DCF Studio

    INFY.NS · NSI · Technology

    Infosys Limited

    Also onConsensus Drift

    Implied value per share

    INR 1093.37

    Market price

    INR 1051.40

    Implied upside

    +4.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · USD model at 95.8630

    AdjustedReports in USD, trades in INR. Modelled in USD, converted at the end.
    NoteRisk-free rate is an assumption: INR assumption - no free live source available for this market.

    Current EV/EBITDA of 917.0x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    INR 1093.37+4.0%
    Exit multiple
    INR 2105.52+100.3%
    Market price
    INR 1051.40

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn4bnFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueUSD 20.9bnUSD 21.6bnUSD 22.3bnUSD 23.1bnUSD 23.9bn+3.4%
    EBITUSD 4.3bnUSD 4.5bnUSD 4.6bnUSD 4.8bnUSD 5.0bn+3.4%
    NOPATUSD 3.2bnUSD 3.4bnUSD 3.5bnUSD 3.6bnUSD 3.7bn+3.4%
    Add depreciation & amortisationUSD 605.3mUSD 626.1mUSD 647.7mUSD 670.0mUSD 693.0m+3.4%
    Less capital expenditureUSD -316.3mUSD -327.2mUSD -338.4mUSD -350.1mUSD -362.1m+3.4%
    Less increase in working capitalUSD -204.0mUSD -211.0mUSD -218.3mUSD -225.8mUSD -233.5m+3.4%
    Free cashflow to firmUSD 3.3bnUSD 3.4bnUSD 3.6bnUSD 3.7bnUSD 3.8bn+3.4%
    Discount factor0.95340.86660.78770.71590.6508-
    Present valueUSD 3.2bnUSD 3.0bnUSD 2.8bnUSD 2.6bnUSD 2.5bn-6.0%
    Present Value Of The ForecastUSD 14.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate6.80%INR assumption - no free live source available for this market (assumption)
    Equity risk premium8.00%Market assumption
    Beta0.402Reported 0.108, pulled toward 1.0 (Blume)
    Cost of equity10.02%Risk-free + beta x equity risk premium
    Cost of debt6.80%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 4258.5bn100.0% of capital
    Total debtUSD 967.0m0.0% of capital, book value as a proxy
    Tax rate25.2%Effective, capped at statutory
    WACC10.02%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 11.41

    68% of EV

    Forecast FCFF, final year
    USD 3.8bn
    Capex at depreciation, working capital in reinvestment
    USD 3.7bn
    Less reinvestment at g/ROIC (8.6% of NOPAT)
    USD -317.6m
    Capitalised
    USD 3.4bn
    ROIC (reported)
    29.2%
    Terminal value, undiscounted
    USD 46.3bn
    Terminal value, discounted
    USD 30.1bn
    Enterprise value
    USD 44.2bn
    Less net debt
    USD -2.8bn
    Equity value
    USD 47.0bn

    Exit at 20.0x EBITDA

    Value per shareUSD 21.96

    84% of EV

    Terminal value, undiscounted
    USD 113.1bn
    Terminal value, discounted
    USD 73.6bn
    Enterprise value
    USD 87.7bn
    Less net debt
    USD -2.8bn
    Equity value
    USD 90.5bn

    Spread between methods: 63%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.02%13.6614.3015.0715.9817.09
    9.02%12.0012.4412.9613.5514.26
    10.02%10.7211.0411.4111.8212.29
    11.02%9.729.9510.2210.5110.84
    12.02%8.909.089.289.499.74

    Outlined: this model. Green text: above today's price of 10.97. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year3.4%2.3%-1.1pp
    EBIT margin20.8%19.9%-0.9pp
    Discount rate10.0%10.4%+0.3pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.