivalry High Lower Entry barriers in the industry have led to high concentration in the industry. Bargaining Power of Buyers Increasing With availability of multiple vendors, Buyers have a lot of choice and this has led to pressures on the billing rates. Threat from Substitutes - Increasing Emerging economies like China, Brazil and Russia can be the substitute places for offshoring taking away the India advantage to certain extent. Source: Institutional Research Institutional Research Initiating Coverage 16

Valuation & Outlook At the CMP of `960, Zensar is trading at 14.9x, and 14.1x its FY16E, and FY17E EPS of `65.7 and `69.4. Compared to its peers; Zensar is trading at a discount P/E multiple, although its margins are better than or comparable to peers. We initiate coverage on Zensar technologies Ltd with a BUY rating and attach a multiple of 16.8 xs to Zensars FY17E earnings (EPS) to arrive at the target price of `1,166, indicating a potential upside of 21%. 1 year forward P/E Chart 1600 1400 1200 1000 800 600 400 200 0 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Close -Unit Curr 5.0 X 8.0 X 12.0 X 15.0 X 18.0 X Source: Capitaline, Institutional Research 1 year forward P/ BV Chart 1600 1400 1200 1000 800 600 400 200 0 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Close -Unit Curr 1.5 X 2.0 X 2.5 X 3.0 X 3.5 X Source: Capitaline, Institutional Research Institutional Research Initiating Coverage 17

Income Statement Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E Net revenues 21,145 23,155 26,276 29,115 33,177 Other Oper. Income 140 194 281 246 294 Total Oper. income 21,285 23,349 26,557 29,361 33,471 Employee Cost 11,778 13,003 16,252 18,449 21,071 EBITDA 2,952 3,580 3,917 4,446 4,778 EBITDA Margin (%) 14% 15% 15% 15% 14% Depreciation 331 378 415 451 480 Other Income 86 304 268 434 400 Interest (Net) 100 103 112 107 100 PBT 2,607 3,403 3,658 4,322 4,598 PBT Margin (%) 12% 15% 14% 15% 14% Tax 861 1028 1,012 1,359 1,471 Adjusted PAT 1,746 2,375 2,646 2,963 3,126 Extraordinary Items 0 0 0 2 0 Reported PAT 1,746 2,375 2,646 2,961 3,126 Balance Sheet Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E Equity capital 436 438 443 443 443 Reserves & Surplus 6853 9017 11127 13773 15233 Net worth 7,289 9,455 11,570 14,216 15,677 Total debt 1701 1099 424 405 360 Total Liabilities & Equity 12,572 14,859 17,345 20,421 22,037 Tangible Assets 978 890 872 1,200 1,320 Total fixed assets 3,993 4,236 5,488 6,016 6,341 Investments 8 7 8 10 15 Goodwill 2,990 3,326 4,601 4,800 5,000 Other Fixed Assets 294 297 467 750 800 Total Non-Current Assets 8,263 8,755 11,436 12,776 13,476 Debtors 3,354 3,581 4,539 5,500 6,000 Cash & bank 1,420 1,458 1,972 2,395 2,181 Loans & advances 856 817 867 1,000 1,000 Other Current Assets 937 1,392 1,704 2,000 2,500 Total Current Assets 8,035 10,015 11,240 13,495 14,681 Creditors 3,267 3,825 4,702 5,400 5,600 Provisions 315 468 637 400 400 Current Liab. & Prov. 3,582 4,294 5,339 5,800 6,000 Total Assets 12,572 14,859 17,345 20,421 22,037 Key Ratio Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E Per Share Ratios Fully diluted E P S 41.34 52.93 58.99 65.68 69.36 Book Value 172.57 210.73 257.95 315.37 347.77 Dividend per share 2.51 4.49 5.01 6.44 7.92 Valuation Ratio P/E 14.61 17.45 15.86 14.61 13.83 P/BV 1.44 1.45 2.25 3.26 2.76 EV/EBITDA 10.88 10.16 9.57 7.53 6.68 EV/Sales 0.82 0.78 1.33 1.94 1.59 Growth Ratios Sales Growth 31% 21% 18% 22% 16% EBITDA Growth 50% 27% 20% 8% 37% Net Profit Growth 15% 43% 15% 36% 23% EPS Growth 16% 43% 15% 36% 23% Common size Ratios EBITDA Margin 14% 15% 15% 15% 14% EBIT margin 13% 15% 14% 15% 14% PAT margin 8% 10% 10% 10% 9% Employee cost 56% 56% 62% 63% 64% Return ratios RoNW 24% 25% 23% 21% 20% RoCE 30% 33% 31% 30% 29% Solvency Ratios Total Debt/Equity 23% 12% 4% 3% 2% Cash Flow Y/E Mar (`mn) FY13 FY14 FY15E FY16E FY17E PBT 2,606 3,399 3,659 4,322 4,598 Add: Depreciation 331.6 383 415 451 480 Other Adjustments (61) (94) (354) (102) (115) Chg. in working capital 1,810 3,146 4,194 (769) (868) Taxes paid (861) (1,028) (1,012) (1,359) (1,471) Extra Ordinary Items - - - - - CF from operations 949 2,333 918 1,391 1,417 Change in fixed assets (336) (332) (338) (380) (350) Purchase of investment (336) (332) (338) (380) (350) Proceeds from Invest. Sale 2,813 2,695 5,797 100 (150) Other Adjustments 35 84 66 38 38 CF from Investing acti. (247) (1,284) (1,820) (660) (850) Chg. in debt (652) (516) (754) 204 150 Chg. in Equity capital (163) - (229) - - Chg. in Pref. capital - - - - - Dividend & dividend tax (379) (411) (542) (500) (300) CF from Financing acti. (231) (282) (813) (296) (150) Chg. in cash (326) 36 512 435 417 Opening cash 834 1,506 1,651 1,960 2,395 Closing cash 1,420 1,458 1,972 2,395 2,181 Du-Pont Analysis (%) FY12 FY13 FY14 FY15E FY16E PAT/ PBT 67% 70% 72% 69% 68% PBT/ PBIT 96% 97% 97% 98% 98% PBIT / Sales 13% 15% 14% 15% 14% Sales / Assets 235% 219% 219% 199% 207% Assets/ Equity 123% 112% 104% 103% 102% ROE 24% 25% 23% 21% 20% Institutional Research Initiating Coverage 18

NOTES Recommendation Rationale Recommendation Expected Absolute Return (%) over 12 months BUY >15% ACCUMULATE <10% and >15% NEUTRAL <-10% and <10% REDUCE >-10% and <-20% SELL >-10 Expected absolute returns are based on share price at market close unless otherwise stated. Stock recommendations are based on absolute upside (downside) and have a 12-month horizon. Our target price represents the fair value of the stock based upon the analyst s discretion. We note that future price fluctuations could lead to a temporary mismatch between upside/downside for stock and our recommendation. GEPL CAPITAL Pvt Ltd Reg Office: D-21 Dhanraj mahal, CSM Marg, Colaba, Mumbai 400001 Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Name : Omkar Tanksale Sector : IT Services Disclaimer: This report has been prepared by GEPL Capital Private Limited ("GEPL Capital "). GEPL Capital is regulated by the Securities and Exchange Board of India. This report does not constitute a prospectus, offering circular or offering memorandum and is not an offer or invitation to buy or sell any securities, nor shall part, or all, of this presentation form the basis of, or be relied on in connection with, any contract or investment decision in relation to any securities. 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GEPL Capital specifically prohibits the redistribution of this material in whole or in part without the written permission of GEPL Capital and GEPL Capital accepts no liability whatsoever for the actions of third parties in this regard. Institutional Research Initiating Coverage 19