PERSISTENT SYSTEMS

EQUITY RESEARCH - MODEL

DISCUSSION ON EQUITY RESEARCH MODEL - PERSISTENT SYSTEMS
Investment stocks

fundamental approach

decision should I invest in the stock at the CMP

value of company = Intrinsic Value > CMP more than 15%

Project Company
starting t = 0 does not start at t =0
life is finite life is infinite (going concern)
assumptions were given to us we have figure out the drivers and take assumptions

IMPORTANT SECTIONS OF AN ANNUAL REPORT --> INVESTMENT ANALYSIS

1 CHAIRMAN'S SPEECH VISION & MISSION
2 DIRECTOR'S REPORT OPERATIONAL EXCELLENCE
3 MANAGEMENT DISCUSSION & ANALYSIS (MDA) COMMENTARY ON LATEST RE
4 INDUSTRY REPORT DEMAND & SUPPLY OF THE S
5 FINANCIAL STATEMENT DATA (IS/BS/CFS)

Total Revenue = Price x Quantity

ANALYSIS OF MARUTI REVENUES
ASP (P)

Maruti x

Number of cars sold (Q)

ANALYSIS OF AIRTEL REVENUES

ARPU = MONTHLY BILL
MOBILE
SUBSCRIBERS

AIRTEL BROADBAND

DTH

ANALYSIS OF IT SERVICES REVENUES

HOSPITAL IN USA
WANTS SOFTWARE FOR MGMT.

PERSISTENT IS THE VENDOR TO BUILD THE SOFTWARE

 NO SALEABLE INTELLECTUAL PROPERTY
SO CHARGE THE CLIENT FOR EFFORT

HOW TO MEASURE THE EFFORT

MAN DAYS OR MAN MONTHS OR MAN HOURS

METRIC TO REVENUE ESTIMATION

NO. OF MONTHS TOTAL TOTAL

SERVICES PROVIDED DEVELOPE OF EFFORT REVENUE
AT RS EFFORT MONTHS RATE PER MONTH $/MONTH (USD)
ONSITE = GDC 1 10 10 10000 100000
OFFSHORE = INDIA 10 10 100 1000 100000
200000
50
10,000,000

REVENUE MODEL - PERSISTENT SYSTEMS

GDC - BILLING RATE (USD/MONTH)

GDC GDC - MONTHS BILLED

SERVICES
PERSISTENT INDIA INDIA - BILLING RATE (USD/MONTH)

INDIA - MONTHS BILLED

IP LED
IP - BILLING RATE (USD/MONTH)

IP- MONTHS BILLED

PERFECT COMPETITION
ENTRY BARRIER LOW
INFLUENCE OF PERSISTENT ON BILLING RATE NOT THERE

VALUATION OF COMPANY

DISCOUNTED CASH FLOW VALUATION RELATIVE VALUATION

PRESENT VALUE OF FUTURE CASH FLOWS IS FIRM VALUE LAW OF ONE PRICE
BASED ON VALUATION RATIO
FREE CASH FLOW TO FIRM (FCFF) = THE AMOUNT OF CASH P/E, EV/REVENUE, P/S,P/BV
GENERATED FOR ALL STAKEHOLDERS OF FIRM
STAKEHOLDERS = DEBT + EQUITY FIND THE RATIOS FOR PEERS
THIS IS ALSO CALLED AS ENTERPRISE VALUE (EV)
EV = DEBT + EQUITY - CASH FIND THE INDUSTRY MEDIAN
25TH , 75TH PERCENTILE
FCFF = EBIT*(1-TAX) + D&A - PURCHASE OF ASSETS + CHG IN WC
USE THE INDUSTRY MEDIAN
DICOUNT RATE FOR FCFF IS WACC OR PERCENTILE VALUE
(CONSIDERING BOTH STAKEHOLDERS , DEBT & EQUITY) TO FIND TARGET PRICE OF OU
WACC = We * Ke + Wd * Kd

We = MARKET VALUE OF EQUITY / TOTAL CAPITAL

MARKET VALUE OF EQUITY = PRICE OF STOCK * NUMBER OF SHARES

Wd = 1 - We
Kd = INT RATE * (1 - TAX RATE)
Ke = Rf + BETA*(Rm - Rf) <=== CAPITAL ASSET PRICING MODEL (CAPM)

EV = PV OF ALL FCFF DISCOUTNED AT WACC

MATHEMAICALLY , EV WOULD BE

WE CAN ESTIMATE THE FCFF FOR NEXT 6 YEARS USING OUR FORECASTS
FOR THE REMAINING YEARS TILL INFINITE WE USE 2 STAGE BASED H-MODEL
OF VALUATION
THIS MODEL CONSIDERS THE BUSINESS LIFE CYCLE STAGES AND MODERATES THE
GROWTH RATE
STAGE -1 : LINEAR DECLINE IN GROWTH RATE OF PROFITS OR CASH FLOWS
STAGE -2 : TERMINAL VALUATION BASED ON GORDON GROWTH MODEL

GORDON GROWTH MODEL

PV = A/r

FROM EV WE CAN ESTIMATE THE EQUITY VALUE

AND THE INTRINSIC PRICE TO TAKE INVESTMENT DECISION

EQUITY VALUE = EV - DEBT + CASH

INTRINSIC PRICE = EQUITY VALUE / NUMBER OF SHARES
and take assumptions

ISION & MISSION

PERATIONAL EXCELLENCE
OMMENTARY ON LATEST RESULTS
EMAND & SUPPLY OF THE SECTOR
 <== TOTAL REVENUE ($)
<== INR/USD
<== REVENUE IN INR MILLION

ELATIVE VALUATION
AW OF ONE PRICE
ASED ON VALUATION RATIOS
/E, EV/REVENUE, P/S,P/BV

IND THE RATIOS FOR PEERS

IND THE INDUSTRY MEDIAN OR

5TH , 75TH PERCENTILE
 SE THE INDUSTRY MEDIAN
OR PERCENTILE VALUE
O FIND TARGET PRICE OF OUR CASE
 REVENUE
DRIVERS

IS

COST DRIVERS

CFS

ASSET
SCHEDULE

BS

BALANCE SHEET
RATIO

HISTORICAL
DATA

ANNUAL
REPORT
ESTIMATES OF
CASH FLOW VALUATION

Intirinsic Price >

CMP

+15% BUY
FORECASTS INVESTMENT
DECISION
 DCF

RELATIVE
VALUATION
Persistent Systems
Layout
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16
Year 2013 - A 2014 - A 2015 - A 2016 - A
Mar/17 Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24
2017 - A 2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E
 Revenue
1. GDC
2. India
3. IP Led

cln 1. GDC 2. India

a. Person months billed a. Person months billed
b. Average revenue per person month b. Average revenue per person month

a. Person months billed a. Person months billed

i. Person months billable i. Person months billable
ii. Utilisation % ii. Utilisation %

i. Person months billable i. Person months billable

: Number of billable employees*12 : Number of billable employees*12

PRICE QTY
days
prsn months months persons rate per prsn per month person months
20 10 2 20
2 10 1000 20

12 3
100 admin 20
120 other
prsn x months technical 80

70
3. IP Led
a. Person months billed
b. Average revenue per person month

a. Person months billed

i. Person months billable
ii. Utilisation %

i. Person months billable

: Number of billable employees*12

AMT

REVENUE
As you have tried filling the missing values - you must have faced some difficulties
Overcoming these challenges are important as you will be required to do this kind of work in your job!
As we go along for the next 2 sessions, you can use this file - so that you can do your work and match it with your group!!
Following are the tasks you need to follow to complete the 4 steps which you must have memorised till now :)

Step 1 EBITDA Forecast

Step 2 EBIT Forecast
Step 3 PAT Forecast
Step 4 BS, CFS Forecast

Note: You will be required to take assumptions : Please discuss in your group and take similar assumptions
These assumptions can be changed later after the model is complete and everyone in one group has similar figures

Task 1 Sheet "Revenue Drivers" -> Try to complete the same after understanding Revenue Schema
Task 2 Sheet "Cost Drivers" -> Try to complete all operating expenses and do EBITDA Forecast
Task 3 Sheet "Asset Schedule" -> Try to complete the schedule and do EBIT Forecast
Task 4 As debt is negligible -> You can keep interest constant in Income Statement and debt constant in Balance sheet
So, you can get away without making a debt schedule in this model -> complete PAT Forecast
Task 5 Sheet "Balance Sheet" -> Keep Cash blank, Use asset schedule to link fixed assets, Use PAT to link equity (Rest of
Task 6 Create a new sheet using the sheet "LAYOUT" -> Name the new sheet "CFS" i.e. Cash Flow Statement
Task 7 Complete CFS and match the BS
Task 8 Think of working capital assumptions and change a few things in BS (Think!!)
Task 9 After task 8, BS will get mismatch -> Try to match it back by making changes in CFS
Task 10 Complete till Task 9 in this session, and leave DCF and Relative Valuation for next session
 atch it with your group!!
sed till now :)

has similar figures

bt constant in Balance sheet

Use PAT to link equity (Rest of the things keep constant for now)
sh Flow Statement
Persistent Systems
Income Statement
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A
Revenue from Operations 12,945 16,692 18,913 23,123 28,784
Other Income 286 310 938 773 958
Total Revenue 13,231 17,002 19,851 23,896 29,743

Employee Benefit expense 7,188 9,090 11,114 14,068 17,649

Cost of technical professionals 536 906 1,090 1,587 2,178
COGS 7,724 9,995 12,203 15,654 19,827

Gross Profit 5,507 7,006 7,647 8,242 9,916

Other Expenses 2,094 2,553 2,806 3,554 4,304

EBITDA 3,413 4,453 4,842 4,688 5,612

Depreciation 783 1,026 939 990 1,490

EBIT 2,630 3,427 3,903 3,698 4,122

Interest Expense 0 1 3 1 1
EBT 2,630 3,427 3,900 3,697 4,121

Exceptional Items - - - - (114)

PBT 2,630 3,427 3,900 3,697 4,007

Tax Expense 754 934 993 924 992

PAT 1,876 2,493 2,906 2,773 3,015
24.99% 24.76%
EPS PAT / No. of es
Basic 48.62 64.07 36.84 34.74 37.68
Diluted 46.90 31.16 36.33 34.66 37.68

Number of Shares
Basic 38.59 38.91 78.89 79.82 80.01
Diluted 40.00 80.00 80.00 80.01 80.01

Other Income 000 286 310 938 773 958

Investments 000 3116 4071 4661 4914 4500

Other bank balances 000 0 0 526 39 48
Cash and Cash equivalents 000 561 957 987 1400 1461
Total 3677 5028 6175 6353 6009
% of
assumption 1 Opening 8.43% 18.66% 12.52% 15.09%

assumption 2 based on avg o 7.13% 16.75% 12.34% 15.51%

of opening n closing

Other income as per assumption 2 286 310 938 773 958

Revenue from Operations 000 12945 16692 18913 23123 28784

growth rate 28.94% 13.31% 22.26% 24.48%

100

2023
books

2000
Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24
2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E
30,337 34,473 39,431 44,458 50,005 55,856 62,167
1,191 1,241 1,523 2,460 3,022 4,265 5,187
31,528 35,715 40,953 46,918 53,027 60,121 67,354

18,316 20,182 23,085 26,028 29,276 32,701 36,396

3,181 2,312 2,645 2,982 3,354 3,746 4,170
21,497 22,495 25,730 29,010 32,629 36,448 40,566

10,031 13,220 15,224 17,908 20,398 23,673 26,788

4,153 5,189 5,936 6,692 7,527 8,408 9,358

5,878 8,031 9,288 11,216 12,870 15,265 17,430

1,585 1,475 1,646 1,848 2,076 2,330 2,610

4,293 6,556 7,642 9,368 10,795 12,935 14,820

1 immaterial
4,293 6,556 7,642 9,368 10,795 12,935 14,820

-
4,293 6,556 7,642 9,368 10,795 12,935 14,820

1,062 1,621 1,890 2,317 2,670 3,199 3,666

3,231 4,934 5,752 7,051 8,125 9,736 11,155
24.73% 24.73%

40.39 61.68 71.90 88.15 101.57 121.71 139.45

40.39 61.68 71.90 88.15 101.57 121.71 139.45

79.99 79.99 79.99 79.99 79.99 79.99 79.99

79.99 79.99 79.99 79.99 79.99 79.99 79.99
same as last year

1191 1241 1523 2460 3022 4265 5187

5916 5916 5916 5916 5916 5916 5916

1070 1070 1070 1070 1070 1070 1070
1344 3231 9522 13292 21629 27816 38882
8330 10217 16509 20279 28616 34803 45869
 19.82% 14.90% 14.90% 14.90% 14.90% 14.90% 14.90%

16.61% 13.67% 13.67% 13.67% 13.67% 13.67% 13.67%

1191 1267 1826 2514 3341 4333 5512

30337 35301 41076 47797 55618 64718 75307

5.39% 16.36% 16.36% 16.36% 16.36% 16.36% 16.36% avg of last 4 years

3 103

finance bill
amendments

30

remaining r
assumed to be same
Persistent Systems
Balance Sheet
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A
Property, Plant and Equipment 2,800 2,785 3,021 2,968 2,768
Capital work-in-progress 1,174 307 40 24 48
Goodwill - 23 24 78 76
Other Intangible assets 702 1,269 995 1,325 2,515
Intangible assets under development - - - 242 241
Investments 173 823 2,308 1,469 2,339
Loans 199 138 58 86 136
Other non-current financial assets - - 13 870 922
Deferred tax assets (net) 190 261 244 129 306
Other non-current assets 524 459 81 649 72
Total Non Current Assets 5,763 6,066 6,784 7,840 9,425

Investments 3,116 4,071 4,661 4,914 4,500

Trade receivables 2,451 3,028 3,586 4,275 4,754
Cash and Cash equivalents 561 957 987 1,400 1,461
Other bank balances - - 526 39 48
Loans 346 410 11 9 10
Other current financial Assets - - 909 1,764 2,316
Current tax assets (net) - - 20 153 94
Other current assets 434 902 397 803 855
Total Current Assets 6,908 9,368 11,097 13,358 14,039

Total Assets 12,671 15,434 17,881 21,199 23,464

Equity share capital 400 400 800 800 800

Other equity 9,783 11,823 13,901 15,778 18,193
Total Equity 10,183 12,223 14,701 16,578 18,993

Borrowings 14 32 26 27 22
Deferred payment liabilities 559 301 - - 20
Provisions 80 93 116 124 146
Deferred tax liabilities (net) - 1 3 - 111
Total Non Current Liabilities 653 426 145 151 298

Trade Payables 319 434 497 1,599 1,209

Deferred Payment Liabilities - - - 4 1
Other Financial liabilities - - 535 535 453
Other Current Liabilities 468 1,140 730 1,108 1,119
Provisions 1,048 1,211 1,274 1,224 1,391
Total Current Liabilities 1,835 2,785 3,036 4,469 4,173
Total Liabilities and Shareholders Equity 12,671 15,434 17,881 21,199 23,464

Checksum (ASSETS = LIABILITY + EQUITY) - - - - -

Balance Sheet Ratios

DSO TR 59.91 63.82 62.04 57.25

Payable Days TP 13.74 13.92 24.44 25.85

Days of sales outstanding

receivable days 365 365
T.O Ratio t.o / anything

DSO = 365 x avg drs

credit sales

DSO x credit sales = Avg drs op + cl

365 2

(avg x 2) op + cl

(avg x 2) - op ' = closing

Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24
2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E
2,581 3,139 3,818 4,592 5,464 6,428 7,484
8 8 8 8 8 8 8
77 77 77 77 77 77 77
2,464 2,464 2,464 2,464 2,464 2,464 2,464
45 45 45 45 45 45 45
2,881 2,881 2,881 2,881 2,881 2,881 2,881
143 143 143 143 143 143 143
37 37 37 37 37 37 37
642 642 642 642 642 642 642
92 92 92 92 92 92 92
8,969 9,526 10,205 10,979 11,852 12,815 13,871

5,916 5,916 5,916 5,916 5,916 5,916 5,916

4,847 6,516 6,482 8,173 8,310 10,102 10,390
1,344 3,231 9,522 13,292 21,629 27,816 38,882
1,070 1,070 1,070 1,070 1,070 1,070 1,070
7 7 7 7 7 7 7
2,758 2,758 2,758 2,758 2,758 2,758 2,758
114 114 114 114 114 114 114
1,563 1,563 1,563 1,563 1,563 1,563 1,563
17,620 21,175 27,433 32,894 41,368 49,346 60,701

26,589 30,702 37,638 43,873 53,220 62,162 74,572

800 800 800 800 800 800 800

20,472 25,406 31,158 38,209 46,334 56,069 67,224
21,272 26,206 31,958 39,009 47,134 56,869 68,024

17 17 17 17 17 17 17
- - - - - - -
160 160 160 160 160 160 160
270 270 270 270 270 270 270
447 447 447 447 447 447 447

1,673 852 2,036 1,220 2,442 1,649 2,905

- - - - - - -
396 396 396 396 396 396 396
1,201 1,201 1,201 1,201 1,201 1,201 1,201
1,599 1,599 1,599 1,599 1,599 1,599 1,599
4,870 4,049 5,233 4,417 5,639 4,846 6,102
 26,589 30,702 37,638 43,873 53,220 62,162 74,572

- - - - - - -

57.76 60.16 60.16 60.16 60.16 60.16 60.16

24.47 20.49 20.49 20.49 20.49 20.49 20.49

365 365
.o / anything Drs T.O Ratio credit sales / Average debtors

Payable Days 365 x avg crs

cr purchases

Payable Days x cr pur = x avg crs

365

avg is there
closing reqd

x 2) - opening
Persistent Systems CASH FLOW STATEMENT
Balance Sheet
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A

CFO
PAT
Dep
change in w capital Trade rec L.Y. - C.Y
Trade payables C.Y. - L.Y

CFI
Capex
pur of FA

CFF
Debt taken / repaid

Net change in cash CFO + CFI + CFF

OPENING
CLOSIN
W STATEMENT

Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24

2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E

4,934 5,752 7,051 8,125 9,736 11,155

1,475 1,646 1,848 2,076 2,330 2,610
-1668 34 -1691 -137 -1792 -289
-821 1184 -816 1222 -794 1256
3,920 8,617 6,391 11,286 9,480 14,732

-2033 -2325 -2621 -2949 -3294 -3666

(2,033) (2,325) (2,621) (2,949) (3,294) (3,666)

0 0 0 0 0 0

- - - - - -

1,887 6,292 3,770 8,337 6,187 11,066

1,344 3,231 9,522 13,292 21,629 27,816
3,231 9,522 13,292 21,629 27,816 38,882
Persistent Systems FCFF
Balance Sheet
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A

CFO
CFI
CFF

FCFF
CF of all the future years in PV as on Terminal year

Totall FCFF

Enterprise Value ₹ 92,265.20 RATE WACC

Less: debt 16.55
Less: pref 0 Enterprise Value = Equity MV + Debt +
Add : Cash and cash equivalents 1343.72

Equity Value ₹ 93,592.37 Co.A takeover Co.B

No. of Eq shares 79.99232483
Intrinsic value per share ₹ 1,170.02 Gift box Co.B
Equity
market price per share 5764 Debt
Pref
Overvalued

Gordons model Going concern FCFF (terminal year) + G

continue to earn profits forever WACC - G
till infinity

G 11066 +
growth rate 13.68% -
World growth rate 5.90%

WACC Weighted average cost of capital

Mkt value % rate

Equity 21271.99 14.49% Ke 3081.418 CAPM Rf + (Rm - Rf ) x beta
Debt 16.55 3.593% Kd 0.594603
Pref 0 3.99% 10.50%
21288.54 3082.013
 Ke 14.49%
WACC 14.48%

Kd 4.773% 3.593%
bef tax aft tax

Persistent Systems's Weighted Average Cost Of Capital (WACC) for Today is calculated as:
WACC = E / (E * Cost of + D / (E
= 0.9863 * 13.79% + 0.0137
= 13.68%
 Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24
2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E

3920 8617 6391 11286 9480 14732

-2033 -2325 -2621 -2949 -3294 -3666
0 0 0 0 0 0

1887 6292 3770 8337 6187 11066

150630.9
500 10001 200

1887 6292 3770 8337 6187 161697

Equity MV + Debt + Pref - CASH

10000 PRICE
Co.A takeover Co.B 10 crores costed 1000 CASH BACK
9 cr
9000 COSTED
cash 1 cr

minal year) + G

5.90% 11719.08 150631

5.90% 7.78%

Rf 7% - 3%
10 yr GOI bond country risk

3.99%
 Rm -Rf 8%

beta 1.26

* Cost of * (1 - Tax Rate)

* 7.68% * (1 - 25.54%)
Persistent Systems FCFE
Balance Sheet
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar/13 Mar/14 Mar/15 Mar/16 Mar/17
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A

CFO
CFI
Debt taken / repaid

FCFE
CF of all the future years in PV as on Terminal year

Total FCFE

Equity Value ₹ 90,810.86 rate KE

No. of Eq shares 79.9923248
Intrinsic value per share ₹ 1,135.24

market price per share 5764

Overvalued

Gordons model Going concern FCFE (terminal year) + G

continue to earn profits forever Ke - G
till infinity

G 11066 +
growth rate 13.79% -
World growth rate 5.90%

Ke 14.49% we found
Cost of Equity:

GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The for

Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-F

a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated dail

b) Beta is the sensitivity of the expected excess asset returns to the expected excess market retur

c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFo

Cost of Equity = 7.19000000% + 1.10 * 6% = 13.79%

 Mar/18 Mar/19 Mar/20 Mar/21 Mar/22 Mar/23 Mar/24
2018 - A 2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E

3920 8617 6391 11286 9480 14732

-2033 -2325 -2621 -2949 -3294 -3666
0 0 0 0 0 0

1887 6292 3770 8337 6187 11066

148531

1887 6292 3770 8337 6187 159597

minal year) + G
Ke - G

5.90% 11719.08 148531

5.90% 7.89%

red rate of return. The formula is:

turn of the Market - Risk-Free Rate of Return)

ee rate. It is updated daily. The current risk-free rate is 7.19000000%.

xpected excess market returns. Persistent Systems's beta is 1.10.

lled market premium. GuruFocus requires market premium to be 6%.

 comparative ratios
PE PB PS

L& T 40.4 10.06 6.08

Tata 60.33 21.96 14.23
Oracle 19.56 4.76 6.03

mean average 40.096666667 12.26 8.78

(a)PE ratio PRICE

EARNINGS 1

Average 40.096666667 = MPS

EPS

40.096666667 = MPS
122.76

4922.2668 = MPS

5765 Actual MP Relative Valuation

OVERVALUED

(b) PB ratio P 12.26

book vlaue/ share 519

6362.94 relative value

5765 actual

undervalued
EV/ EBITDA

24.84
43.24
11.3

26.46

(d) EV 26.46 EV
EBITDA 1601.79

EV 42383.3634 Enterprise Value

Less: debt
Less: pref
Add : Cash and cash equivalents

Equity Value
No. of Eq shares
MPS Relative Valuation

Actual MP

(c) PS ratio p 8.78

sales per share 1160.209424

10186.63874 relative value

5765 actual

undervalued
 42383.3634
364.98
0
1091.25

43109.6334
7.64
5642.6221728

5765

OVERVALUED
Persistent Systems
Revenue Driver - Price * Quantity Method
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A 2018 - A
Revenue from Operations in INR Mn 12,945 16,692 18,913 23,123 28,784 30,337
Revenue By Delivery Centers
Global development Centers 18.2% 20.9% 24.8% 28.0% 26.8% 32.0%
India 64.6% 61.1% 56.1% 50.9% 45.2% 42.4%
IP Led 17.2% 18.0% 19.1% 21.1% 28.0% 25.6%

Global development Centers c amt 2,356 3,489 4,690 6,475 7,714 9,708
India 8,363 10,199 10,610 11,770 13,011 12,863
IP Led 2,227 3,004 3,612 4,879 8,060 7,766

Billed Person Months a qty

GDC 3,294 3,980 5,113 6,623 7,280 9,255
India 37,882 40,053 40,981 42,327 45,346 47,151
IP Led 8,974 9,148 10,207 13,509 19,978 19,982

Average Revenue per Person Months b rate

GDC 4% 0.72 0.88 0.92 0.98 1.06 1.05
India 6% 0.22 0.25 0.26 0.28 0.29 0.27
IP Led 4% 0.25 0.33 0.35 0.36 0.40 0.39

Billable Person Months prsn x months

GDC 3,718 4,585 5,754 7,682 8,515 10,609
India 51,823 57,506 58,493 57,871 60,245 60,597
IP Led 8,974 9,148 10,207 13,509 19,978 19,982

Utilisation rate billed / billable

GDC 88.6% 86.8% 88.9% 86.2% 85.5% 87.2%
India 73.1% 69.7% 70.1% 73.1% 75.3% 77.8%
IP Led 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Number of billable employees

GDC prsn 310 382 480 640 710 884
India 4,319 4,792 4,874 4,823 5,020 5,050
IP Led 748 762 851 1,126 1,665 1,665

Addition in number of billable employees

GDC 72 97 161 69 175
India 474 82 (52) 198 29
IP Led 15 88 275 539 0
Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E
34,473 39,431 44,458 50,005 55,856 62,167

11,374 13,330 15,324 17,514 19,821 22,304 a x b

13,714 14,980 16,153 17,520 18,934 20,487
9,385 11,121 12,981 14,972 17,101 19,377

utlisation rate * billable

10,427 11,750 12,987 14,272 15,531 16,805
47,424 48,870 49,716 50,869 51,865 52,941
23,219 26,455 29,692 32,928 36,165 39,401

c / a
1.091 1.135 1.180 1.227 1.276 1.327
0.289 0.307 0.325 0.344 0.365 0.387
0.404 0.420 0.437 0.455 0.473 0.492

12,073 13,536 15,000 16,463 17,927 19,390

61,960 63,323 64,686 66,049 67,412 68,775
23,219 26,455 29,692 32,928 36,165 39,401

Uti rate = billed

86.4% 86.8% 86.6% 86.7% 86.6% 86.7% billable
76.5% 77.2% 76.9% 77.0% 76.9% 77.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1,006 1,128 1,250 1,372 1,494 1,616

5,163 5,277 5,391 5,504 5,618 5,731
1,935 2,205 2,474 2,744 3,014 3,283

122 122 122 122 122 122

114 114 114 114 114 114
270 270 270 270 270 270
Persistent Systems
Cost Drivers
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A 2018 - A 2019 - E
Revenue from Operations 12,945 16,692 18,913 23,123 28,784 30,337 34,473

Employee Benefit expense 7,188 9,090 11,114 14,068 17,649 18,316 20,182
Cost of technical professionals 536 906 1,090 1,587 2,178 3,181 2,312
Other Expenses 2,094 2,553 2,806 3,554 4,304 4,153 5,189

% of
Employee Benefit expense 55.52% 54.46% 58.76% 60.84% 61.31% 60.38% 58.55%
Cost of technical professionals 4.14% 5.43% 5.76% 6.86% 7.57% 10.48% 6.71%
Other Expenses 16.18% 15.30% 14.84% 15.37% 14.95% 13.69% 15.05%
Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
2020 - E 2021 - E 2022 - E 2023 - E 2024 - E
39,431 44,458 50,005 55,856 62,167

23,085 26,028 29,276 32,701 36,396

2,645 2,982 3,354 3,746 4,170
5,936 6,692 7,527 8,408 9,358

58.55% 58.55% 58.55% 58.55% 58.55%

6.71% 6.71% 6.71% 6.71% 6.71%
15.05% 15.05% 15.05% 15.05% 15.05%
Persistent Systems
Asset Schedule
(All numbers in INR Million, Except per share data)
(Red for assumptions, Blue for Acutal data and Black for Calculations)
Date Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
Year 2013 - A 2014 - A 2015 - A 2016 - A 2017 - A 2018 - A

Property, Plant and Equipment 2,800 2,785 3,021 2,968 2,768 2,581
Other Intangible Assets 702 1,269 995 1,325 2,515 2,464
Total Fixed Assets CLOSING 3,502 4,054 4,016 4,293 5,283 5,045

Depreciation & Amortisation 783 1,026 939 990 1,490 1,585

Depreciation & Amortisation Rate % dep / (op + addn/2) 24.6% 20.6% 21.4% 28.2% 26.8%

Purchase of Fixed Assets 1,335 988 1,216 1,980 1,252

Purchase of Fixed Assets as %
Revenue from Operations 8.0% 5.2% 5.3% 6.9% 4.1%

OP 1000

ADDITION 500 1-Jan ASSUMED to be in the mid

31-Dec

CLOSING 1500

op 5000 dep 500

actual closing 6000

Purchase of Fixed Assets 1500

 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
2019 - E 2020 - E 2021 - E 2022 - E 2023 - E 2024 - E

3,139 3,818 4,592 5,464 6,428 7,484

2,464 2,464 2,464 2,464 2,464 2,464 same as last year
5,603 6,281 7,055 7,928 8,891 9,947 Op + pur - dep

1,475 1,646 1,848 2,076 2,330 2,610 rate * (op + pur/2 )

24.3% 24.3% 24.3% 24.3% 24.3% 24.3%

2,033 2,325 2,621 2,949 3,294 3,666

5.9% 5.9% 5.9% 5.9% 5.9% 5.9%

100% dep

MED to be in the mid 50% dep on fresh purchases

4500 should be closing

cl - op + dep

1500