Financial Modelling and Forecasting of Selected Information Technology Companies Listed in India
TL;DR
The findings support a company-specific, rather than sector-wide, approach to valuation and investment judgement in Indian IT equities, and suggest that nine of the ten companies are trading above their conservatively modelled intrinsic value, with TCS the sole exception.
Abstract
-Financial modelling and forecasting translate a company's historical accounting record into a forward-looking view of its earning power and value, which matters greatly for a sector such as Indian information technology (IT) whose revenues are shaped by currency movements, global demand cycles and rapid technological change. This study examines the financial performance, five-year forecasts and intrinsic value of ten NSE/BSE-listed Indian IT companies spanning large, mid-and small-cap segments, using audited financial statements for FY2020-21 to FY2024-25. Profitability, leverage and efficiency were assessed through ratio, trend, horizontal and vertical analysis; a five-year forecast (FY2025-26 to FY2029-30) and Discounted Cash Flow (DCF) valuation were then built for each company, with three hypotheses tested using one-way ANOVA and a paired t-test. Results show statistically significant differences in profitability (Return on Equity, Net Profit Margin) and leverage (Debt-Equity ratio) across the sample, and a forecasted revenue growth rate significantly lower than historical growth, reflecting a deliberate moderation of unsustainable recent trends rather than naive extrapolation. DCF valuation suggests that nine of the ten companies are trading above their conservatively modelled intrinsic value, with TCS the sole exception. The findings support a company-specific, rather than sector-wide, approach to valuation and investment judgement in Indian IT equities.