>INFOTECH ENTERPRISES LIMITED (INDIA INFOLINE)

Infotech more than just survived in FY09, a year of great challenges for Indian IT industry due to recession in key global markets and high exchange rate volatility across currencies. We believe that by delivering a strong operating performance and making crucial business investments, Infotech has further differentiated itself in the mid-cap IT space. Aided by huge generation of cash during the year, the much stronger and fungible balance sheet provides opportunity for further differentiation. Post our analysis of the company's FY09 annual report, we re-rate Infotech's valuations by 1x FY11E EPS. Key takeaways of our analysis are as follows

■ Strong operating performance with 1) reported consolidated revenue growth of 4% under US GAAP despite a significantly higher cross currency hit than peers 2) 200 bps OPM expansion on toght cost control and revenue shift towards EMI segment and offshore 3) net profit growth of 8% despite making substantial provisions for unrealized forex losses.

■ FY09 witnessed large customers reposing their faith in Infotech by renewing theri relationships. Infotech also added four new image-enhancing relationships.

■ Proforma net profit stood material 6.7% below reported profit. Outstanding ESOPs represents a potential 3.2% equity dilution

To see full report: INFOTECH ENTERPRISES LIMITED