The IB League

Campus case study

Background :
You have been selected as one of the top Investment Bankers in the country to present a sell
side case to the senior management and the Board of Mphasis Ltd (Mphasis or the
company). Your idea of a strategic transaction related to Mphasis at this juncture has generated
good interest amongst the Board of the company, which has decided to have a detailed
presentation from your team on the aforementioned idea.
Besides, the Board would also be interested in knowing your take on the current dynamics in the
sector and would also be keen to know your views on the valuation for the entire company.
Company overview :
Founded in June 2000, Mphasis operates as an information technology solutions provider. It
offers applications, business process outsourcing and infrastructure services. The company
operates its business through the key segments as shown in the table below. It serves the
banking and capital markets, insurance, manufacturing, communications, media and
entertainment, healthcare and life sciences, transportation and logistics, retail and consumer
packaged goods, energy and utilities and government sectors. The company is headquartered in
Bangalore, India.
Revenues by segment in INRm

FY2015

Banking and Capital Markets

23,702

Insurance

8,125

Information Technology, Communication and Entertainment

9,578

Emerging Industries

16,398

Others

145

Total

57,948

Divisional overview :
Banking and Capital Markets:
Mphasis combines its expertise in the banking industry with latest technology and state of the art
methodology to offer the most innovative solutions in areas like multi-channel delivery, mobile
technologies, business analytics and business process improvement, among others.
The companys integrated applications, business processes and infrastructure solutions and
services are designed to help clients meet their most challenging business and technology
needs. Mphasis provides insights in banking and exhaustive domain experience to help clients in
accelerating growth strategies, business models and results.

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Insurance:
Mphasis caters to the broad insurance industry including life & annuities, property & casualty as
well as reinsurance. It provides solutions and services that help insurers address some of the
most difficult business challenges. From distribution to underwriting, billing to claims, policy
administration to asset management, Mphasis is focused on helping insurers meet the needs of
policy holders and distribution partners.
Information Technology, Communication and Entertainment:
Mphasis industry experience and expertise in media entertainment can help transform the
companies in this segment by aligning them with emerging business models, changing consumer
behavior, evolving technologies and competition.
Mphasis services telcos across the globe in both traditional operations as well as emerging
technology areas. It optimizes traditional operations, infrastructure & business processes for
telcos and mobile virtual network operators and enabler using its solutions and services.
Emerging Industries:
Mphasis has done well to move beyond traditional business segments and has spread its wings
in emerging industries like retail, travel & transportation and manufacturing etc. Mphasis
services in retail comprise a mix of business consulting, technology consulting, architecture and
design, implementation, management, maintenance of product/enterprise applications and legacy
applications services. Mphasis has extensive experience in the travel & transportation domain
and has developed large and complex applications implementing a range of technologies for
airline operation, airport management, cargo logistics and travel agency operations.

_____________________________________________________________________________

More information: Since we know that you need to do a detailed study of the business of the
company and its valuation, we have assigned a mentor who will help you in this exercise.
Our Star Banker - Mr. DealMan, has sent an email to you, the contents of which are
reproduced on the next page - We would recommend that you take full cognizance of Mr.
DealMans advice.

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Email from Mr. DealMan:

Folks, in any investment banking deal, a banker is supposed to have a deep understanding of
the companies under consideration. As this is a sell side deal, I would recommend that you start
with knowing this companys business in detail and how it is performing in the IT industry with
relation to its peers. A good starting point for you would be the companys fillings on its website:
http://www.mphasis.com/financial-results.html
Needless to say, once you have studied the company under consideration in detail, you should
look for more information from its peer set, looking at their annual reports and company
presentations.
Once you have analysed the companies, please also go through sector reports. This will give you
enough knowledge on how the sector is progressing, what are the opportunities and challenges
in the sector, etc. You can start by going through some of the reports on NASSCOM and its blog.
http://www.nasscom.in/research-reports
Once you have completed gathering information from the knowledge centers mentioned above,
please also look for broker reports on the relevant company/industry. Here are some links where
you can directly access the reports (in some instances you may have to create an id to access
the reports) :
http://www.researchbytes.com/Mphasis-Limited-M0399.htm
http://www.motilaloswal.com/Financial-Services/Research/Search/Mphasis-COM/526299
http://www.moneycontrol.com/news/Mphasis/brokerage-reports-MB02-6months-5.html
To do a proper valuation for a sell side deal, you should also know at what valuation other peers
in the same universe are trading and what were the premiums or discounts paid for similar
transactions previously. I have selected a set of companies and transactions as a starting point
for you. But as I am hard pressed for time, I cannot compile a final set of companies and
transactions that should be taken for this exercise. I would suggest that you select relevant
companies/transactions from the list and complete your desired analysis.
Hope you make good use of all the suggestions above. Please keep in mind that these are only
guidelines and you should not limit your work to the mentioned suggestions / links.

All the Best !!!

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Trading multiples1
Market Cap
(USDm)

EV
(USDm)

66,169

Atos
CGI

EV/ Sales

EV/ EBITDA

EV/ EBIT

P/E ratio

2015e

2016e

2015e

2016e

2015e

2016e

2015e

2016e

Long-term
Growth rate

62,723

2.0x

1.9x

12.1x

11.4x

13.8x

12.8x

19.9x

18.1x

8.90%

7,630

6,674

0.6x

0.5x

5.2x

4.7x

7.7x

6.8x

12.6x

11.2x

15.50%

12,344

13,618

1.7x

1.6x

9.1x

8.7x

11.8x

11.2x

15.1x

14.0x

9.70%

936

885

2.1x

1.8x

13.2x

11.9x

n/a

n/a

18.4x

16.1x

n/a

36,239

33,964

2.8x

2.4x

14.0x

12.2x

15.7x

13.4x

19.9x

17.2x

16.90%

9,508

10,107

0.9x

0.9x

4.8x

4.7x

9.0x

8.5x

13.5x

12.5x

9.90%

Cyient

975

888

1.7x

1.5x

11.5x

9.5x

13.7x

11.1x

16.3x

14.0x

21.00%

eClerx

727

652

3.6x

3.1x

11.0x

9.3x

13.1x

11.2x

17.0x

14.8x

17.20%

1,197

1,109

1.8x

1.6x

11.5x

9.8x

16.7x

13.7x

18.5x

16.0x

14.30%

242,903

230,874

13.6x

10.2x

22.1x

16.6x

26.0x

19.3x

42.6x

32.3x

35.80%

348

490

1.0x

0.9x

7.3x

6.4x

8.5x

7.5x

7.7x

6.4x

n/a

11,241

14,249

0.4x

0.4x

5.1x

4.7x

10.3x

8.8x

11.5x

10.3x

10.00%

4,774

5,102

2.1x

1.9x

12.5x

11.1x

15.6x

13.8x

18.6x

16.1x

12.50%

373,501

312,475

5.2x

4.5x

10.8x

9.2x

13.1x

11.2x

19.2x

16.7x

14.90%

HCL Tech

20,449

19,040

3.1x

2.7x

13.0x

11.6x

13.7x

12.2x

16.9x

15.1x

15.00%

Hexaware

1,197

1,122

2.4x

2.1x

12.8x

11.1x

14.0x

12.0x

18.6x

16.0x

16.40%

HP

55,906

62,597

0.6x

0.6x

5.0x

5.0x

6.8x

6.7x

8.3x

7.9x

4.20%

IBM

161,904

192,075

2.3x

2.3x

8.4x

8.3x

10.1x

10.1x

10.3x

10.0x

6.40%

33,764

28,576

3.2x

2.8x

11.5x

10.2x

12.4x

11.1x

16.6x

15.0x

12.20%

1,313

1,178

10.3x

7.8x

39.2x

25.9x

44.7x

28.8x

56.4x

37.2x

42.80%

294

292

0.6x

0.5x

5.3x

4.4x

6.9x

5.4x

8.4x

7.2x

(4.80%)

364,405

300,835

3.2x

3.0x

9.0x

8.2x

10.7x

9.6x

16.7x

14.6x

10.70%

Mindtree

1,599

1,453

2.3x

2.0x

11.7x

10.0x

13.7x

11.7x

17.5x

15.1x

16.20%

Mphasis

1,311

997

1.2x

1.0x

7.5x

6.3x

8.2x

7.0x

12.5x

10.6x

12.00%

NIIT Tech

368

318

0.8x

0.7x

5.2x

4.5x

7.1x

6.1x

11.8x

9.3x

n/a

NTT Data

11,918

14,528

1.1x

1.1x

6.8x

6.5x

17.9x

16.0x

28.6x

23.4x

9.30%

179,084

167,109

4.3x

4.2x

9.2x

9.2x

9.7x

9.6x

14.5x

13.9x

6.90%

Persistent

779

684

2.1x

1.8x

9.9x

8.4x

12.6x

10.4x

16.3x

14.1x

n/a

Polaris

260

228

0.7x

0.7x

6.1x

5.1x

7.2x

6.1x

9.1x

7.6x

14.70%

83,568

90,028

4.0x

3.8x

11.9x

11.1x

12.8x

12.1x

17.0x

15.7x

9.10%

3,686

2,955

3.0x

2.7x

10.4x

9.2x

11.1x

9.7x

16.0x

14.1x

15.00%

77,803

74,643

4.5x

4.0x

16.0x

13.9x

16.9x

14.7x

21.5x

18.7x

16.50%

7,345

6,889

1.7x

1.5x

10.0x

8.5x

11.7x

9.9x

15.5x

12.9x

17.40%

Twitter

22,263

20,306

9.2x

6.2x

37.9x

22.2x

70.5x

37.0x

105.0x

53.9x

66.30%

Wipro

21,129

18,324

2.3x

2.1x

10.4x

9.5x

11.8x

10.7x

14.8x

13.5x

11.10%

WNS

1,396

1,232

2.3x

2.1x

10.9x

10.1x

17.7x

15.0x

15.6x

14.4x

15.70%

Xerox

11,570

18,683

1.0x

1.0x

7.1x

6.8x

11.5x

10.2x

10.5x

9.6x

5.20%

Company
Accenture

CMC
Cognizant
CSC

EXL
Facebook
Firstsource
Fujitsu
Genpact
Google

Infosys
Just Dial
KPIT Tech
Microsoft

Oracle

SAP SE
Syntel
TCS
Tech
Mahindra

Note:
1.
Valuation multiples calendarized to December year end

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Precedent transactions
Announcement
Date

Deal Value
(USDm)

EV
(USDm)

EV/
EBITDA

EV/
Sales

Target

Acquiror

17-Jun-15

Anite plc

Keysight Technologies Inc

605.67

559.16

27.75x

3.23x

15-Jun-15

DealerTrack Technologies Inc

Cox Enterprises Inc

4,460.21

4,460.21

38.73x

4.70x

12-May-15

AOL Inc

Verizon Communications Inc

4,285.60

4,267.90

13.83x

1.66x

7-May-15

Telecity Group plc

Equinix Inc

4,021.73

4,021.73

16.15x

7.58x

27-Apr-15

iGate Corp

Cap Gemini SA

4,447.67

4,447.67

17.54x

3.45x

15-Apr-15

Beijing Chuanyun Logistics Investment

Alibaba Health Information Technology

1,267.32

2,481.02

235.12x

187.51x

12-Feb-15

Orbitz Worldwide Inc

Expedia Inc

1,582.43

1,582.43

12.32x

1.74x

8-Dec-14

EVRY ASA

Apax Partners LLP

1,024.16

1,024.16

6.22x

0.56x

25-Nov-14

Advanced Computer Software Group plc

Vista Equity Partners LLC

1,194.04

1,194.04

17.63x

3.59x

16-Oct-14

CMC Ltd

Tata Consultancy Services Ltd

514.31

1,011.79

15.65x

2.60x

13-Jun-14

OpenTable Inc

Priceline Group Inc

2,613.44

2,495.84

53.62x

12.58x

26-May-14

Kakao Inc

Daum Communications Corp

6,985.22

6,859.89

111.23x

33.36x

22-Jul-13

Yahoo! Inc (3.7%)

Yahoo! Inc

1,164.40

28,967.10

36.46x

6.01x

8-Nov-12

KAYAK Software Corp

Priceline.com Inc

2,041.93

1,976.47

37.58x

7.45x

29-Jun-12

3i Infotech Ltd

Various investors

408.54

483.91

12.53x

1.64x

31-May-12

CGI Group Inc

Caisse de Depot et Placement du Quebec

974.09

6,453.35

8.40x

1.57x
8.79x

22-May-12

Ariba Inc

SAP AG Systeme Anwendungen Produkte

4,608.70

4,412.30

152.65x

21-Mar-12

Satyam Computer Services Ltd

Tech Mahindra Ltd

1,561.33

2,273.28

16.31x

2.06x

21-Feb-12

Alibaba.com Ltd

Alibaba Group Holding Ltd

2,483.75

7,489.72

26.14x

7.40x

4-Aug-11

Emdeon Inc

Blackstone Group LP

3,096.25

3,096.25

12.23x

2.88x

1-Jun-11

Telvent GIT SA

Schneider Electric SA

1,939.62

1,982.55

12.13x

1.89x

27-Apr-11

SAVVIS Inc

CenturyLink Inc

3,093.02

3,093.02

14.90x

3.32x

1-Apr-11

SRA International Inc

Providence Equity Partners Inc

1,864.93

1,804.32

12.02x

1.06x

15-Nov-10

Isilon Systems Inc

EMC Corp

2,584.13

2,470.32

410.35x

45.88x

26-Sep-10

Visma AS

KKR & Co LP; Montagu PE

1,437.14

1,820.75

15.66x

3.17x

18-Aug-10

McAfee Inc

Intel Corp

7,666.87

6,878.48

17.24x

3.43x

15-Jul-10

Dimension Data Holdings plc

Nippon Telegraph & Telephone Corp-NTT

3,102.59

2,930.59

15.42x

0.75x

10-May-10

Tivit Terceirizacao de Tecnologia e

Servicos

Apax Partners LP

4-May-10

Interactive Data Corp

Silver Lake Mgmt LLC; Warburg Pincus

5-Nov-09

IMS Health Inc

28-Sep-09

Affiliated Computer Services Inc - ACS

962.27

962.27

18.12x

1.92x

3,351.96

3,045.94

11.28x

4.02x

TPG Capital LP (Texas Pacific); CPPIB

5,203.35

5,203.35

12.45x

2.40x

Xerox Corp

8,414.76

8,414.76

7.57x

1.29x

3,884.50

3,734.50

12.33x

1.41x

816.49

769.64

12.06x

2.03x

1,059.84

1,059.84

21.87x

2.62x

21-Sep-09

Perot Systems Corp

Dell Inc

26-Sep-08

Axon Group plc

HCL Technologies Ltd

28-Jul-08

Detica Group plc

BAE Systems plc

13-May-08

Electronic Data Systems Corp - EDS

Hewlett-Packard Co

13,304.00

13,304.00

10.13x

0.60x

12-May-08

DRS Technologies Inc

Finmeccanica SpA

5,601.97

5,601.97

25.67x

2.42x

6-Aug-07

Infocrossing Inc

Wipro Ltd

556.23

556.23

20.69x

2.39x

2-Aug-07

CheckFree Corp

Fiserv Inc

4,313.18

4,027.14

20.97x

4.37x

30-May-07

Ceridian Corp

Thomas H Lee Partners; Fidelity National

5,190.18

4,904.98

14.56x

3.09x

18-May-07

aQuantive Inc

Microsoft Corp

5,923.09

5,630.21

283.01x

25-Apr-07

Covansys Corp

Computer Sciences Corp - CSC

1,281.60

1,159.32

24.00x

2.55x

12-Mar-07

FastWeb SpA

Swisscom AG

5,373.72

6,319.70

11.49x

3.67x

26-Oct-06

Kanbay International Inc

Cap Gemini SA

1,175.25

1,100.82

26.63x

4.78x

25-Sep-06

Emdeon Corp

Emdeon Corp

1,550.00

4,822.51

34.43x

3.78x

19-Sep-06

Symbol Technologies Inc

Motorola Inc

3,900.00

3,863.23

72.19x

2.19x

25-Jul-06

Mercury Interactive Corp

Hewlett-Packard Co

4,686.20

4,686.20

37.03x

6.83x

17-Apr-06

Flextronics Software Systems Ltd

KKR, Sequoia Capital

900

1,004.17

29.11x

9.22x

3-Apr-06

MphasiS BFL Ltd

Electronic Data Systems Corp - EDS

381.04

731.35

21.16x

3.47x

10-Jan-06

GTECH Holdings Corp

De Agostini SpA

4,561.21

4,561.21

9.17x

3.58x
1.49x

14-Dec-05

Anteon International Corp

General Dynamics Corp

2,156.89

2,156.89

16.52x

19-Sep-05

Unilog SA

LogicaCMG plc

1,143.14

1,027.51

12.52x

1.28x

28-Mar-05

SunGard Data Systems Inc

Investor Group

11,760.48

11,760.48

11.30x

3.31x

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