IT · investment research
Infosys
INFY
Verdict
AVOID
medium confidence · 3-5 years
Composite score
54/100
Weighted across all eight pillars
Business quality
56/100
Moat, returns, balance sheet, cash, management
Valuation score
3/100
At 76.7x against a sector median of 43.8x, the price embeds roughly 58% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Avoid for now — the business or governance risk outweighs the opportunity.
WHY
- • Profitability & returns scores 100/100 (improving) — ROCE was 29.5% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Valuation scores 3/100 (stable) — At 76.7x against a sector median of 43.8x, the price embeds roughly 58% earnings growth. Anything less has to come out of the multiple.
- • Industry & macro scores 88/100 (improving) — IT (India) demand is improving.
- • Business & moat scores 34/100 (improving) — Each additional user or partner improves the proposition for the rest.
WHERE
IT · Large cap · position sized to at most 0% of an equity portfolio.
WHEN
Re-run this analysis after the next quarterly result.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 27% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹1,843 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Valuation risk — The multiple already discounts a lot of future growth.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check US/EU tech spend — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
Infosys is a competitively exposed it business compounding revenue at 7.6% and profit at 9.0%, earning 31.4% on capital. Quality scores 56/100 and valuation 3/100 at 76.7x. The decision is therefore avoid with medium confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
Infosys operates in the Indian it sector with a large-cap footprint and a listed market value of about ₹662k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 21/100
Network effects
Each additional user or partner improves the proposition for the rest.
Segment mix
Growth 22.2% · margin 7.2% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 7.6% · margin 25.8% — Growing broadly in line with the overall business.
Growth 25% · margin 29.6% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 24.5% · margin 8.3% — Fastest growing part of the mix — watch whether margins hold as it scales.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
34/100Trend: improving · weight 14%
- MoatNetwork effects
Each additional user or partner improves the proposition for the rest.
- Segment concentrationDigital & cloud services is 14.2% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin20.0%
Margin moved from 13.0% to 20.0% year on year.
Profitability & returns
100/100Trend: improving · weight 16%
- ROCE31.4%
ROCE was 29.5% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE29.2%
Return on equity after leverage — read alongside debt levels.
- Net margin13.0%
Share of every rupee of revenue that reaches reported profit.
Growth quality
46/100Trend: stable · weight 15%
- Revenue CAGR (4y)7.6%
Top-line compounding over the reported history.
- Profit CAGR (4y)9.0%
Profit is compounding faster than revenue — operating leverage is working.
- Growth sourceCapex-led (organic)
Capex is 14.0% of revenue this year.
Balance sheet
50/100Trend: deteriorating · weight 12%
- Debt / EBITDA1.78x
Leverage is serviceable from current cash generation.
- Debt / equity0.76x
Capital structure relative to shareholder funds.
- Working capital63 days
Cycle is tight, so growth is largely self-funding.
Cash conversion
52/100Trend: stable · weight 13%
- OCF / PAT90%
Reported profit is backed by operating cash.
- Free cash flow₹-3,342 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
46/100Trend: stable · weight 14%
- Guidance delivery60% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding31.5% (+0.03 y/y)
Promoter ownership is stable or rising.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII +0.03 · DII -0.81
Direction of institutional ownership over the last year.
- Capital allocationSurplus cash is largely returned to shareholders…
Surplus cash is largely returned to shareholders rather than reinvested.
Industry & macro
88/100Trend: improving · weight 8%
- Demand trendimproving
IT (India) demand is improving.
- StructureConsolidated
Consolidated — a few large players hold most of the profit pool.
- Competitive intensitylow
How hard it is to keep pricing and share.
- Macro driversUS/EU tech spend, USD/INR, Wage inflation
Variables that move the earnings base regardless of company execution.
Valuation
3/100Trend: stable · weight 8%
- P/E vs sector76.7x vs 43.8x
At 76.7x against a sector median of 43.8x, the price embeds roughly 58% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted8.52 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield-0.50%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹1.08 L Cr | ₹20,586 Cr | ₹13,381 Cr | ₹10,972 Cr | ₹5,555 Cr | 32.8% |
| FY2023 | ₹1.18 L Cr | ₹31,748 Cr | ₹21,271 Cr | ₹17,868 Cr | ₹14,340 Cr | 29.5% |
| FY2024 | ₹1.27 L Cr | ₹27,900 Cr | ₹16,461 Cr | ₹14,156 Cr | ₹2,742 Cr | 26.1% |
| FY2025 | ₹1.36 L Cr | ₹17,687 Cr | ₹7,782 Cr | ₹6,848 Cr | ₹2,766 Cr | 29.5% |
| FY2026 | ₹1.45 L Cr | ₹29,059 Cr | ₹18,888 Cr | ₹16,999 Cr | ₹-3,342 Cr | 31.4% |
No accounting-quality flags in the sample data.
Ownership & management
Who owns it, and have they delivered?
Promoter
31.5%
+0.03 y/y
Pledge
None
No disclosed pledge
FII
7.9%
+0.03 y/y
DII
4.3%
-0.81 y/y
Guidance delivered in 60% of the last eight quarters; average leadership tenure 17 years.
Surplus cash is largely returned to shareholders rather than reinvested.
- ⚠ Related-party transactions at 6.9% of revenue
Industry & macro context
IT (India)
Demand trend
improving
Cyclicality
low
Competition
low
Regulatory pressure
medium
Consolidated — a few large players hold most of the profit pool.
Macro drivers: US/EU tech spend · USD/INR · Wage inflation
Valuation
expensive versus the sector
P/E
76.7x
Sector median P/E
43.8x
P/B
5.34x
Earnings yield
1.3%
FCF yield
-0.5%
PE / growth
8.52
Estimated fair-value band ₹1,843 – ₹2,355 , built on FY2026 EPS of ₹45.5. Gap to the current price: +31.7%. Ranges are a modelling output, not a target price.
At 76.7x against a sector median of 43.8x, the price embeds roughly 58% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Valuation riskhigh
The multiple already discounts a lot of future growth.
Monitor: Any quarter where growth slows below the implied rate.
- Governancehigh
Related-party transactions at 6.9% of revenue
Monitor: Annual report disclosures and auditor commentary.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 31.4% | stays above 28% | falls for two consecutive years |
| Cash conversion | 90% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 7.6% CAGR | tracks the 58% priced in | slows for two quarters with no margin offset |
| Promoter holding | 31.5% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 72/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.