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INFINITE COMPUTER
OUTPERFORMER (RS158, MCAP: RS6.9BN / US$153MN)
• Infinite was incorporated in 1999 and is a mid-tier IT services provider focused on acquiring large clients (offering
high revenue potential) and mining them deeper. It has successfully positioned itself as a credible Tier2 vendor and
co-exists with Tier1 vendors in a few of its key accounts. The company has grown faster than comparable peers due to
its strategy of acquiring large clients.
• Business on track: The management highlighted that business is growing in line with expectations. It expects the
company to clock revenues of US$190m-195m in FY11 (+35-38% yoy) and sees a much higher run rate in FY12 led by
recent Motorola, iYogi and R-APDRP deals.
• Motorola deal: Infinite acquired SMS and MMS messaging IP from Motorola under a revenue-share deal in March
2010. As part of the agreement, it acquired a non-transferable license of Motorola’s messaging solutions for 10 years.
In the first year, Infinite’s share of revenues from this platform will be 30% and increase to 70% from the second year.
The company expects to generate ~US$20m in FY11 and ~US$40m in FY12. The deal is expected to be a key growth
driver for the company’s top line. It would also boost margins as it operates at margins higher than the company’s
average levels.
• iYogi deal: Infinite entered into a three-year strategic alliance with iYogi in April 2010 to provide IMS services.
Infinite uses iYogi’s global delivery platform, iMantra, to seamlessly extend L-1, L-2 and L-3 helpdesk support to
iYogi’s customers across multiple geographies, including the US, Canada, the United Kingdom and Australia. Infinite
employs ~1,200 people on this platform and expects the peak strength to be 1,300-1,400. Since most of these employees
were under a three-month training period, the company saw minimal revenue contribution from this platform.
However, it expects revenues to pick up from April 2011. The deal is expected to contribute ~US$5m in FY11 and
US$10m-12m in FY12, with operating margins higher than the company average.
• R-APDRP deal: In October 2010, Infinite won a Rs1.3bn contract from the Uttarakhand state government for RAPDRP
implementation. This deal has two components – implementation, expected to be the major revenue
contributor, and follow-up support. The implementation part is running behind schedule and is expected to complete
by March 2012. Revenue from this deal is expected to be lumpy, while operating margins have been below the
company’s average. While the company has bid for other states’ APDRP projects as well, it has not won any because
of its stringent margin constraints.
• Supply side: The company plans to hire 500-600 employees in FY12. Though the current attrition level (~12%) is at a
historical high for Infinite, it is still below current industry levels. Given the strong-demand led environment and
industry-wide high attrition, company is likely to give 15-20% wage hikes in FY12.
• Our view: We expect Infinite Computer to grow faster than its mid-cap peers over the coming quarters as the
Motorola, iYogi and R-APDRP projects are in ramp-up mode. The stock currently trades at inexpensive valuations of
~6x FY12E EPS; we have an Outperformer rating with 12-month price target of Rs260 (based on 10x avg. FY11-12E
EPS). Infinite remains a key pick in the small-cap IT services space.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
INFINITE COMPUTER
OUTPERFORMER (RS158, MCAP: RS6.9BN / US$153MN)
• Infinite was incorporated in 1999 and is a mid-tier IT services provider focused on acquiring large clients (offering
high revenue potential) and mining them deeper. It has successfully positioned itself as a credible Tier2 vendor and
co-exists with Tier1 vendors in a few of its key accounts. The company has grown faster than comparable peers due to
its strategy of acquiring large clients.
• Business on track: The management highlighted that business is growing in line with expectations. It expects the
company to clock revenues of US$190m-195m in FY11 (+35-38% yoy) and sees a much higher run rate in FY12 led by
recent Motorola, iYogi and R-APDRP deals.
• Motorola deal: Infinite acquired SMS and MMS messaging IP from Motorola under a revenue-share deal in March
2010. As part of the agreement, it acquired a non-transferable license of Motorola’s messaging solutions for 10 years.
In the first year, Infinite’s share of revenues from this platform will be 30% and increase to 70% from the second year.
The company expects to generate ~US$20m in FY11 and ~US$40m in FY12. The deal is expected to be a key growth
driver for the company’s top line. It would also boost margins as it operates at margins higher than the company’s
average levels.
• iYogi deal: Infinite entered into a three-year strategic alliance with iYogi in April 2010 to provide IMS services.
Infinite uses iYogi’s global delivery platform, iMantra, to seamlessly extend L-1, L-2 and L-3 helpdesk support to
iYogi’s customers across multiple geographies, including the US, Canada, the United Kingdom and Australia. Infinite
employs ~1,200 people on this platform and expects the peak strength to be 1,300-1,400. Since most of these employees
were under a three-month training period, the company saw minimal revenue contribution from this platform.
However, it expects revenues to pick up from April 2011. The deal is expected to contribute ~US$5m in FY11 and
US$10m-12m in FY12, with operating margins higher than the company average.
• R-APDRP deal: In October 2010, Infinite won a Rs1.3bn contract from the Uttarakhand state government for RAPDRP
implementation. This deal has two components – implementation, expected to be the major revenue
contributor, and follow-up support. The implementation part is running behind schedule and is expected to complete
by March 2012. Revenue from this deal is expected to be lumpy, while operating margins have been below the
company’s average. While the company has bid for other states’ APDRP projects as well, it has not won any because
of its stringent margin constraints.
• Supply side: The company plans to hire 500-600 employees in FY12. Though the current attrition level (~12%) is at a
historical high for Infinite, it is still below current industry levels. Given the strong-demand led environment and
industry-wide high attrition, company is likely to give 15-20% wage hikes in FY12.
• Our view: We expect Infinite Computer to grow faster than its mid-cap peers over the coming quarters as the
Motorola, iYogi and R-APDRP projects are in ramp-up mode. The stock currently trades at inexpensive valuations of
~6x FY12E EPS; we have an Outperformer rating with 12-month price target of Rs260 (based on 10x avg. FY11-12E
EPS). Infinite remains a key pick in the small-cap IT services space.
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