Valuation of midcap companies in IT sector

Abstract

Discussions of the Indian software industry generally revolve around large companies like Infosys, Wipro, TCS etc. which have been dominating the industry over the last decade or so. Through this project, we propose to study another segment of the software industry which comprises of companies smaller in terms of market capitalization, employee base and revenues; these are referred to as mid cap companies in the equity market parlance. A few mid cap companies have been selected depending on certain parameters (detailed in the methodology section). The cost structure, revenue distribution, market value added, business strategy of these companies are then studied with the aim of deducing what factors contribute to the value of these companies. Analyst predictions regarding this segment of the software industry have also been included to understand what the roadmap could be for these companies. The study then compares the selected companies with industry benchmarks like Infosys and Cognizant to examine whether there are any striking similarities or differences in financial models, business strategy. This project would give us an understanding of factors which contribute to the growth and value of mid cap software companies in India, their growth prospects and in general, the dynamics of the Indian software industry.