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Ratio Analysis of Infosys Ltd.

FY 2023-24 Vs 2324-25
 Executive Summary

In FY 2024–25, Infosys demonstrated steady business performance despite

global economic uncertainty, geopolitical disruptions, and cautious IT
spending by clients. The company’s revenue grew by 6.1% year-on-year,
reaching ₹1,66,590 crore, supported by demand in cloud, AI, and digital
transformation services.
Profitability remained robust, with operating margins at 21.1%, showing
operational efficiency and cost control. However, the net profit margin
declined slightly to 16.4% (from 17.1% in FY 24) due to higher effective tax
rates. Infosys also maintained strong cash flows, with free cash flow of
about ₹34,000 crore, highlighting financial resilience.
The company upheld a shareholder-friendly dividend policy, declaring ₹43
per share dividend for FY 25. Liquidity remained solid, with a current ratio
above 2 and virtually no debt, underscoring its strong balance sheet.
Strategically, Infosys continued investing in AI-first services, automation,
cloud platforms, and employee upskilling, positioning itself to capitalize on
emerging technologies. It also won several large deals, though growth in
discretionary spending segments remained muted.
Infosys’s Return on Equity (ROE) stood at 29%, reflecting healthy returns to
shareholders, though slightly lower than the previous year (32.1%). Its
valuation remained stable, with a P/E ratio of ~24x, supported by investor
confidence.
Looking ahead, Infosys expects modest growth in FY 2025–26, focusing on
cost optimization, digital transformation demand, and expanding AI-led
solutions. The company remains financially strong, globally competitive,
and committed to delivering long-term value to stakeholders.
 Company Overview – Infosys Ltd.

Infosys Limited, founded in 1981 and headquartered in Bengaluru, India, is a global

leader in IT consulting, digital services, and outsourcing solutions. It is India’s
second-largest IT services company and is listed on the NSE, BSE, and NYSE.
The company serves clients across industries including financial services,
manufacturing, retail, energy, telecom, healthcare, and public services, operating
in over 50 countries. With a workforce of more than 3,30,000 employees, Infosys is
among the world’s largest employers in the IT sector.
Infosys provides services in cloud computing, artificial intelligence, data analytics,
cybersecurity, enterprise applications, engineering, and business process
management (BPM). It is widely recognized for its strong governance, innovation,
and client delivery excellence.
In FY 2024–25, Infosys reported revenue of ₹1,66,590 crore with an operating
margin of 21.1% and net profit of ₹27,244 crore. It maintained a strong balance
sheet with minimal debt, high cash reserves, and an ROE of 29%.
Strategically, Infosys is investing in AI-first solutions, cloud partnerships,
automation, and sustainability initiatives, positioning itself as a key partner in
global digital transformation.
 key Financial Hilights (FY 2024-25 Vs FY 2023-24)

In FY 2024–25, Infosys recorded revenue from operations of ₹136,592 crore,

compared to ₹128,933 crore in FY 2023–24, reflecting a year-on-year growth of
around 6%. This steady increase demonstrates the company’s ability to sustain
momentum despite a challenging global economic environment marked by
cautious client spending and slower technology budgets. The revenue growth was
driven by continued demand for digital transformation services, cloud solutions,
and AI-led initiatives, along with strong performance in key verticals such as
financial services, manufacturing, and retail.
Infosys’s global delivery model, coupled with its investments in AI-first strategy
and automation platforms, enabled it to attract large transformation deals and
strengthen client relationships. The company’s ability to expand its service
portfolio and maintain competitiveness also contributed to consistent revenue
gains. Overall, this performance underlines Infosys’s resilient business model,
adaptability in shifting market conditions, and focus on sustainable long-term
growth.

Objectives of the study

1.To analyze the financial performance of Infosys Ltd. over two years (FY 2023–
24 and FY 2024–25) using audited financial statements.

The primary objective of this study is to analyze the financial performance of Infosys Ltd.
over two financial years, FY 2023–24 and FY 2024–25, using audited financial statements.
Financial performance analysis involves examining the company’s revenue, profitability,
liquidity, solvency, and efficiency, which are essential indicators of its overall health and
sustainability. By reviewing audited statements, the study ensures that the data is
authentic, reliable, and compliant with accounting standards, thereby providing an
accurate basis for evaluation.
Through ratio analysis and year-on-year comparisons, this objective seeks to identify
trends, strengths, and weaknesses in Infosys’s financial position. It also aims to
understand how effectively the company has utilized its resources, managed costs, and
delivered returns to shareholders. Ultimately, this objective will provide meaningful
insights into Infosys’s ability to maintain growth, competitiveness, and financial stability
in a dynamic business environment.
2.To evaluate key financial ratios such as liquidity, profitability, solvency, turnover,
valuation, and overall performance through DuPont analysis.

The objective of evaluating key financial ratios is to gain a comprehensive

understanding of Infosys Ltd.’s financial position and performance from different
perspectives. Liquidity ratios (such as current ratio and quick ratio) help assess the
company’s ability to meet its short-term obligations. Profitability ratios (including
net profit margin, return on assets, and return on equity) indicate how efficiently the
company generates earnings relative to revenue and shareholder investment.
Solvency ratios (like debt-to-equity and interest coverage) measure the long-term
financial stability and risk profile of the company. Turnover or activity ratios (such as
asset turnover and receivables turnover) provide insights into how effectively
Infosys utilizes its resources. Valuation ratios (like P/E and P/B) highlight market
perceptions of the company’s value. Finally, the DuPont analysis offers an integrated
view of performance by breaking down Return on Equity into profitability, efficiency,
and leverage components, allowing a deeper evaluation of shareholder value
creation.

3.To examine the financial stability and solvency position of Infosys through
debt-equity structure, interest coverage, and cash reserves.

The objective of examining Infosys’s financial stability and solvency position is to

evaluate the company’s long-term ability to meet its financial commitments and
sustain operations without facing liquidity stress. This is primarily assessed
through the debt-equity structure, which reflects the proportion of debt versus
shareholders’ equity in financing the business. A lower reliance on debt generally
indicates lower financial risk. The interest coverage ratio further highlights the
company’s capacity to comfortably meet interest obligations from its operating
profits, ensuring financial security. Additionally, analyzing cash reserves and
investments provides insights into Infosys’s liquidity buffer, which acts as a
safeguard during uncertain business cycles. Together, these indicators reveal the
company’s resilience, risk exposure, and long-term financial soundness, helping to
determine whether Infosys is strategically positioned to maintain stability and
support sustainable growth.
 Ratio Definitions

1. Liquidity Ratios
Current Ratio = Current Assets ÷ Current Liabilities
→ Measures a company’s ability to meet short-term obligations.
Quick Ratio (Acid-Test Ratio) = (Current Assets – Inventory) ÷ Current Liabilities
→ Tests short-term liquidity without relying on inventory.
2. Profitability Ratios
Gross Profit Margin = (Gross Profit ÷ Revenue) × 100
→ Shows profitability after deducting cost of goods sold.
Operating Margin = (Operating Profit ÷ Revenue) × 100
→ Reflects operational efficiency.
Net Profit Margin = (Net Profit ÷ Revenue) × 100
→ Indicates the percentage of revenue converted into profit.
Return on Assets (ROA) = (Net Profit ÷ Total Assets) × 100
→ Measures efficiency in using assets to generate profit.
Return on Equity (ROE) = (Net Profit ÷ Shareholders’ Equity) × 100
→ Shows profitability from shareholders’ investment.
3. Turnover (Activity) Ratios
Asset Turnover Ratio = Revenue ÷ Total Assets
→ Indicates efficiency in using assets to generate sales.
Receivables Turnover Ratio = Net Credit Sales ÷ Average Trade Receivables
→ Measures efficiency in collecting receivables.
Inventory Turnover Ratio = Cost of Goods Sold ÷ Average Inventory
→ Shows how often inventory is sold and replaced.
4. Solvency Ratios
Debt-to-Equity Ratio = Total Debt ÷ Shareholders’ Equity
→ Indicates long-term financial stability.
Interest Coverage Ratio = EBIT ÷ Interest Expense
→ Shows ability to meet interest obligations.
5. Valuation Ratios
Earnings Per Share (EPS) = Net Profit ÷ Number of Shares Outstanding
→ Profit attributable to each share.
Price-to-Earnings Ratio (P/E) = Market Price per Share ÷ EPS
→ Indicates how the market values the company relative to earnings.
Price-to-Book Ratio (P/B) = Market Price per Share ÷ Book Value per Share
→ Compares market valuation with accounting value.
6. Overall Performance – DuPont Analysis
ROE (DuPont Formula) = (Net Profit Margin × Asset Turnover × Equity Multiplier)
→ Breaks down ROE into profitability, efficiency, and leverage components for
deeper analysis.
Ratio Analysis for Infosys Ltd. focusing on FY
2023–24 and FY 2024–25:
1. Liquidity & Solvency Ratios
Infosys maintained strong short-term financial health:
Current Ratio: 2.62× in FY 2024–25 and 2.43× in FY 2023–24
Quick Ratio: Matches Current Ratio, reflecting negligible inventory in
operations (both 2.62× and 2.43×)
Debt-to-Equity Ratio: Effectively 0, underscoring Infosys’s net-cash
position and very low leverage
Interpretation: Strong liquidity and no significant debt position indicate
robust short-term solvency and low financial risk.

2. Profitability Ratios
Infosys exhibited solid profitability performance:
Operating Margin: 21.1% in FY 2024–25, up from 20.7% in FY 2023–24
Net Profit Margin: Slight decline from 17.1% to 16.4%
Return on Equity (ROE): Approximately 32–33% in FY 2023–24, edging up to
33.7% in Q1 FY 2025 (annualized)
Return on Assets (ROA): Around 23.7% in FY 2023–24
Interpretation: Operating efficiency improved year-on-year, but net margins
slightly declined due to tax or non-core costs. ROE and ROA remained
impressively high, reflecting effective capital utilization and strong earnings
retention.

3. Activity (Turnover) & Efficiency Ratios

Asset Turnover Ratio: Approximately 1.19×
Receivables/Inventory Turnover: Not disclosed; traditional IT services
firms like Infosys have minimal inventory.
Interpretation: A turnover ratio exceeding 1 indicates efficient use of assets to
generate revenue.

4. Valuation & Shareholder Returns

Dividend Payout Ratio: Approx. 79.6% (net profits) and 72.2% (cash profits)
in FY 2024–25
P/E Ratio: Around 24× at end of FY 2024–25
Enterprise Value / Revenue: Near 4.7×

Interpretation: High payout ratios show Infosys’s shareholder-friendly stance.

Valuation multiples are consistent with industry norms, showing solid market
confidence.
 Summary Table

Ratio Category FY 2023–24 FY 2024–25

Current Ratio 2.43× 2.62×

Quick Ratio 2.43× 2.62×

Debt-to-Equity 0 0

Operating Margin 20.7% 21.1%

Net Profit Margin 17.1% 16.4%

ROE 32–33% 33.7% (annualized)

ROA 23.7% —

Asset Turnover 1.19× —

Dividend Payout — 79.6% (NP), 72.2% (CP)

P/E Ratio 23.6× ~24×

EV/Revenue — ~4.7×

Overall Interpretation

Infosys demonstrates a robust financial foundation with strong liquidity,

zero leverage, high operating efficiency, and disciplined profit distribution.
While net margins softened slightly, the company continues to deliver high
returns on equity and assets. Recent valuations reflect sustainable investor
confidence.
 Conclusion

The financial analysis of Infosys Ltd. for FY 2023–24 and FY 2024–25 highlights
the company’s strong revenue growth, profitability, and robust liquidity
position. Infosys continues to maintain a conservative capital structure with
low debt levels and healthy cash reserves, reflecting high financial stability
and solvency. The company has demonstrated consistent operational
efficiency through improved turnover ratios and solid interest coverage. Its
emphasis on digital transformation, cloud services, and global expansion has
contributed significantly to revenue growth. However, Infosys faces challenges
such as global economic uncertainty, rising competition from IT peers, and
margin pressures due to wage inflation and currency fluctuations. Overall,
Infosys remains financially sound, innovative, and well-positioned for
sustainable growth.

Recommendations

1. Enhance Revenue Diversification – Expand service offerings in emerging

technologies like AI, machine learning, and cybersecurity to reduce
dependency on traditional IT services.
2. Strengthen Global Market Penetration – Target underrepresented
geographies such as Africa and Latin America to capture new revenue
streams.
3. Optimize Cost Structure – Focus on automation, talent reskilling, and
efficient resource allocation to mitigate margin pressures.
4. Increase Shareholder Value – Continue strong dividend payouts and
consider share buyback programs to reward investors.
5. Sustain Cash Reserves – Maintain high liquidity levels to manage risks
arising from global uncertainties and potential disruptions.
6. Focus on ESG & Innovation – Invest in sustainability initiatives and R&D to
enhance brand reputation and long-term competitiveness.