A Financial Model On Infosys

The company is a software technology company and develops software for its clients. It does not sell physical goods but sells services and charges its clients for the software services it provides. Its main costs include salary for its employees, office maintenance and costs, software and hardware tools, and other smaller expenses. They essentially build apps and websites, fix bugs and keep software running, and also help companies with any software/hardware related things. Furthermore, they help companies make their databases and apps on modern cloud platforms instead of physical servers. Their clients include finance management and any company requiring custom website or app creation.

The revenue for FY23-24 is 153670 crores. In FY24-25, the revenue has increased to 162990 crores. Despite the increase in revenue, the cost of goods sold has also increased and the profit itself has decreased. The net profit goes from 22858 crores to 21979 crores. This is most likely due to reasons such as an increase in the cost it takes to perform their services or an increase in other related expenses. If competition is present, the possible revenue they could gain is also decreased due to other companies that can perform the same services. The company is growing but for it to continue and perform better, it has to reduce its expenses. The revenue for the forecast year 25-26 is 179,289 crores and increases in forecast year 26-27 to 197,218 crores. The net profit margin in FY23-24 is 14.9% but due to decrease in profit in FY 24-25, it becomes 13.5%. For both forecast years it goes up to 15.2% and 15.8%. The most interesting part I found was that the real profit decreased in FY23-24 and FY24-25 and it caused almost everything else in those financial years to decrease as well. Despite the next forecast years having an increase, all the other sections for the two actual years decreased. My growth rate assumption for revenue is approximately 8% for FY26 because the actual increase from the previous years is quite similar. I increased the revenue growth rate for the next year to 10% as there was an approximate increase of 10%.

Infosys is a good business itself and is not struggling much in the modern markets. There are still some risks to the company and its forecast that can cause problems in the coming years. Firstly, despite the revenue growing quickly, the expenses themselves are also growing and for the company to gain more profit, the expenses must be reduced. They need to change something that would slow them to spend less money on expenses like COGS and salaries to employees so that they can maximize their revenue and profits. The company is actually doing better than I predicted and the revenue growth is still faster than the growth of expenses. My verdict is that for Infosys as a company to do better than it is doing now, it has to find ways to cut back its expenses and be able to continue its revenue. One assumption I am not sure about is the expenses going up and how they will bring it down. My model shows that the cost of goods sold is going up year by year and I am not entirely sure about this assumption. In the case that this assumption is wrong, then Infosys is actually doing very well as a company and is making a lot of profit and would be a good business to think about investing in. One more thing to take into account is Infosys does not manufacture physical goods so things like selling price per unit and variable cost per unit cannot easily be determined.

Akhil Real Financial Model INFY - Financial Model - Akhil Chendur.pdf

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