PC - Tech Mahindra - v4 -...

Please refer to Disclosures and Disclaimers at the end of the Research Report.

Tech Mahindra All set to join the Big league

IT Services: Initiating Coverage 27 December 2013

PhillipCapital (India) Pvt. Ltd.

Formidable force post Satyam integration; superior return profile Post integration with Satyam, Tech Mahindra (TechM) has transformed into a full range IT service provider, with significant presence in all key geographies and verticals. We expect the combined entity to benefit from TechM’s expertise in Telecom and Satyam’s presence in manufacturing and BFSI space. The combined entity has a strong presence in Europe, which we expect to be the next frontier for the Indian IT Services sector.

Overall, we expect TechM to report topline CAGR of 17% over FY13‐15 and maintaining average EBITDA margins of ~22% over the period. The PAT is expected to grow by 31% over this period, enabling the company to deliver average ROE of ~25%.

Strong presence in Europe to boost growth, as it opens up to outsourcing Our analysis of the top 80 companies (by capex spend) in Europe, in each of the four sectors (telecom, manufacturing, BFSI and retail) reveals that 21 of those have never outsourced and another 35 have outsourced, but not offshored their IT development work. That, in our opinion, is a testimony to the potential that the region represents, for the Indian IT companies.

TechM has been one of the most active Indian IT vendor in the European region, with over 33% of its revenues coming from EU. Its growth over the last six quarters too, has been much ahead of peers. We expect the trend to continue, and the company to benefit immensely from more companies opening up to outsourcing, on the back of cost pressures and regulatory changes.

Domain expertise in Telecom to drive growth momentum TechM has always had strong expertise in the Telecom domain. Today, it is one of the preferred IT vendors for telecom companies. It has also been able to add key clients (eg AT&T, Verizon) to its portfolio. The division has grown by CQGR of 8.9% (excl BT) over the last six quarters. We expect higher momentum of deals in the telecom space, driven by regulatory changes and advent of new technology (smartphone, mobility, social media) and TechM to grab larger part of the same.

Multiple avenues for margin expansion TechM has a significantly lower blended pricing level for services provided as compared with the peer average of $38/hr. Along with utilization levels (currently at 77%), we see the company with significant headroom for margin expansion over the next few years.

Bundled services to support growth in other verticals In order to enrich its portfolio, TechM has been bundling its Communications & Networking services with Enterprise Solutions – an expertise gained from Satyam. The company intends to target multiple CXOs of an organisation and boost business from strong client mining. We expect the strategy to payoff, as it has for HCL Tech.

Attractive valuations – definite case for FURTHER re‐rating On our current estimates, the stock is trading at 15x FY14 and 13x FY15 earnings. While the stock has run up significantly over the last six months (6m 77%, 12m 90%), we believe the stock still trades at a significant discount to its peers (top 4).

As stated before, post integration with Satyam, TechM has transformed into a full range IT service provider, with significant presence in all key geographies and verticals and reduced client concentration. Hence we believe it should get a multiple in‐line with the top 4, especially Wipro and HCL Tech.

We value the company at 14x avg FY15‐16 earnings (30% premium to its historical average, but in‐line with our multiple for Wipro and HCL Tech). That gives us a price target of Rs2150, representing 18% upside from current level. We initiate with BUY.

BUY TECHM IN | CMP Rs 1827 TARGET Rs 2150 (+18%) Company Data

O/S SHARES (MN) : 233MARKET CAP (RSBN) : 426MARKET CAP (USDBN) : 6.952 ‐ WK HI/LO (RS) : 1872 / 895LIQUIDITY 3M (USDMN) : 33.4FACE VALUE (RS) : 10

Share Holding Pattern, %

PROMOTERS : 36.5FII / NRI : 33.7FI / MF : 15.0NON PROMOTER CORP. HOLDINGS : 1.9PUBLIC & OTHERS : 12.8

Price Performance, % 1mth 3mth 1yrABS 6.4 39.1 99.9REL TO BSE 4.1 32.9 90.4

Price Vs. Sensex (Rebased values)

60

100

140

180

220

260

Apr‐10 Apr‐11 Apr‐12 Apr‐13Tech MahindraBSE Sensex

Source: Bloomberg, Phillip Capital Research

Other Key Ratios

Rs bn FY14E FY15E FY16E

Net Sales 188.3 223.5 261.3EBIDTA 41.1 47.7 55.9Net Profit 28.7 33.5 39.5EPS, Rs 121.0 141.0 166.3PER, x 15.1 13.0 11.0EV/EBIDTA, x 9.3 7.7 6.2P/BV, x 4.0 3.1 2.4ROE, % 26.5 23.9 22.2Source: Phillip Capital India Research Vibhor Singhal (+ 9122 6667 9949) [email protected] Varun Vijayan (+ 9122 6667 9992) [email protected]

– 2 of 21 –

27 December 2013 / INDIA EQUITY RESEARCH / TECH MAHINDRA INITIATING COVERAGE

Key Charts in the report Outsourcing opportunity in the EU region remains huge

74

2

8

0

2

4

6

8

10

12

14

16

18

20

Telecom Manufacturing BFSI Retail & Travel

IT outsourced Only Backoffice Never outsourced

611

8

10

The who’s who of the potential targets in Europe (in order of capex) Telecom Manufacturing BFSI Retail & Travel Vodafone Group PLC Volkswagen AG Exor SpA Deutsche Lufthansa AG Deutsche Telekom AG Fiat SpA Societe Generale SA Christian Dior SA Telefonica SA Daimler AG Lloyds Banking Group Intl Consolidated Airlines Orange SA BMW Banco Santander SA Louis Vuitton Telecom Italia SpA Peugeot SA Royal Bank of Scotland Deutsche Post AG BT Group PLC Renault SA BNP Paribas SA Inditex SA Vivendi SA EADS Allianz SE L'Oreal SA KPN NV Siemens AG Credit Suisse Group Hennes & Mauritz AB Swisscom AG Continental AG UniCredit SpA Cie Financiere Richemont Telenor ASA CGE Michelin UBS AG Marks & Spencer TeliaSonera AB Volvo AB KBC Groep NV Adidas AG Portugal Telecom SGPS SA CNH Industrial NV DNB ASA Kering Belgacom SA Valeo SA Barclays PLC Firstgroup PLC Telekom Austria AG Safran SA Wendel SA Ryanair Holdings PLC Telefonica Deutschland Finmeccanica SpA ING Groep NV Henkel AG & Co KGaA Ericsson Alstom SA Credit Agricole SA Kingfisher PLC Eutelsat Communications SA MAN SE AXA SA Swatch Group AG SES SA Scania AB Aviva PLC The easyJet PLC Hellenic Telecom BAE Systems PLC Vienna Insurance Vopak NV Tele2 AB Thales SA Prudential PLC Luxottica Group SpA

Never Outsourced Not offshored

Revenue CQGR for EU over last 6 quarters Revenue CQGR for Telecom over last 6 quarters

4.3

8.5

5.6

5.7

4.9

2.1

‐1.6

‐3.1

TechM

TechM ex BT

TCS

Infosys

HCL Tech

Wipro

IBM

Capgemini

5.6

8.9

2.0

‐0.6

0.1

‐6.7

‐1.5

TechM

TechM ex BT

TCS

Infosys

Wipro

IBM

Capgemini

Source: PhillipCapital India Research

Of the 80 largest spenders in Euro Stoxx 600 across 4 sectors in Europe: 7 Telecom, 4 Manufacturing, 2 BFSI and 8 Retail companies have never outsourced. Of the remaining, 6 Telecom, 11 Manufacturing, 8 BFSI and 10 Retail companies have outsourced, but not offshored.

– 3 of 21 –


Investment Thesis Our investment thesis on TechM rests on the following pillars: 1) Significant room for margin expansion TechM has a significantly lower blended pricing level for services provided as compared with the peer average of $38/hr. Along with utilization levels (currently at 77%), we see the company with significant headroom for margin expansion over the next few years. We however, have been conservative and have taken price‐hike and utilization‐levels in‐line with the industry. Overall, we expect TechM to report topline CAGR of 17% over FY13‐15 and maintaining average EBITDA margins of ~22% over the period. The PAT is expected to grow by 31% over this period, enabling the company to deliver strong average ROE of ~25%. 2) Attractive valuations – definite case for FURTHER re‐rating On our current estimates, the stock is trading at 15x FY14 and 13x FY15 earnings. While the stock has run up significantly over the last six months (6m 77%, 12m 90%), we believe the stock still trades at a significant discount to its peers (top 4). We note that post integration with Satyam, the company has transformed into a full range IT service provider, with significant presence in all key geographies and verticals. Its client concentration too has decreased considerably, and hence we believe it should get a multiple in‐line with the top 4. We believe a multiple in‐line with Wipro and HCL is definitely justified, and expect the rerating to happen over the next few quarters.

3) Strong presence in Europe to boost growth, as the region opens up to outsourcing Our analysis of the top 80 companies (by capex spend) in Europe, in each of the four sectors (telecom, manufacturing, BFSI and retail) reveals that 21 of those have never outsourced and another 35 have outsourced, but not offshored their IT development work. That, in our opinion, is a testimony to the potential that the region represents, for the Indian IT companies. TechM has been one of the most active Indian IT vendor in the European region, with over 33% of its revenues coming from EU. Its growth over the last six quarters too, has been much ahead of peers. We expect the trend to continue, and the company to benefit immensely from more companies opening up to outsourcing, on the back of cost pressures and regulatory changes.

4) Domain expertise in Telecom to drive growth momentum Having started as a developer for BT, TechM has always had strong expertise in the Telecom domain. Today, it remains one of the preferred IT vendors for the companies in this domain. It has also been able to add key clients (eg AT&T, Verizon) to its portfolio. The division has grown by CQGR of 8.9% (excl BT) over the last six quarters. We expect higher momentum of deals in the telecom space, driven by regulatory changes and advent of new technology (smartphone, mobility, social media) and TechM to grab larger part of the same. 5) Bundled services to support growth in other verticals In order to enrich its portfolio, TechM has been bundling its Communications & Networking services with Enterprise Solutions – an expertise gained from Satyam. The company intends to target multiple CXOs of an organisation and boost business from strong client mining. We expect the strategy to payoff, as t has for HCL Tech.

6) Being over‐ambitious might pose risk TechM management has set an internal target of $5bn topline by FY16. While they maintain it remains a wishful ambition, and not a target, we note that the same might lead to the company becoming too aggressive and compromising on the margins and/or looking for inorganic avenues of growth. Either of the two pose a significant risk to TechM’s earnings and the growth story.

– 4 of 21 –


Robust growth, leading to superior return profile TechM , post integration of Satyam, has transformed into a full range IT service provider, with presence in all verticals across multiple geographies. It has a fairly distributed market with strong growth from its established geographies namely US, Europe and emerging markets such as Australia, Middle East and LATAM. The company has developed more than 25 platforms and products to support its 576 active clients. It has also forayed deeply into the key domains of SMAC – esp Mobility and Analytics – which we expect to be the growth drivers for IT companies over the next decade. Over the last 6 quarters, TechM witnessed strong growth of 5.6% CQGR aided by non‐organic business growth, against a peer average of 1.8%. We expect TechM to grow at a CAGR of 17% over FY13‐15, maintaining average EBITDA margins of ~22% over the period. The PAT is expected to grow by 31% over this period, enabling the company to deliver strong average ROE of ~25%.

Robust growth expected in $ revenues Net profit to grow in‐line with the reveneus

‐20%

0%

20%

40%

60%

80%

100%

120%

140%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

US$

mn

US$ revenues Growth %

‐40%

‐20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

0

5

10

15

20

25

30

35

40

45

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

Rs Bn

PAT Growth %


EBITDA Margin to remain stable Stable return profile

15%

17%

19%

21%

23%

25%

27%

29%

31%

0

10

20

30

40

50

60

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

Rs Bn

EBITDA Margins %

0%

10%

20%

30%

40%

50%

60%

70%

0%

10%

20%

30%

40%

50%

60%

FY09

FY10

FY11

FY12

FY13

FY14

E

FY15

E

FY16

E

ROE % ROCE %


– 5 of 21 –


Significant headroom for margin expansion In addition to the benefit of rupee depreciation, which is applicable to all Indian IT vendors, we see TechM with significant headroom for margin expansion: 1) Lower pricing levels – the company charges significantly lower rates than the top 4 2) Low utilisations – have come down to 77% from peak of 80% 3) Further upside in value chain in new businesses. TechM has a significantly lower blended pricing level for services provided as compared with the peer average of $38/hr. We believe that there is higher chance of increase in blended pricing levels on account of specialised value added services which would be a tailwind for margin expansion. Furthermore, migration to non‐linear revenue models should also yield higher margins.

Utilizations can provide headroom for margin expansion.. …. Along with pricing, which remains far below peers (Top 4)

80%

78% 78%

79%

78%

77%

76%

76%

77%

77%

78%

78%

79%

79%

80%

80%

81%

Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14

Utilisations %

21

23

25

27

29

31

33

35

37

39


US$/hr

Blended pricing levels Peer average


TechM had a great success in turning around all of its recent acquisitions mainly – Satyam, Hutchison Global, Comviva and vCustomer, which had lower margins than the company average. With new contract wins through these acquisitions and with better pricing profile, we believe that further improvement in margins is imminent.

Valuation Table

CMP M‐Cap _______ROE (%)______ ______P/E (x)______ ______P/BV (x)______ _____EV/EBITDA (x)____Companies Rs Rs bn FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E

TCS 2,094 4,098 36.1 35.3 22.2 17.5 8.0 6.2 16.3 13.5Infosys 3,530 2,017 21.7 21.8 19.8 16.6 4.3 3.6 13.2 10.8Wipro 550 1,354 24.0 23.2 17.6 15.4 4.2 3.6 13.0 11.3HCL Tech 1,246 881 31.0 27.5 15.2 13.8 4.7 3.8 10.1 8.9Tech Mahindra 1,827 433 26.5 23.9 15.1 13.0 4.0 3.1 9.5 7.9Persistent 986 39 21.7 22.5 15.4 12.3 3.4 2.8 9.4 7.5KPIT 172 32 21.8 21.3 11.8 9.6 2.6 2.0 7.6 6.4

Source: PhillipCapital India Research Estimates

– 6 of 21 –


All set to exploit the next frontier – Europe Our recent interactions with industry experts and analysis on IT spending data from TPI sources suggests that European companies, which were hitherto reluctant to outsourcing, are opening up for Infrastructure, BPO and Apps related outsourcing to local and foreign vendors. Due to challenges faced from changing regulations & policies in Eurozone and declining fixed cost recovery, most of the large industries are forced to choose low cost ‐ high quality technology services from providers, especially from the low‐cost regions. Recent first time outsourcers from EU Date Companies Sector Outsourced to

10‐Jan‐13 Luxottica Retail HP 20‐Aug‐13 Finmeccanica Aerospace Northgate Arinso 10‐Sep‐13 Scandinavian Airlines Airlines TCS 10‐Sep‐13 Continental CV Manufacturer IBM 3‐Oct‐13 KBC Group Bank Cognizant 19‐Dec‐13 Orange Telco iGate


Compliance and policy issues to force Euro companies for more outsourcing European industries that are directly linked to policy regimes, are facing multiple challenges in transforming their business processes inline with the regulatory requirements of respective regions. Complete technology transformation requires large expertise and methodologies which are highly capital intensive of its own accord, which make vendors like TechM a partner of choice. Largely untapped market Analysing more on European companies, we found that out of Top 80 large companies (on CAPEX spends) in Euro region, 21 have never outsourced their IT operations & technology infrastructure to local outsourcing vendors, let alone to offshoring IT companies. Furthermore, of the remaining 59 companies, 35 have outsourced, but have never offshored their IT development work. Outsourcing opportunity in the EU region remains huge

74

2

8

0

2

4

6

8

10

12

14

16

18

20

Telecom Manufacturing BFSI Retail & Travel

IT outsourced Only Backoffice Never outsourced

611

8

10


Put together, we see these Never Outsourced + Never Offshored category companies, as the target set from the EU region, for the Indian IT vendors. The magnitude of the opportunity – 56 out of 80 companies with total annual capex spend of $128bn (estimated annual IT spend ~$38bn) is clearly huge.

According to Ovum Research, ~$47bn of existing outsourced contracts will come up for renewal by 1H2015: • Government projects (TCV:~$12bn) • Manufacturing (~$7.9bn), • Services (~$5.2bn) • Telecom (~$4.4bn)

Of the 80 largest spenders in Euro Stoxx 600 across 4 sectors in Europe: 7 Telecom, 4 Manufacturing, 2 BFSI and 8 Retail companies have never outsourced. Of the remaining, 6 Telecom, 11 Manufacturing, 8 BFSI and 10 Retail companies have outsourced, but not offshored.

– 7 of 21 –


The who’s who of the potential targets in Europe (in order of capex) Telecom Manufacturing BFSI Retail & Travel Vodafone Group PLC Volkswagen AG Exor SpA Deutsche Lufthansa AG Deutsche Telekom AG Fiat SpA Societe Generale SA Christian Dior SA Telefonica SA Daimler AG Lloyds Banking Group Intl Consolidated Airlines Orange SA BMW Banco Santander SA Louis Vuitton Telecom Italia SpA Peugeot SA Royal Bank of Scotland Deutsche Post AG BT Group PLC Renault SA BNP Paribas SA Inditex SA Vivendi SA EADS Allianz SE L'Oreal SA KPN NV Siemens AG Credit Suisse Group Hennes & Mauritz AB Swisscom AG Continental AG UniCredit SpA Cie Financiere Richemont Telenor ASA CGE Michelin UBS AG Marks & Spencer TeliaSonera AB Volvo AB KBC Groep NV Adidas AG Portugal Telecom SGPS SA CNH Industrial NV DNB ASA Kering Belgacom SA Valeo SA Barclays PLC Firstgroup PLC Telekom Austria AG Safran SA Wendel SA Ryanair Holdings PLC Telefonica Deutschland Finmeccanica SpA ING Groep NV Henkel AG & Co KGaA Ericsson Alstom SA Credit Agricole SA Kingfisher PLC Eutelsat Communications SA MAN SE AXA SA Swatch Group AG SES SA Scania AB Aviva PLC The easyJet PLC Hellenic Telecom BAE Systems PLC Vienna Insurance Vopak NV Tele2 AB Thales SA Prudential PLC Luxottica Group SpA

Never Outsourced Not offshored Source: PhillipCapital India Research

TechM has always had a strong presence in EU region, on the back of its strong relationship with BT. With Satyam being strong in ES, esp in manufacturing domain, the combined entity today now stands a formidable force in the region. EU forms 33% of total revenues for TechM, and has grown at CQGR of 4.3% (8.5% excl BT) over the last six quarters – much higher than Indian peers, as well as the local giant Capgemini. Recent contract wins for TechM, from the EU region Date Company Deal Span Contract Value

13‐Sep‐13 Volvo 3 years $40mn 5‐Aug‐13 BASE; Subsidiary of KPN 5 years $50‐70mn 24‐Jul‐13 UBS Fund Services 5 years NA 6‐Jun‐13 Bridgestone Europe Multi Year Multi million 5‐Sep‐12 KPN, Dutch 5 years $100mn


European revenues – CQGR for the past 6 quarters – TechM significantly ahead

4.3

8.5

5.6

5.7

4.9

2.1

‐1.6

‐3.1

TechM

TechM ex BT

TCS

Infosys

HCL Tech

Wipro

IBM

Capgemini


– 8 of 21 –


Domain expertise to aid growth in Telecom domain According to data from IDC and research firms such as Gartner and Forrester, the global telecom industry has crest‐fallen to its lowest in growth in the past 5 years. Recession in the global economies took a toll on the industry, with overall growth flattening out globally. While the data usage has been stable, the growth factors expected by the industry experts haven’t played out for the industry. In our opinion, the following developments have further aggravated the decline: • Explosion in new devices such as smartphones and tablets • Everchanging policies in respective economies • Revolution in technology from 2G to a 4G

However, the recent data indicates the industry’s attempt to enhance their technologies and monetise the communication revenues across regions. Going forward, we believe that TSPs in other geographies would also capitalise in IT spends more on improving their service horizons and would introduce applications similar to Instant Messaging and Whatsapp to capture its lost marketshare. SMAC technologies to remain the focus for growth The use of Mobility by corporates has been picking up significantly over the past few years. Research firms such as Gartner and Forrester suggests that Mobility (amongst SMAC) would pickup strong momentum in the coming years. Over next three years, the industry expects Mobility to grow at CAGR of 15%+ led by demand from the enterprises. Enterprise SMAC services to grow by 20% CAGR during FY13‐15E…

72

107

37

50

0

20

40

60

80

100

120

2013 2015E 2013 2015E

Revenu

es, U

S$ bn

Cloud IT Services Social Mobility and Analytics


Introduction of smart devices such as tablets & smartphones and the advanced network access enhances the ability to manage different processes in an industry offline. Employers and employees could be live 24/7 and participate in any operations on‐the‐go. We note that this transition in technology interface is gaining significant traction in many industries, including manufacturing, BFSI and retail.

We also note that leading telecom companies have been losing revenues to an unexpected competitor – Apps. A survey indicated that ~8bn ‘Happy New Year’ messages were exchanged on the New Year’s eve last year, on WhatsApp. In its absence, all these would have contributed to SMS revenues for the TSPs. On similar front, VOIP services like Viber and Skype are eating into the voice revenues of the TSPs, while availability of public wi‐fi connection reduces the scope of data revenues.

The above developments have forced the TSPs across the globe, to appoint software vendors to develops applications that can help them capture the lost revenues to these

– 9 of 21 –


‘competitors’. As more TSPs join the bandwagon, we expect vendors like TechM to benefit the most, from their domain expertise.

Leading telecom solutions vendor in Indian IT space TechM has the largest telecom practice amongst Indian IT peers with annual revenues of ~US$1.2bn. During FY09‐13, TechM’s telecom revenues grew at a CAGR of 5% while the peer average stood at 3%. British Telecom forms a major part of TechM’s telecom practice (with ~32% of its telecom revenues in FY13), which has declined at a rate of 10% CAGR during FY09‐13. However TechM with its strong presence in US and other regions has maintained pace ahead of its peers.

Telecom revenue CAGR for last 5 years CQGR for last 6 quarters

5.2

19.0

6.9

‐3.9

3.5

‐2.3

3.1

TechM

TechM exBT

TCS

Infosys

Wipro

IBM

Capgemini

5.6

8.9

2.0

‐0.6

0.1

‐6.7

‐1.5

TechM

TechM ex BT

TCS

Infosys

Wipro

IBM

Capgemini


Excluding BT, TechM’s revenues grew at a CAGR of 19% over the last five years and continued to grow at a healthy rate of 9% (CQGR) in the last 6 quarters, while the peer average CQGR stood at ~2%. AT&T and Verizon ‐ two large clients in US ‐ put together currently forms a large portion of its telecom practice. We believe that at a current growth rate of 6%, TechM would achieve strong marketshare and will start competing with the MNC giants such as IBM. We also believe that with the addition of enhanced portfolio of Enterprise Solutions, growth from the new businesses would compensate the falling BT business in the near future. Declining dependence on BT (Telecom revenues)

339 410504

666 726822

993

596575 472

460 431384

356

0

200

400

600

800

1,000

1,200

1,400

1,600

FY08 FY09 FY10 FY11 FY12 FY13 LTM '14

US$

mn

TechM exBT BT rev

64%

26%


– 10 of 21 –


Far ahead of the Indian peers Peer comparison revealed that TechM trumps the telecom practice of the Top 4 and MNCs. • TCS (second largest in Telecom after TechM) with ~US$1.1bn (10% to its revenues)

has alluded to facing challenges in ramping up its telecom business, despite having large TSPs like Telenor in their clientele.

• Infosys’ telecom business contributes to 9% of its overall revenues (US$720mn), and has seen a declining trend (‐1% CQGR over last 6 quarters), owing to declining BT share.

• Wipro has rather a small telecom practice (with US$560mn, ~9% contribution) largely providing IMS solutions for the TSPs globally.

TechM’s dominance in Telecom space – much ahead of Indian peers

1,206

822

1,138

719560

910

46%

37%

10% 10% 9% 9%6% 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1000

1200

1400

1600

1800

2000TechM

TechM ex‐

BT

TCS

Infosys

Wipro

IBM

Capgem

ini

US$, m

n

Telecom Revenue % of total rev9,200


We believe that, going forward, TechM would be able to achieve significant growth (current rate of 9% CQGR, ex‐BT) as compared to peers with addition of large TSPs & high quality engagements to its existing clientele. It would start competing with the likes of IBM, who has a ~US$9bn annual revenue run rate for communications space with a declining trend of 7% CQGR in last 6 quarters.

– 11 of 21 –


Merger with Satyam leads to a formidable profile The combination of TechM and Satyam, with least overlap of clientele, places the company in a strong position to acquire large outsourcing contracts across varopus domains. TechM’s expertise in Mobility, Networking & SI and Satyam’s expertise in ES, Engineering Services and BPO brings up the value of the combined entity to high levels of recognition among global players. Also the combination reduces the concentration risk of Telecom as a sole vertical for TechM, to a multitude of verticals with strong presence in Manufacturing and BFSI. TechM with its end to end solutions at lower pricing as compared to its peers, along with leading brand value and addition of new technology services would become a key to its business transformation. We believe that combining its expertise in networking and communication technology with enterprise and engineering solutions (as bundled services), would enable it to gain more marketshare against its Indian and MNCs peers.

TechM ‐ Pre merger clientele – FY13 Post merger clientele – FY13

Top client, 30%

Top 2‐5 clients, 42%


Non Top 10 clients, 19%

Top client, 13%



Non Top 10 clients, 50%


TechM Pre merger vertical concentration – FY13 Post merger verticals concentration – FY13

Telecom, 97%

BT, 30%

Others, 3%

Telecom, 48%

BT, 13%

Manufacturing, 19%

TME, 12%

BFSI, 9%

Others, 13%


– 12 of 21 –


Beyond Telecom – catching up fast Although, telecom still contributes over 47% of its total revenues, TechM has significantly improved in other verticals such as Manufacturing, BFSI & TME. Satyam offers Enterprise Solutions with verticals such as Manufacturing, BFSI and TME as major focus. In the past 6 quarters, these verticals combined have grown by 4.2% ‐ close to the company average. Recent deal wins from non‐telecom verticals Date Company Deal Span Contract Value

9‐Nov‐13 Perpetual, FS firm Multi year NA 13‐Sep‐13 Volvo 3 years $40mn 1‐Aug‐13 Schahin Petroleo Multi year $50‐70mn 1‐Aug‐13 Leading bank in Brazil Multi year $50‐70mn 24‐Jul‐13 UBS Fund Services 5 years NA 6‐Jun‐13 Bridgestone Europe Multi Year Multi million


Segmental revenue contribution – FY13 Verticalwise CQGR comparison for the past 6 quarters…

1,206

493329 283

171 151

46%

19%

12%11%

7% 6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

200

400

600

800

1,000

1,200

1,400

TelecomManufact TME BFSI Retail & travel

Others

US$

mn

Segmental revenue% contribution

5.6

4.3

2.6

0.2

7.5

1.1

4.3

Telecom Manufact TME BFSI Retail & travel Others

CQGR for 6 qtrs


We note that many of TechM’s recent large deal wins from Europe and EMs are predominantly from Manufacturing & Utilities sector. The company has acquired ~US$350mn of TCV from ex‐Telecom verticals during the period of YTD FY14.

– 13 of 21 –


Bundled Services – The way forward TechM has more than two decade long experience in telecom services. With multiple acquisitions in the recent past, it has been able to provide high value services with enterprise connectivity solutions, mobility and value added services for industries besides telecom.

In order to enrich its portfolio, the company has been bundling its Communications & Networking services with Enterprise Solutions – an expertise gained from Satyam. While the discretionary spend from most of the industries has been declining, TechM has been adjoining the Application services and Infrastructure services to provide seamless end to end solutions for their clients.

On the back of the above, we believe that TechM’s strategy to bundle services not only attract clients but also is advantageous for resource allocation and other costs related to the services provided. Will it work ? It did for HCL Tech … HCL Technologies, a closer peer in terms of revenues, has adopted a similar strategy of bundling IMS services with Enterprise Solutions, which has given them an edge in tackling large contracts requiring end to end solutions & services. The ‘Business Services’ segment had shown a promising growth in its deal win ratio from 40% to 65% in the recent quarters. While its growth in recent quarters has been led by IMS division, it has, nonetheless, gained significant traction in other horizontals.

We expect the same strategy to work for TechM, where it has been bundling its Communications & Networking services with Enterprise Solutions. Its expertise in the telecom space remains unparalleled, and the same would help the company mine further into its existing clients. What has worked for HCL Technologies so far, should also work for Tech Mahindra, in our opinion.

Structure of Strategic Delivery Focus

TECHNOLOGY TRENDS

Cloud Computing

Enterprise Mobility

Big Data

Social Media

Internet of Things

XaaSAugmented Reality

DIGITAL INFRASTRUCTURE

Connected Devices

Converged Content

Connected Network

Connected Channels

Connected Applications

Seamless Connected Experience

Source: Company, PhillipCapital India Research

– 14 of 21 –


In our recent interactions with the management, they emphasised their intent to target multiple CXOs of an organisation and boost business from strong client mining. TechM has invested heavily to create a strong S&M team for targeting each department of a client organisation, separately and collectively.

The six CXO target strategy

SIX PILLARS

COO CMO CFO

CIO CTO CSO

Execution Stamina

Domain Leadership(competencies, NMACS,

innovation)

Cross Leverage Enterprise

Strategic Account Focus


As stated before, we expect TechM to focus on building their portfolio by bundling the two competencies – Telecom + Enterprise Solutions while approaching large as well as SME clients. Going forward, we expect this to become a trend for the company enhancing its brand value, while the overall cost of services would come down. TechM also intends to improvise their portfolio by developing its expertise across the disruptive technologies ‐ SMAC, while utilising their existing capabilities in business solutions.

Characteristics of bundling competencies

Business Requirement• Seamless access of enterprise application using Any Device, Any Network with Any Ownership, Used Any Where

• Differentiated Application Accessbased on User Role, Device Type and Context

• Intelligent adaption to customer behavior

Solutions Delivered• Intelligent Application Middleware Platform integrated with customer’s infrastructure.

• Support for multi‐domain applications including best‐in‐class features:• BYOD and Mobility• Security and Policy Enforcement• Real Time Audio/Video Collaboration

• Intelligent Applications Mgmt

Value delivered• Speed and Scale• Enterprise Integration• Reduced Security Risks

Enterprise Competencies

• EBS

• Engineering Services

• IMS

Telecom Competencies

• Networks

• Mobility

• Security


– 15 of 21 –


Focus on S&M to lead to better client mining TechM has increased its S&M spend (as % of sales) significantly over the last few years, and is today, behind only TCS in that regard. The characteristics of Satyam being a high quality service provider and TechM with a strong and incentivised sales force with robust client mining ability, gives a strong visibility in revenues. S&M spends for TechM have been high amongst the peers

10%

12%

14%

16%

18%

20%

22%

FY08 FY09 FY10 FY11 FY12 FY13

as a %

of sales

TCS Tech MahindraWipro HCL Tech


Annualized revenue per client

10.9

9.38.7

6.4

5.1

0

2

4

6

8

10

12

TCS Infosys HCL Tech* Wipro TechM

US$

mn


– 16 of 21 –


Inorganic growth gaining momentum TechM’s business acquisitions in high end IT services & BPO space, have gained momentum in FY13. It acquired Hutchison Global and Comviva Tech for a combined value of US$135mn at a valuation of 0.5x sales and 0.7x sales respectively.

Hutchison Global, which leads in Customer Lifecycle Management for Telecom, contributed revenues of US$175mn in FY13 and had a CQGR run rate of 10% for the last 4 quarters. Comviva a high‐end Value Added Services and Mobility products vendor for Telecom, contributed to US$70mn of revenues in FY13, with a CQGR run rate of 4% since acquisition.

Mergers & Acquisitions Company Acquired Country Date Value % Stake Type of Services Valuation Prev Yr Rev

Axes Technologies (India) Pvt Ltd India 17‐Nov‐05 US$54mn 100% Telecom Products ‐ ‐ Motorola Inc. ‐ Under CanvasM (JV) US 2‐Aug‐06 NA Wholly owned VAS Products and solutions ‐ ‐ iPolicy Networks Pvt Ltd Indian Sub 18‐Jan‐07 NA 100% Network Products ‐ ‐ Satyam Computers India 5‐May‐09 US$640mn 43% Enterprise solutions 0.3x sales US$1.9bn vCustomer International India 7‐Mar‐12 US$27mn 100% BPO ‐ ‐ Hutchison Global Services Australia 4‐Sep‐12 US$87.1mn 100% High end BPO Services 0.5x sales US$175mn Comviva MNC 17‐Sep‐12 US$48mn 51% VAS 0.7x sales US$70mn Complex IT Brazil 15‐Feb‐13 US$25mn 51% SAP 0.8x sales ~60mn Type Approval Lab Sweden 14‐Apr‐13 NA 100% Testing platform ‐ ‐


It also acquired Type Approval Labs from Sony in 2013 (acquisition price remains undisclosed) to enhance its testing services. Through Mahindra Satyam, TechM acquired 51% stake in Complex IT, a SAP solutions vendor in Brazil, to foray into LATAM for tapping a potential $1bn SAP market.

Post the recently announced merger, Mahindra Engineering services (MES) would strengthen TechM’s high‐end consulting and engineering services for the manufacturing vertical (mainly Aerospace and Auto) and will contribute to a revenue of ~US$40mn+ annually. We note that there are financial risks in managing large acquisitions done in a short span. However, we believe that TechM, with expected operating cash flow of Rs73bn throughout FY13‐15E, would be able mitigate most of the acquisition risks.

– 17 of 21 –


Satyam litigations – major concerns resolved Post its acquisition of Satyam, TechM management has settled multiple lawsuits, pertaining to the operations of Satyam, leading to cash outflow of $275mn. As of now, only two litigations remain, both of which, are highly unlikely to result in any implication for the company, as per the management. • Indian Income tax department: submitted three notices for cumulative penalty of

Rs26.17bn (Rs20bn provisional in nature) pertaining to Satyam availing the benefit of Double‐Tax‐Avoidance Treaty. The claim litigation continues in court. The company has made a provision of Rs5bn for the same.

• Raju Group of companies: 37 Raju group of companies have raised a demand of Rs12.3bn, pertaining to loan given by them to Satyam. Of this amount, the Enforcement Directorate believes Rs8.2bn to have been siphoned off, and wants the same to be paid to the govt. The dispute still continues in court.

Lawsuits settled pertaining to Satyam operations Lawsuits settled Settlement amount

SEC regulation violation and wrong accounting policy (Class Action) US$125mnUpaid ‐ Forging of agreement in a contract US$70mnAberdeen Asset Mgmt PLC, UK US$68mnAberdeen Asset Mgmt, US US$12mn

Source: Company

The management has allocated provisions of Rs12.6bn (incl Rs5bn above) for unanticipated litigations against Satyam. We note that auditing and verification of Satyam’s books are ongoing relating to tax issues for prior years, the outcome of which, remains a constant risk, though minor, in our opinion.

Valuation

P/E Band EV/EBITDA Band

4x

12x

20x

28x

0

500

1000

1500

2000

2500

3000

3500

4000

4500(Rs)

4x

5x

6x

7x

0

50000

100000

150000

200000

250000

300000

350000

400000

450000 (Rs mn)

Valuation Table

CMP M‐Cap _______ROE (%)______ ______P/E (x)______ ______P/BV (x)______ _____EV/EBITDA (x)____Companies Rs Rs bn FY14E FY15E FY14E FY15E FY14E FY15E FY14E FY15E

TCS 2,094 4,098 36.1 35.3 22.2 17.5 8.0 6.2 16.3 13.5Infosys 3,530 2,017 21.7 21.8 19.8 16.6 4.3 3.6 13.2 10.8Wipro 550 1,354 24.0 23.2 17.6 15.4 4.2 3.6 13.0 11.3HCL Tech 1,246 881 31.0 27.5 15.2 13.8 4.7 3.8 10.1 8.9Tech Mahindra 1,827 433 26.5 23.9 15.1 13.0 4.0 3.1 9.5 7.9Persistent 986 39 21.7 22.5 15.4 12.3 3.4 2.8 9.4 7.5KPIT 172 32 21.8 21.3 11.8 9.6 2.6 2.0 7.6 6.4

Source: PhillipCapital India Research Estimates

– 18 of 21 –


Revenue break‐up

Telecom, 47%

Manufacturing, 19% TME,

12%

BFSI, 9%

Retail/Transport, 7%

Others, 6%

Americas, 44% Europe, 33% RoW, 23%

Onsite, 51% Offshore, 49%

USD, 48% GBP, 20%EURO,9%

AUD, 7%

Others, 16%

Verticals

Geographies

Revenue Mix ‐ IT

Currency Mix

Employee Mix and Client profile

Top 5, 36% Top 10, 48% Top 20, 61%

≥ $1 mn, 223 ≥ $5 mn, 77

≥ $10 mn, 48

≥ $20 mn, 26

≥ $50 mn, 10

Soft prof, 65% BPO prof, 27%

Sales,8%

Client rev share

Contract profile (No of Contracts)

Employee mix

Utilisations and Attrition

14%

15%

15%

16%

16%

17%

17%

18%

76%

76%

77%

77%

78%

78%

79%

79%

80%

80%

81%


Utilizations (Ex trainees) Attrition


– 19 of 21 –


Financials

Income Statement Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Net sales 143,320 188,343 223,543 261,312Growth, % 22 31 19 17Employee expenses ‐90,007 ‐116,532 ‐139,647 ‐163,447Other Operating expenses ‐22,682 ‐30,703 ‐36,186 ‐41,949EBITDA (Core) 30,631 41,108 47,709 55,916Growth, % 56.9 34.2 16.1 17.2Margin, % 21.4 21.8 21.3 21.4Depreciation ‐3,896 ‐4,701 ‐5,762 ‐7,042EBIT 26,735 36,407 41,947 48,874Growth, % 63.7 36.2 15.2 16.5Margin, % 18.7 19.3 18.8 18.7Interest paid ‐922 ‐815 ‐553 ‐453Other Non‐Operating Income 2,121 3,575 3,850 4,934Pre‐tax profit 26,334 39,167 45,245 53,355Tax provided ‐6,479 ‐10,321 ‐11,764 ‐13,872Profit after tax 19,855 28,846 33,481 39,482Others (Minorities, Associates) ‐301 ‐142 ‐19 ‐22Net Profit 19,554 28,704 33,463 39,461Growth, % 17.1 35.7 16.6 17.9Net Profit (adjusted) 21,154 28,704 33,463 39,461Wtd avg shares (m) 237 237 237 237

Y/E Mar, $ mn FY13 FY14E FY15E FY16E

US$ Revenue 2,633 3,088 3,606 4,215Growth, % 6.7 17.3 16.7 16.9Re / US$ (rate) 54.4 61.0 62.0 62.0

Balance Sheet Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Cash & bank 34,629 48,698 61,440 80,332Debtors 33,688 40,249 48,996 58,706Inventory 110 258 306 358Loans & advances 20,358 25,800 30,622 34,364Other current assets 6,537 8,772 10,412 12,171Total current assets 95,322 123,778 151,776 185,931Investments 14,393 14,393 19,393 24,393Gross fixed assets 36,017 45,017 55,017 65,017Less: Depreciation ‐13,699 ‐18,400 ‐24,162 ‐31,204Add: Capital WIP 2,595 2,595 2,595 2,595Net fixed assets 24,913 29,212 33,450 36,408Total assets 138,105 170,859 208,095 250,209 Current liabilities 28,951 35,119 42,085 47,019Provisions 16,203 16,670 16,451 16,777Total current liabilities 45,154 51,789 58,537 63,796Non‐current liabilities 10,768 9,268 7,768 6,768Total liabilities 55,922 61,057 66,305 70,564Paid‐up capital 2,316 2,316 2,316 2,316Reserves & surplus 78,523 106,000 137,970 175,802Minorities 1,344 1,486 1,505 1,527Shareholders’ equity 82,183 109,802 141,791 179,644Total equity & liabilities 138,105 170,859 208,095 250,209

Source: Company, PhillipCapital India Research Estimates

Cash Flow Y/E Mar, Rs mn FY13 FY14E FY15E FY16E

Pre‐tax profit 26,334 39,167 45,245 53,355Depreciation 3,896 4,701 5,762 7,042Chg in working capital ‐7,812 ‐8,218 ‐8,290 ‐10,329Total tax paid ‐7,534 ‐9,854 ‐11,982 ‐13,547Other operating activities 1,600 0 0 0Cash flow from operating activities 16,484 25,796 30,735 36,521Capital expenditure ‐10,250 ‐9,000 ‐10,000 ‐10,000Chg in investments 293 0 ‐5,000 ‐5,000Chg in marketable securities 0 0 0 0Other investing activities 0 0 0 0Cash flow from investing activities ‐9,957 ‐9,000 ‐15,000 ‐15,000Free cash flow 6,234 16,796 20,735 26,521Equity raised/(repaid) 12 ‐5 0 0Debt raised/(repaid) ‐2,974 ‐1,500 ‐1,500 ‐1,000Dividend (incl. tax) ‐750 ‐1,221 ‐1,493 ‐1,629Other financing activities ‐39 0 0 0Cash flow from financing activities ‐2,858 ‐2,726 ‐2,993 ‐2,629Net chg in cash 3,669 14,069 12,742 18,892

Valuation Ratios & Per Share Data FY13 FY14E FY15E FY16E

Per Share data EPS (INR) 89.3 121.0 141.0 166.3Growth, % 9.2 35.5 16.5 17.9Book NAV/share (INR) 341.4 456.8 591.2 750.6CFPS (INR) 53.9 93.7 113.3 133.1DPS (INR) 2.7 4.4 5.4 5.9Return ratios Return on assets (%) 16.1 19.0 17.9 17.4Return on equity (%) 26.2 26.5 23.9 22.2Return on capital employed (%) 24.1 27.7 25.2 23.7Turnover ratios Asset turnover (x) 3.0 3.1 3.1 3.0Sales/Total assets (x) 1.1 1.2 1.2 1.1Sales/Net FA (x) 6.6 7.0 7.1 7.5Working capital/Sales (x) 0.1 0.1 0.1 0.2Receivable days 85.8 78.0 80.0 82.0Payable days 93.8 87.1 87.4 83.6Working capital days 39.6 45.1 51.9 58.4Liquidity ratios Current ratio (x) 2.1 2.4 2.6 2.9Quick ratio (x) 2.1 2.4 2.6 2.9Dividend cover (x) 33.0 27.5 26.2 28.3Total debt/Equity (%) 10.5 6.5 3.9 2.5Net debt/Equity (%) (32.3) (38.5) (39.9) (42.6)Valuation PER (x) 20.4 15.1 13.0 11.0PEG (x) ‐ y‐o‐y growth 2.2 0.4 0.8 0.6Price/Book (x) 5.4 4.0 3.1 2.4Yield (%) 0.1 0.2 0.3 0.3EV/Net sales (x) 2.8 2.0 1.6 1.3EV/EBITDA (x) 12.9 9.3 7.7 6.2EV/EBIT (x) 14.8 10.5 8.8 7.1

– 20 of 21 –


Management (91 22) 2300 2999(91 22) 6667 9735

Research

Deepak Jain (9122) 6667 9758 Ankur Sharma (9122) 6667 9759 Surya Patra (9122) 6667 9768Priya Ranjan (9122) 6667 9965 Aditya Bahety (9122) 6667 9986

Infrastructure & IT Services Abhishek Ranganathan, CFA (9122) 6667 9952Manish Agarwalla (9122) 6667 9962 Vibhor Singhal (9122) 6667 9949 Neha Garg (9122) 6667 9996Sachit Motwani, CFA, FRM (9122) 6667 9953 Varun Vijayan (9122) 6667 9992

Metals Shikha Khurana (9122) 6667 9948Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Dhawal Doshi (9122) 6667 9769Ennette Fernandes (9122) 6667 9764 Dharmesh Shah (9122) 6667 9974Vivekanand Subbaraman (9122) 6667 9766 Vishal Randive (9122) 6667 9944

Oil&Gas, Agri InputsGauri Anand (9122) 6667 9943

Vaibhav Agarwal (9122) 6667 9967 Deepak Pareek (9122) 6667 9950 Rosie Ferns (9122) 6667 9971

Anjali Verma (9122) 6667 9969

Sales & Distribution Kinshuk Tiwari (9122) 6667 9946 Sales Trader ExecutionAshvin Patil (9122) 6667 9991 Dilesh Doshi (9122) 6667 9747 Mayur Shah (9122) 6667 9945Shubhangi Agrawal (9122) 6667 9964 Suniil Pandit (9122) 6667 9745Kishor Binwal (9122) 6667 9989Sidharth Agrawal (9122) 6667 9934Dipesh Sohani (9122) 6667 9756

Vineet Bhatnagar (Managing Director)Jignesh Shah (Head – Equity Derivatives)

Automobiles

Banking, NBFCs

Consumer, Media, Telecom

Cement

Economics

Engineering, Capital Goods

Sr. Manager – Equities Support

Pharma

Retail, Real Estate

Quant

Database Manager

Contact Information (Regional Member Companies)

SINGAPORE

Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 Raffles City Tower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG Phillip Securities (HK) Ltd

11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN Phillip Securities Japan, Ltd

4‐2 Nihonbashi Kabutocho, Chuo‐ku Tokyo 103‐0026

Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 www.phillip.co.jp

INDONESIA PT Phillip Securities Indonesia

ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia

Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 www.phillip.co.id

CHINA Phillip Financial Advisory (Shanghai) Co. Ltd.

No 550 Yan An East Road, Ocean Tower Unit 2318 Shanghai 200 001

Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940 www.phillip.com.cn

THAILAND Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE King & Shaxson Capital Ltd.

3rd Floor, 35 Rue de la Bienfaisance 75008 Paris France

Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 www.kingandshaxson.com

UNITED KINGDOM King & Shaxson Ltd.

6th Floor, Candlewick House, 120 Cannon Street London, EC4N 6AS

Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835 www.kingandshaxson.com

UNITED STATES Phillip Futures Inc.

141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA PhillipCapital Australia

Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia

Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 www.phillipcapital.com.au

SRI LANKA Asha Phillip Securities Limited

Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka

Tel: (94) 11 2429 100 Fax: (94) 11 2429 199 www.ashaphillip.net/home.htm

INDIA PhillipCapital (India) Private Limited

No. 1, C‐Block, 2nd Floor, Modern Center , Jacob Circle, K. K. Marg, Mahalaxmi Mumbai 400011 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in

– 21 of 21 –


Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only and neither the information contained herein nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment or derivatives. The information and opinions contained in the Report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication to future performance. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax and financial advisors and reach their own regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. In no circumstances it be used or considered as an offer to sell or a solicitation of any offer to buy or sell the Securities mentioned in it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which we believe are reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence/Conflict: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its employees, directors, or affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd may not hold more than 1% of the shares of the company(ies) covered in this report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic or political factors. Past performance is not necessarily indicative of future performance or results. Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorized use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading in can be substantial. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd. which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities andExchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Marco Polo Securities Inc. ("Marco Polo").Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. PhillipCapital (India) Pvt. Ltd. Registered office: 2nd Floor, C‐Block, Modern Centre, Mahalaxmi, Mumbai – 400011

PC - Tech Mahindra - v4 -...

Documents

Transcript of PC - Tech Mahindra - v4 -...