3I Infotech Net Debt / EBITDA dropped on 13.0x from 27.7x to 14.7x in 2015 while EBITDA surged on 76.3%

29-05-2015 • About 3I Infotech ($3IINFOTECH) • By InTwits

3I Infotech reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

3I Infotech doesn't have a profitable business model yet: FY2015 ROIC is -2.5%
EBITDA Margin is quite volatile: 12.3% in FY2015, 7.2% in FY2014, 7.9% in FY2013, 13.3% in FY2012, 20.5% in FY2011
3I Infotech has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's a lot of higher than industry average of 14.7%.
CAPEX is quite volatile: 0 in FY2015, 229 in FY2014, 426 in FY2013, 617 in FY2012, 638 in FY2011
The company has unprofitable business model: ROIC is at -2.5%
It operates with high leverage: Net Debt/EBITDA is 14.7x while industry average is 0.9x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

3I Infotech ($3IINFOTECH) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	25,697	16,810	13,114	13,079	13,440	2.8%
EBITDA	5,255	2,234	1,036	939	1,655	76.3%
Net Income	2,525	-3,600	-5,050	-3,576	-9,763
Balance Sheet
Cash	1,579	883	377	511	115	-77.5%
Short Term Debt	5,490	2,870	1,733	5,882	5,827	-0.9%
Long Term Debt	14,503	17,016	19,706	20,585	18,603	-9.6%
Cash flow
Capex	638	617	426	229	0	-100.0%
Ratios
Revenue growth	62.7%	-34.6%	-22.0%	-0.3%	2.8%
EBITDA growth	4.2%	-57.5%	-53.6%	-9.4%	76.3%
EBITDA Margin	20.5%	13.3%	7.9%	7.2%	12.3%	5.1%
Net Income Margin	9.8%	-21.4%	-38.5%	-27.3%	-72.6%	-45.3%
CAPEX, % of revenue	2.5%	3.7%	3.2%	1.8%	0.0%	-1.8%
ROIC	13.6%	3.7%	-4.2%	-5.3%	-2.5%	2.9%
ROE	23.6%	-32.0%	-52.8%	-52.5%		52.5%
Net Debt/EBITDA	3.5x	8.5x	20.3x	27.7x	14.7x	-13.0x

Revenue and profitability

The company's Revenue increased on 2.8% in FY2015. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 5.1 pp from 7.2% to 12.3% in FY2015.

Net Income marign dropped on 45.3 pp from -27.3% to -72.6% in FY2015.

Leverage (Debt)

Debt level is 14.7x Net Debt / EBITDA and 14.8x Debt / EBITDA. Net Debt / EBITDA dropped on 13.0x from 27.7x to 14.7x in FY2015. Debt decreased on 7.7% in FY2015 while cash dropped on 77.5% in FY2015.

Appendix 1: Peers in IT Consulting & Software

Below we provide 3I Infotech benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)		9.3%	7.3%	9.9%	37.0%
Cyient ($CYIENT)		30.7%	20.6%	17.8%	24.0%
Empower India ($EMPOWER)		-3.7%	-13.2%	-32.6%	23.9%
Tech Mahindra ($TECHM)		6.8%	25.2%	174.0%	20.1%
Mindtree ($MINDTREE)		26.6%	23.2%	28.8%	17.0%
Median (18 companies)	37.5%	22.9%	20.6%	14.3%	10.6%
3I Infotech ($3IINFOTECH)		-34.6%	-22.0%	-0.3%	2.8%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)				47.4%	42.4%
Infosys ($INFY)	45.3%	41.3%	98.1%	35.9%	38.3%
Mindtree ($MINDTREE)	32.8%	31.5%	36.2%		34.8%
Wipro ($WIPRO)	31.5%	29.2%	30.4%	32.0%	31.6%
Median (4 companies)	34.7%	32.7%	36.2%	35.9%	36.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Oracle Financial Services Software ($OFSS)	37.4%	35.3%	35.2%	37.4%	39.7%
Infosys ($INFY)	32.5%	31.6%	27.9%	26.3%	27.1%
Tata Consultancy Services ($TCS)	29.9%	29.5%	28.6%	30.7%	26.1%
Wipro ($WIPRO)	21.1%	19.1%	20.9%	22.4%	22.3%
Mindtree ($MINDTREE)	11.8%	15.1%	19.8%	20.6%	20.3%
Median (21 companies)	18.0%	15.1%	17.8%	18.5%	14.7%
3I Infotech ($3IINFOTECH)	20.5%	13.3%	7.9%	7.2%	12.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	16.4%		22.1%	15.3%	12.4%
Niit Technologies ($NIITTECH)	4.1%	5.9%	4.6%	6.1%	7.9%
Financial Technologies (India) ($FINANTECH)	64.7%	8.6%	11.2%		6.5%
Mindtree ($MINDTREE)	5.6%	2.5%	4.5%	5.0%	5.6%
Tech Mahindra ($TECHM)	3.0%	5.4%	2.6%	5.0%	5.0%
Median (18 companies)	4.2%	3.9%	3.5%	3.5%	3.1%
3I Infotech ($3IINFOTECH)	2.5%	3.7%	3.2%	1.8%	0.0%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)	47.1%	48.6%	48.4%	50.2%	40.5%
Tech Mahindra ($TECHM)	19.2%	15.4%	20.1%	43.0%	29.7%
Geometric ($GEOMETRIC)	19.6%	29.9%	46.4%	41.1%	20.6%
Mindtree ($MINDTREE)	14.9%	24.9%	34.6%	36.2%	32.0%
Cmc ($CMC)	31.5%	26.2%	33.2%	35.3%	26.0%
Median (30 companies)	19.2%	19.6%	21.4%	23.2%	20.6%
3I Infotech ($3IINFOTECH)	13.6%	3.7%	-4.2%	-5.3%	-2.5%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	4.0x	8.8x		27.6x	4.2x
Onward Technologies ($ONWARDTEC)	2.7x	2.4x	2.2x	4.1x	1.9x
Kpit Technologies ($KPIT)	-0.7x	0.3x	0.5x	0.7x	0.4x
Mphasis ($MPHASIS)	0.0x	-0.1x	0.2x		0.2x
Geometric ($GEOMETRIC)	-0.0x	0.1x	-0.0x	-0.2x	0.0x
Median (20 companies)	-0.2x	-0.1x	-0.2x	-0.3x	-0.3x
3I Infotech ($3IINFOTECH)	3.5x	8.5x	20.3x	27.7x	14.7x

3I Infotech stock price chart

3I Infotech financials

mln.	FY2010	FY2011	FY2012

Revenue	15,799	25,697	16,810
EBITDA	5,041	5,255	2,234
Net income	334.6	2,525	-3,600.300
CAPEX	1,698	638.0	616.9
Debt	21,856	19,993	19,886
Cash	1,292	1,579	882.9

About 3I Infotech

3i Infotech Limited provides IP based software solutions and information technology (IT) services in India and internationally. Its products include asset and wealth management solution accelerators and software products, which enable management of various asset classes across the investment lifecycle; and KASTLE corporate and retail banking software and solutions that enable banks to manage their retail operations, including Internet and core banking, fraud detection, universal lending, and risk management, as well as specialized corporate banking products to manage risk, asset liability, payments, and treasury. It also provides brokerage specialized products for stock broking and clearing management, workflow, back-office management, and online trading and accounting, as well as warning, risk, and surveillance system for regulators and exchanges; and document management software and solutions for enterprise-wide document management and archival, and workflow management. In addition, the company offers enterprise resource planning software and solutions to manage enterprise-wide systems, teams, and data; insurance management solution accelerators and software that enable management of insurance business processes; IT infrastructure management software; and Framework, a private equity software solution. Further, its services comprise application development and maintenance, business intelligence and enterprise applications, business process outsourcing, consulting, testing and compliance, and infrastructure management services. The company serves banking, insurance, capital market, and asset and wealth management industries, as well as government, manufacturing, retail, distribution, telecom, and healthcare industries. It has strategic partnerships with Microsoft, Oracle, HP, IBM, Cisco, Symantec, Image Right, Intersystems, redhat, Mentisoftware, Dell, and Hitachi Data Systems. The company was incorporated in 1993 and is based in Navi Mumbai, India.