India IT Services Sector

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

19 February 2015

Asia Pacific/India

Equity Research

Computer Services & IT Consulting

India IT Services Sector SECTOR REVIEW

Can the recent captive trend be a headwind for

Indian IT sector? We don't think so

Figure 1: Three broad outsourcing strategies (size of the bubble represents

management efforts)

High

LowControl

Thirdparty

- High management control- Adherence to regulatory

requirements- No fear of IP losses- Skills in certain areas may

be unavailable with 3rd party

Virtual/ Hybrid

Captive- Relatively low cost- Flexible operations- Best-in-class practices- Lesser management

bandwidth required

Source: Credit Suisse

■ Captives have always been an integral part of offshoring. Global firms

have three options when they consider moving work to an offshore location

such as India – captive, third-party or a hybrid model. Captives form about

22% of revenue (currency-adjusted using 2003 as a base). This has come

down from 31% in 2003 but has been stable for the past five years.

■ Signs of captive activity picking up. Recent news flow suggest renewed

captive activity and we think that this has raised some questions on the

structural prospects for the Indian companies. The news flow include setting

up of new captives as well as the expansion of existing ones.

■ What does it mean for Indian IT vendors? We believe that there is no

material incremental threat for four reasons. (1) A large part of the recent

activity is in engineering and R&D services (ER&D), which forms 45% of

captive revenue but only 10% for the Indian companies. (2) The hybrid

model is being increasingly adopted – the financial services segment is the

best example of hybrid and third-party co-existence – it accounts for 40% of

captive headcount but third-party market share is up from 37% to 44% in five

years. (3) Third-party vendors have significant advantages of scale,

processes and platforms for relatively more commoditised services. (4) Both

BPO and infra services commenced largely with captives but third-party

plays a bigger role now. Most recent captive activity is around ER&D and

SMAC. Once these markets mature, there could be potentially big

opportunities for Indian IT firms.

Research Analysts

Anantha Narayan

91 22 6777 3730

[email protected]

Nitin Jain

91 22 6777 3851

[email protected]

19 February 2015

India IT Services Sector 2

Focus charts Figure 2: After witnessing a declining trend during FY03-

09, the captives' proportion of Indian IT exports has

remained stable during FY09-14

Figure 3: Several new/incremental captives have been set-

up in the last one year

0%

20%

40%

0.0

50.0

100.0

2003 2009 2014

US

D b

n

Overall IT/BPO exports (currency adjusted)Captive exports (currency adjusted)Captive as % of total (RHS)

Source: NASSCOM, Credit Suisse estimates Source: Credit Suisse research

Figure 4: ER&D accounts for the largest share of captive

revenue in India…

Figure 5: …and this segment is still a small part of Indian

IT services firms' revenue IT

33%

BPM22%

ER&D and Products

45%

IT

61%

BPM24%

ER&D and Products

15%

Source: NASSCOM, Credit Suisse estimates Source: NASSCOM

Figure 6: BFSI accounts for ~36-38% of the employees in

IT captives …

Figure 7: The growth for the top-five firms has been better

than the overall BFSI exports growth, partly indicating

likely share gains from captives

BFSI36-38%

Software24-28%

Telecom13-15%

Industrials3-5%

Aerospace & Defence

3-5%

Semiconductors2-4%

Others10-14%

32.0%

34.0%

36.0%

38.0%

40.0%

42.0%

44.0%

46.0%

FY09 FY10 FY11 FY12 FY13 FY14

Top 5 firms BFSI revenues as % of overall BFSI exports

Source: NASSCOM Source: Company data, NASSCOM

Figure 8: ER&D is estimated to be a US$40 bn +

opportunity by 2020

Figure 9: NASSCOM estimates SMAC to be have over

US$280 bn addressable market opportunity by 2016

0

5

10

15

20

25

30

35

40

45

2013 2014 2020

Engineering and R&D exports (US$ bn)

0

50

100

150

200

250

300

350

2013 2016

SMAC - addressable market (US$ bn)

Source: NASSCOM Source: NASSCOM

19 February 2015


Captives have always been an integral part of offshoring Three different models

Global firms have three options when they consider moving work offshore (to India): (1)

captive only (have all the operations in in-house offshore captive centres), (2) third-party

offshoring (use vendors such as TCS, Cognizant and Infosys or Accenture); and (3) hybrid

model (combination of the captive and third-party offshoring model). While management

control is the highest in the pure captive model, it comes with greater management efforts

and higher costs. On the other hand, third-party outsourcing model requires lower

management bandwidth and relatively lower costs, but it leaves management with lesser

control on operations. The third model is somewhere in between the first two models.

Major global outsourcers have used these models to varying degree in their outsourcing

strategies, with captives being an integral part. For example, many of the major financial

institutions have both captive and third-party operations though the mix varies – banks

such as Morgan Stanley and Goldman Sachs have a captive heavy outsourcing strategy,

while banks such as Citi are more outsourcing heavy.

Figure 10: Three broad outsourcing strategies (size of the bubble represents

management efforts)

High

LowControl

Thirdparty

- High management control- Adherence to regulatory

requirements- No fear of IP losses- Skills in certain areas may

be unavailable with 3rd party

Virtual/ Hybrid

Captive- Relatively low cost- Flexible operations- Best-in-class practices- Lesser management

bandwidth required

Source: Credit Suisse research

Captives have been a significant part of India's IT and BPO growth story. While the first

few captive centres were set up by organisations such as GE and Texas Instruments in

the 1980s, the momentum picked up only in 2000 with several companies, particularly in

financial services and hi-tech, setting up offshore centres of their own in India. This not

only provided these companies with high quality resources at significantly lower costs, but

also served as 'proof of concept' for India as an offshore technology services destination.

As the India IT and BPO sector flourished over the last 10-15 years, captives have also

prospered. Captives have grown into a significantly large sub-segment of the India IT and

BPO sector with over US$15 bn revenue (of a total of US$86 bn industry revenue in FY14)

and over 530,000 employees.

Three options: captive, third

party, hybrid

Captives form about 17% of

the Indian industry

19 February 2015


Common motives behind a captive strategy

Captive vs. third-party outsourcing has always been a topic of debate. While prima facie,

captives may appear to be attractive option – both from cost and control, there are several

inherent intricacies. While captives have the advantage of knowledge retention (i.e.

knowledge gained during a project remains within the firm) and information security

(though third-party service providers too have rigorous security standards), there are

issues pertaining to employee management as there is limited scope for career

enhancement and learning, unlike in an IT firm that provides employees with scope to

work with multiple clients on varying technologies. Given this, attrition can be high and

scalability becomes an issue beyond a certain point.

Captives also have a high cost employee structure. Given relatively limited career growth

prospects for the employees, captives generally tend to have a higher compensation in

order to attract talent. Furthermore, captives do not have the kind of training facilities that

third-party service providers have developed and cannot maintain the extent of bench that

third-party providers can maintain (given limited business expansion scope). This leads to

a flatter employee pyramid, which also pushes up the cost base. Also, during cyclical

downturns, it becomes challenging for these companies to scale down quickly while work

with a third-party vendor can be cut down at short notice.

Despite these challenges, global firms have followed a combination of captive and third-

party outsourcing models. Traditionally, global firms use a captive model for a variety of

reasons that can include:

■ Greater control over the IT operations: Some companies, typically first-time risk-

averse offshorers, are often not comfortable with giving control of the IT functions to

third-party IT services vendors. These firms prefer to test the offshoring model through

their own captive centres.

■ Intellectual property concerns: In services that involve greater use of intellectual

property, global firms generally prefer to keep the work in-house. Engineering services

is one such area, for example.

■ Core IT functions and regulatory reasons: In some industries such as telecom, hi-

tech and to some extent banking, IT is considered to be a core part of the business.

Hence a large part of the IT work is still done in-house – either onsite or in captive

centres. Similarly, in banking, certain IT functions could be kept in-house due to

compliance reasons.

■ Evolving service lines: Among the emerging service lines, where third-party IT

service providers do not have an established track record, global firms could keep the

work in-house, until the third-party service providers demonstrate reasonable

execution credentials. For example, initially, some of the US financial institutions used

the captive route for remote infrastructure management (RIM) work. However, over

time, Indian IT services firms have developed capabilities. We believe that the mix has

shifted in favour of third-party service providers over the past few years.

■ Weaker INR is an added incentive: A sustained weakness in INR against USD makes

the cost of setting-up and operating a captive operation much more economical for global

firms. Indian IT firms have typically not passed on the currency benefits (or losses) to their

clients. In such a scenario, a weaker INR narrows the relative cost benefit of third-party

vendors over captives. However, we do not think that currency by itself would be a criteria

to set up a captive centre in India, though it may be an added incentive.

High attrition, scalability

challenges and relatively

higher costs are key issues

for captives

Privacy, IP-related issues

and a desire to have

complete control are often

the reasons for opting for a

captive

19 February 2015


Signs of captive activity picking up Captives have a fairly long history in Indian IT outsourcing, with GE and Texas pioneering

the concept of offshoring through captives in the 1980s. From ER&D (engineering and

R&D) operations to start with, the captive model expanded to include BPO services

(processes as well as call centres) and IT. The captives have gone through several cycles

of expansion and downscaling. From ~31% of the overall Indian IT and BPO exports in

2003, the share of captives has stabilised at ~20%. However, of late there has been an

increase in news flows relating to both - expansion of existing captive centres as well as

setting up of new captive centres.

Stable trend over the last 5 years

Over 2003-14, captive revenues have grown at an impressive 19% CAGR (adjusted for

currency, accounting for the fact that they recognise revenue on a 'cost plus' basis).

However, growth trends have differed during this period. During 2003-09, captive revenue

grew at below the sector's average growth rates (23% CAGR vs 30% CAGR for the overall

sector), partly due to sale of several captives (particularly by financial services firms) to

third-party service providers during the global financial crisis. For example, TCS acquired

Citigroup's BPO in 2008, Capita acquired Axa's back-office operations in 2008 and WNS

acquired Aviva's back office operations in 2007. However, since then, over the last five

years (2009-14), the captive revenue growth has largely been in line with the overall

industry exports growth rate, although it has decelerated (to 13%).

Figure 11: After witnessing a declining trend during FY03-09, the captives' proportion of

Indian IT exports has remained stable during FY09-14

0%

5%

10%

15%

20%

25%

30%

35%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2003 2009 2014

US

D b

n

Overall IT/BPO exports (currency adjusted) Captive exports (currency adjusted)

Captive as % of total (RHS)

Source: NASSCOM, Credit Suisse estimates. Note: A large proportion of captives recognise revenue on a

'cost plus' basis (i.e. in INR). Given that the USD has appreciated significantly over the last 5 years, we

have restated the captive revenue using 2003 rates as a base.

The captives' share in

Indian IT exports has been

stable for the past 5 years,

after declining for the

preceding 5

19 February 2015


However, there seems to be renewed captive activity

over the last one year

After a stable mix between third-party outsourcing vs. captive centres, there seems to be a

pick-up in captive activity in India over the last one year. There have been several media

reports of new captives being set-up or of existing captives expanding. For example, while

there are media reports (Media sources such as Economic Time and Business Standard)

about companies such as Citigroup, Wells Fargo, Allstate Insurance, AstraZeneca and

Mercedes Benz expanding their captive operations in India, companies such as Danske

Bank and some smaller players (such as Victoria Secret and Cargill) are said to have set

up new captive centres in India. While the quantitative details (in terms of number of

centres and FTEs) of the recent trends are not available, a cursory look at the news flow

indicate signs of positive momentum.

Figure 12: Several new/incremental captives set-up in the last one year

Date of media

announcement

Company Location Nature of operations Remarks

Feb-15 Twitter Bengaluru ER&D Focus on emerging markets

Jan-15 Wells Fargo Bengaluru IT and BPO Incremental investment over its existing captive operations. Wells Fargo has acquired 1 mn sq feet office space.

4QCY14 Honeywell Bengaluru IT (SMAC) and ER&D Have bought 2 mn sq feet of office space in aggregate

4QCY14 Adobe Bengaluru ER&D

4QCY14 SanDisk Bengaluru ER&D

Dec-14 Mercedes Benz Bengaluru ER&D Second dedicated facility at Whitefield, spread across an area of 266,000 sq ft with a capacity of over 2,400 people to accommodate future growth

Nov-14 Citigroup Chennai and Pune IT According to media reports, Citigroup is planning to set up its own IT arm

Nov-14 Danske Bank Bengaluru IT The IT captive centre was started with 1,000 employees. Danske Bank will also continue working with ITC Infotech (its existing IT outsourcing vendor in India).

Nov-14 Allstate Insurance Bengaluru and Pune IT (SMAC) Currently, Allstate Insurance has 800 employees in its Bengaluru captive centre and another 3,700 employees work with third-party vendors such as Infosys. It is planning to hire 600-800 employees across Bengaluru and Pune over the next 3-4 years.

Jul-14 Lowe's Bengaluru BPO Customer support centre

Jun-14 Rolls-Royce Bengaluru ER&D Setting up a R&D centre. It already operates two engineering centres with TCS and Quest.

Feb-14 AstraZeneca Chennai ER&D To reduce IT outsourcing from 70% to ~30%

Feb-14 Victoria Secret Bengaluru IT (SMAC) Captive centre for data analytics.

2014 Cargill Bengaluru BPO Captive centre

Source: Media sources such as Economic Time and Business Standard

News flows suggest

renewed captive activity

19 February 2015


What does it mean for Indian IT vendors? With the recent news flow on a pick-up in captive activity by global corporations, there

have been questions on the possible implications for the third-party IT service providers.

This is not the first time these concerns have been raised - there have been several

instances earlier and third-party service providers have managed to garner their fair share

of business on each of these occasions. In the current context as well, we believe there is

no material incremental threat to Indian IT firms from captives. Our belief is based on four

reasons:

■ Most of the recent captive growth has been in ER&D, that is a low proportion of the

Indian IT firms' business and is still an underpenetrated segment. This segment has

also started showing signs of significant acceleration for many of the Indian companies

and their management teams have started highlighting the strong growth prospects in

this segment.

■ A 'hybrid' model is gaining more prominence. First time offshorers using this model

can add to incremental revenue for the Indian IT firms. Just as was the case with the

past round of ER&D captives, it is likely that these corporations supplement their

captives' work with work done by third-party providers. EClerx is a relevant example of

successful co-existence of captive and third-party vendors.

■ Commoditised services may still be economical with third-party service providers that

have developed better processes and automation tools over time and can scale up or

down quickly; and

■ The recent trend of a pick-up in ER&D and SMAC related activities should benefit the

Indian IT firms in the medium term as global firms get confidence on India's ability to

offer these services (similar to the evolution of other service lines such as BPO and

IMS which were initiated with captive centres initially). Some of the captives can

eventually be acquired by third-party service providers.

Although there can be one-off cases such as Danske Bank (setting-up its captive centre

and taking over some employees from its existing outsourcing vendor, ITC Infotech1) and

AstraZeneca (targeting to reduce the proportion of third-party outsourcing from ~70% to

~30%2), we believe there is no structural trend that could pose headwinds to Indian IT

firms' growth prospects. We continue to think that demand trends for Indian IT firms

remain solid (please see our note dated 5 February 2015 "Though not dramatically better

than 2014, demand trends are solid for 2015" and the note dated 16 February 2015 "Ten

key takeaways from the NASSCOM conference").

A large part of the recent captive activity has been in

ER&D

There has been a pick-up in ER&D outsourcing to India of late. After years of strong

execution in IT and BPO and building reasonable reference ability in ER&D, there is

increasing willingness among clients to set up ER&D operations in India. For example,

Sony has increased the size of its R&D centre from 100 in 1997 to over 1,800 in 2014,

Manahattan Associates (a US-based supply chain management software company) has

1 http://www.business-standard.com/article/companies/danske-bank-to-set-up-own-captive-technology-

centre-in-india-114112601468_1.html 2 http://www.thehindu.com/business/Industry/astrazeneca-to-set-up-it-captive-unit-in-

chennai/article5685611.ece

We believe there is no

material incremental threat

to Indian IT firms from

captives

ER&D accounts for 45% of

captives' revenue but only

10% of the Indian

companies' revenue

https://plus.credit-suisse.com/u/NXm6YX

https://plus.credit-suisse.com/u/NXm6YX

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x617516&serialid=8UAJm8U8Kzri0aM7Cs%2fmy6B%2b13MuksTFOLW3xGPlzqM%3d

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x617516&serialid=8UAJm8U8Kzri0aM7Cs%2fmy6B%2b13MuksTFOLW3xGPlzqM%3d

19 February 2015


increased its headcount from 5 in 2002 to over 1,100 people. Similar expansions continue

and new companies continue to explore the India market.

Historically too, ER&D has been a major focus area for global firms for captive operations

and a majority of captive centres in India (over 60% in numbers and over 45% in revenue)

focus on ER&D outsourcing. Several companies in sectors such as telecom, hi-tech and

automotive have traditionally preferred a captive model (with small centres). Despite

increasing interest in a captive model for ER&D services, we believe it will not have

material impact on Indian IT service providers as ER&D constitutes a relatively moderate

10% of their revenue. Indeed, as we have discussed in the latter section, this could bring

incremental business opportunities.

Figure 13: ER&D accounts for the largest share of captive

revenue in India…

Figure 14: …and this segment is still a small part of Indian

IT services firms' revenue

IT33%

BPM22%

ER&D and Products

45%

IT66%

BPM24%

ER&D and Products

10%

Source: NASSCOM, Credit Suisse estimates Source: NASSCOM

'Hybrid' model ensures that third-party IT firms and

captives can co-exist

There is an increasing adoption of a 'hybrid' model among global firms. As discussed

earlier, a 'hybrid' model lies somewhere between pure third-party offshoring and a pure

captive strategy. This includes 'virtual captives', where the third-party IT vendor provides

the IT as well as physical infrastructure, and services such as training and hiring and

dedicated resources to service the outsourcing firm (buyer). The buyer, in turn, retains an

element of control over the technology and processes, thus enabling a captive-like

environment. Banks such as Nomura and Credit Suisse already have this type of

arrangement.

There is another dynamic that works in favour of Indian IT firms. Many of the global firms

following a 'hybrid' model are using captives as centres to manage the third-party vendor

relationships as well managing the captives in other geographies such as China and

Philippines. As more new companies follow this model to enter the India offshoring market,

there could be incremental opportunity for the Indian IT firms.

In a hybrid model, captives

are also used to manage

third-party vendor

relationships

19 February 2015


BFSI vertical - the best example of captive and third-party co-existence

Traditionally, BFSI (banking, financial services and insurance) has been the largest and

amongst the most penetrated industry segments for the Indian IT firms. That holds true for

captives as well. Most of the major global banks (including Barclays, Credit Suisse,

Deutsche, Goldman Sachs, JP Morgan, Morgan Stanley, and UBS) have captive centres

in India. BFSI sector accounts for ~40% of both IT and BPO captive headcount in India.

These are also major clients for Indian IT firms.

Figure 15: BFSI accounts for ~35-40% of the employees in

IT captives …

Figure 16: … and ~40-45% in the BPO captives

BFSI36-38%

Software24-28%

Telecom13-15%

Industrials3-5%

Aerospace & Defence

3-5%

Semiconductors2-4%

Others10-14%

BFSI40-42%

Software20-22%

Research & Consulting

9-11%

Computer hardware

8-10%

Telecom7-9%

Healthcare4-6%

Others5-7%

Source: NASSCOM, Credit Suisse Source: NASSCOM, Credit Suisse

A look at the BFSI revenues of third-party Indian IT vendors (represented by the top-5

firms3), indicates that they have growth at an impressive 17% CAGR over FY09-14 as

compared to ~13% CAGR for the industry's BFSI exports (note that industry also includes

captives and MNC vendors). While this growth differential may partly reflect higher growth

for the top-five compared to their smaller and MNC peers, it does confirm the fact that

third-party and captive providers can co-exist. This also includes a period of sustained

weakness in INR during FY12-14, which was an added incentive for global banks to set up

captive operations.

Figure 17: Despite the captive competition, Indian IT

firms' (top 5 firms) BFSI revenue has recorded a healthy

17% CAGR over FY09-14

Figure 18: The growth for the top-five firms has been

better than the overall BFSI exports growth, partly

indicating likely share gains from captives

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0


BFSI revenues top 5 firms

32.0%

34.0%

36.0%

38.0%

40.0%

42.0%

44.0%

46.0%


Top 5 firms BFSI revenues as % of overall BFSI exports

Source: Company data, Credit Suisse Source: Company data, NASSCOM, Credit Suisse

3 TCS, Cognizant, Infosys, Wipro and HCL Tech

BFSI accounts for 40% of

captive headcount …

… but the market share of

third-party vendors in BFSI

has gone up from 37% to

44% in the past five years

19 February 2015


Case study: eClerx

eClerx is an India based KPO with a focus on capital markets, retail and cable segments (through its recently acquired

entity, Agilyst). In the capital markets business, it provides services ranging from trade entry, settlement, clearing and

reconciliation, besides providing documentation and accounting services. Similarly, in sales and marketing services, its

work involves data management, business intelligence and analytics and content management on the website. The

cable business is largely into performance monitoring, technical services and revenue auditing. While the cable

business is niche, eClerx' capital markets business witnesses intense competition from captives given the process

oriented nature of the services. Historically, this business has accounted for nearly half of the company's revenues

(though, this proportion has come down to ~40-42% due to the Agilyst acquisition). Most of eClerx' large client in this

segment already have captive operations in India.

Figure 19: eClerx's services in the capital markets segment are highly process oriented – prone to competition from

captives

Capital markets business

Operational Support Utility Functions

Trade support Trade Entry, Reconciliations, Exceptions Mgmt. Tax Operations Tax Form Coding, Cost Basis, Tax Reclaims

Confirmations Affirmations & Confirmations (Paper & Elec.) Securities

Documentation

Trading Relationship Document Administration

Settlements Settlements, Clearing, Fail Management Finance Financial Accounting, BC&E, Product Control

Margin Collateral Operations & Portfolio Reconciliation Reference Data and

KYC

Client On-boarding, KYC, SSI, Static Data

Asset Servicing Announcements, Corporate Actions, Claims Risk Management Operations Risk & Control, Regulatory Support Source: Company presentation

Historically, eClerx has competed and co-existed with its clients' captive operations in India and despite this, has

achieved an impressive 27% revenues CAGR over FY09-14, while at the same time maintaining healthy margins

(EBITDA margins have averaged ~40% over FY09-14).

Figure 20: eClerx has reasonably high exposure to the

capital markets business

Figure 21: Despite competition from captives in at least

40% of the business, eClerx has managed to post

impressive revenue growth and healthy margins

Capital markets42%

Sales and Marketing

(Retail)42%

Cable16%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Revenue (US$ mn) EBITDA margins (RHS)

Source: Company data Source: Company data

According to eClerx management, global banks have historically used a combination of captive and third-party service

providers. They use captives for proprietary work and third-party firms for IT development and run-the-business kind of

work. They view captives as partners as well competitors; however, management remains confident of the co-existence

of both the business models.

19 February 2015


Figure 22: Quite a few of the top customers for Indian companies have captives

Sr no Company Vertical Captive

presence in

India

Sr no Company Vertical Captive

presence in

India

1 Wal-Mart Retail/CPG Yes 26 Bank of America Corp BFSI Yes

2 Royal Dutch Shell Energy and

utilities

Yes 27 Citigroup Inc BFSI Yes

3 Exxon Mobil Corp Energy and

utilities

Yes 28 Boeing Co/The Mfg/Hi-tech Yes

4 BP PLC Energy and

utilities

29 Wells Fargo & Co BFSI Yes

5 Volkswagen AG Auto Yes 30 Munich Re BFSI

6 Chevron Corp Energy and

utilities

Yes 31 Amazon.com Inc Retail/CPG

7 Apple Inc Mfg/Hi-tech 32 Procter & Gamble Co Healthcare

8 Daimler AG Auto Yes 33 Deutsche Telekom AG Telecom/media Yes

9 General Motors Co Auto Yes 34 BNP Paribas SA BFSI Yes

10 Phillips Energy and

utilities

Yes 35 Home Depot Inc/The Retail/CPG

11 General Electric Co Mfg/Hi-tech 36 Airbus Group NV Mfg/Hi-tech Yes

12 Ford Motor Co Auto Yes 37 Deutsche Post AG Others

13 Allianz SE BFSI Yes 38 Johnson & Johnson Healthcare

14 AT&T Inc Telecom/media 39 HSBC Holdings PLC BFSI Yes

15 Verizon Communications Inc Telecom/media Yes 40 Target Corp Retail/CPG Yes

16 Hewlett-Packard Co Mfg/Hi-tech Yes 41 MetLife Inc BFSI Yes

17 BMW Auto 42 Telefonica SA Telecom/media

18 JPMorgan Chase & Co BFSI Yes 43 Audi AG Auto

19 Tesco PLC Retail/CPG Yes 44 Comcast Corp Telecom/media

20 BASF SE Mfg/Hi-tech 45 BHP Billiton PLC Mfg/Hi-tech

21 Carrefour SA Retail/CPG 46 Vodafone Group PLC Telecom/media Yes

22 Statoil ASA Energy and

utilities

47 Unilever NV Retail/CPG Yes

23 Nestle SA Retail/CPG 48 Deutsche Bank AG BFSI Yes

24 Siemens AG Mfg/Hi-tech Yes 49 ThyssenKrupp AG Mfg/Hi-tech

25 Prudential PLC BFSI 50 Bayer AG Healthcare

Source: Media sources such as Economic Time and Business Standard, Credit Suisse; Note: We have considered the top 50 US and European

companies by revenue in the Bloomberg World index that we know have outsourced work to Indian vendors and their captive presence is based

on news reports.

Third-party service providers have scale advantage

in commoditised services

Indian IT firms have built scale and strong client reference-ability in several service lines

as such as application development and maintenance, testing, BPO and more recently,

infrastructure management. Given their experience of working with multiple clients over a

long period of time, these firms have developed best-in-class practices and processes and

built several re-usable tools. For example, due to repetitive use of certain codes for

application development, IT companies develop frameworks that reduce the manual

efforts to some extent. Similarly in testing projects, these companies have a large

repository of test cases that makes the process relatively more reliable and faster. In BPO

and infrastructure management, many of the companies have built platforms and several

other automation tools, reducing overall manpower efforts.

While some of the global firms may prefer to perform these functions in-house due to

security or other reasons, we believe third-party vendors are better equipped to perform

relatively commoditised work.

Third-party vendors have

the advantages of scale,

processes, and re-usable

IP/platforms

19 February 2015


ER&D and SMAC can be potential big growth

opportunities for Indian IT firms

Traditionally, captives have helped the Indian IT market grow. Captives provide the first-

time offshoring experience to many first time offshorers. This in turn helps in the

development of the market. BPO is one of the best examples. The BPO services evolved

in India through the establishment of American Express and GE captives in the 1990s.

From being purely captive then, the revenue mix in the BPO segment has gradually shifted

in favour of third-party service providers. The captive centres' share in BPO exports was

~43% in 2003 and has been gradually coming down since then - it stood at just over 20%

in 2014. The BPO business has evolved from a pure voice-based model (call-centres) to a

more transaction-oriented model over time. There are several pure play third-party service

providers (such as Genpact, WNS, EXL Services, eClerx, Firstsource Solutions and

Evalueserve) as well as full service providers such as TCS, Infosys and Wipro.

Figure 23: The BPO business has evolved from being dominated by captives to a third-

party dominated business

0%

20%

40%

60%

80%

100%

120%

1990's 2003 2009 2014

BPM - captive revenues as % of overall exports

Source: NASSCOM, Credit Suisse

A similar trend was observed in the infrastructure management business, particularly in

the BFSI industry vertical. While the banks were initially reluctant to outsource their

infrastructure management work to third-party providers, once they had some offshoring

experience through captives, they were comfortable with third-party vendors. In fact, some

of the banks are now comfortable with outsourcing significant part of infrastructure

management to third-party providers on a managed service basis.

"It is not unusual for companies to start out with a captive model, and over time move to an

outsourcing model. Other companies which started their transformation journey late, often

skip the first step and go straight to outsourcing. However, those companies which have

had significant experience with developing a captive model have clearly found the

transition to a fully-outsourced model less complex and arduous, as they typically have

some degree of standardization of their processes and technology already established. In

many cases, moving from a captive model to a fully-outsourced scenario has proven to be

a straightforward advancement in optimizing efficiencies, as outsourcing offers the logical

next step for companies with captives to strip out further costs and find further

efficiencies." - Graham Russell, Head of Global Transaction Processing, AstraZeneca

Both BPO and infra

management services

commenced largely with

captives but third-party

plays a bigger role now

19 February 2015


Recent trend of increasing captive activity in ER&D and emerging technologies

bodes well for Indian IT firms

Many of the new captives and recent expansions are focussed on ER&D and emerging

technologies (Social, Media, Analytics and Cloud - SMAC). While Indian IT firms already

have some presence in the ER&D business for quite some time, it is still small in the

context of addressable market opportunities. On the other hand, emerging technologies

are relatively new for Indian IT firms and they still need to build a referenceable client base

here. But these services are growing very quickly for the Indian companies and holds a lot

of potential (see our note, "The SMAC pack" dated 10 July 2013 for more discussion on

this subject). Both these are multi-billion dollar revenue opportunities and we believe

increasing captive activity in these service lines bodes well for the industry.

Figure 24: ER&D is estimated to be a US$40 bn +

opportunity by 2020

Figure 25: NASSCOM estimates SMAC to be have over

US$280 bn addressable market opportunity

0

5

10

15

20

25

30

35

40

45

2013 2014 2020

Engineering and R&D exports (US$ bn)

0

50

100

150

200

250

300

350

2013 2016

SMAC - addressable market (US$ bn)

Source: NASSCOM Source: NASSCOM

Captives as potential acquisition targets

There have been several instances of captives being acquired by third-party service

providers in the past, the largest being the Citigroup BPO acquisition by TCS in 2008 (for

~US$500 mn). Though most of these acquisitions (particularly in the financial services

sector) were at the time of the global financial crisis, there has also been some activity

later with Cognizant acquiring CoreLogic and ValueSource and Tech Mahindra acquiring

Sony mobile's testing lab and BASF's captive operations. We believe captive acquisition

remains an attractive option for new client acquisition (with some revenue visibility) and

capability building as demonstrated by TCS' Citigroup BPO acquisition. Companies such

as Cyient are looking to acquire captives of its must-win prospects, while the Infosys

management has mentioned missing the captive acquisition opportunities.

Captive activity is picking up

in ER&D and emerging

technologies and both are

significant opportunities for

the Indian companies

Captive acquisition can

provide access to a new

client, significant revenue

with high visibility and new

capabilities

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1019813371&serialid=KDTcan6WWDtwPyROhjt1Ubh5pCqDjCoE198IXqKWkEc%3d

19 February 2015


Figure 26: Some of the captive acquisitions by Indian IT/BPO firms

Year Company Captive operations acquired

2007 WNS Aviva

2007 Infosys Back-office operations of Philips

2008 TCS Citigroup BPO

2008 Capita Axa

2009 Wipro Citi Technology services

2009 Cognizant UBS

2009 Mphasis AIG

2009 EXL Services Schneider Logistics

2009 Mindtree Kyocera Wireless

2011 Cognizant CoreLogic

2013 Tech Mahindra Sony Mobile's testing lab

2013 Cognizant KBC's offshore arm (ValueSource)

2014 Tech Mahindra BASF

Source: Company data, Credit Suisse estimates

19 F

eb

ruary

201

5

Ind

ia IT

Serv

ices

Sec

tor

15

Figure 27: Global valuation comparables

Company Local Mcap 3M

ADTV

Sales

(CY14)

EV/Sales Sales

CAGR

EV/EBITDA EBITDA

CAGR

P/E (x) EPS Growth (%) Share price perf

Price US$

mn

US$

mn

US$

mn

CY14 CY15E CY16E CY14-

16

CY14 CY15E CY16E CY14-16 CY14 CY15E CY16E CY14 CY15E CY16E 1m 3m 12m

US-listed

Accenture 89 59,340 230.8 30,337 1.8 1.7 1.6 4.7% 11.0 10.5 9.9 5.1% 19.3 18.1 16.6 7% 7% 9% 0% 7% 8%

Syntel* 45 3,768 7.5 911 4.9 4.5 4.1 9.0% 16.0 15.5 13.5 9.0% 15.9 15.6 14.1 8% 2% 10% -2% 3% 0%

Cognizant* 60 36,651 221.9 10,263 3.4 2.8 2.4 17.3% 15.2 13.0 11.4 15.5% 23.2 20.5 17.7 29% 13% 16% 9% 16% 20%

CSC* 67 9,406 68.8 12,499 0.8 0.8 0.8 0.2% 4.7 4.6 4.5 2.6% 15.1 13.8 12.6 27% 9% 9% 6% 6% 6%

EXLS* 32 1,040 3.9 502 1.9 1.7 1.5 11.2% 9.5 8.5 7.2 15.1% 17.7 16.6 14.6 -1% 7% 14% 2% 15% 22%

iGATE* 39 3,145 9.6 1,268 2.8 2.5 2.3 10.4% 12.6 11.5 9.8 13.5% 19.8 17.9 14.8 4% 11% 21% -8% 10% 11%

Infosys (ADR) 36 41,540 92.8 8,666 4.3 3.9 3.4 11.6% 15.5 14.1 12.8 10.1% 21.5 19.3 17.3 16% 12% 11% 5% 9% 21%

Wipro (ADR) 14 34,308 6.4 7,000 4.8 4.3 3.8 11.5% 19.1 16.8 14.8 13.7% 25.4 21.9 19.2 11% 16% 14% 15% 14% 7%

Genpact* 22 4,696 12.0 2,279 2.2 2.0 1.8 9.4% 13.5 12.3 10.8 11.5% 21.0 18.9 16.6 -9% 12% 13% 7% 22% 43%

WNS* 24 1,228 2.5 496 2.6 2.4 2.2 8.5% 11.2 10.5 9.5 8.4% 14.5 13.7 12.6 27% 7% 8% 2% 19% 12%

Europe-listed

Atos 67 7,702 21.2 12,022 0.6 0.6 0.6 -0.5% 5.9 5.3 4.9 9.3% 15.0 13.0 11.6 3% 16% 11% 2% 22% -4%

Capgemini 65 12,057 42.3 13,976 0.8 0.9 0.8 -1.3% 8.6 7.8 7.3 8.4% 17.3 15.2 14.0 26% 14% 9% 6% 14% 20%

Indra 9 1,678 18.5 3,911 0.6 0.6 0.6 0.5% 7.5 7.3 7.0 3.8% 12.5 11.2 10.2 -14% 11% 10% 12% 9% -33%

TietoEnator 23 1,955 3.0 2,035 0.9 1.1 1.1 -6.1% 7.0 7.0 6.9 1.0% 15.6 15.5 15.0 2% 1% 3% 7% 16% 28%

India-listed

Cyient* 548 989 0.8 425 2.1 1.8 1.6 15.3% 12.4 10.3 8.7 19.7% 18.5 15.1 13.2 29% 23% 14% -3% 5% 57%

eClerx* 1,274 620 0.6 150 3.9 3.5 3.1 12.7% 10.5 9.6 8.7 10.0% 15.8 13.8 12.6 5% 14% 9% -3% 3% 5%

Firstsource Solutions* 32 339 1.3 505 0.9 0.9 0.8 8.0% 7.5 6.4 5.6 15.9% 9.7 7.4 6.1 16% 32% 21% 2% -17% 10%

HCL Tech 2,033 22,938 28.7 5,694 0.1 0.1 0.0 14.0% 15.0 13.8 12.2 11.0% 20.6 18.0 15.8 34% 15% 13% 23% 23% 38%

Hexaware 268 1,295 6.1 422 3.0 2.5 2.2 14.7% 16.5 14.0 12.0 17.1% 25.3 19.8 17.1 -16% 27% 16% 23% 20% 69%

Infosys (local) 2,296 42,335 113.0 8,666 4.4 4.0 3.5 11.6% 16.2 14.6 13.1 10.9% 21.9 19.7 17.7 16% 12% 11% 9% 9% 25%

KPIT* 210 661 7.0 484 1.5 1.3 1.2 13.1% 10.8 9.1 7.4 20.7% 16.1 12.8 10.5 10% 25% 22% -2% 22% 24%

Mindtree 1,462 1,965 3.9 566 3.3 2.9 2.5 14.5% 16.7 14.1 12.1 17.3% 23.5 20.5 17.8 23% 15% 15% 4% 18% 80%

MphasiS* 375 1,265 0.5 973 1.3 1.3 1.2 4.2% 8.2 8.2 7.5 4.5% 11.4 10.9 9.8 61% 4% 12% 1% -6% -6%

NIIT Technologies 409 365 0.7 386 0.9 0.8 0.7 9.1% 6.0 5.2 4.3 18.1% 12.8 11.2 8.9 -15% 14% 26% 0% -5% -12%

OFSS* 3,367 4,573 2.2 634 5.5 5.0 4.1 16.2% 14.6 13.5 10.6 17.4% 21.9 21.3 17.5 1% 3% 21% 1% 2% 26%

Persistent* 1,738 1,116 2.5 304 3.4 2.9 2.5 18.0% 15.5 12.8 10.5 21.4% 24.4 20.1 17.0 22% 22% 18% -5% 34% 73%

Polaris* 147 236 2.6 333 0.6 0.6 0.6 3.9% 5.3 5.1 4.6 7.5% 8.3 7.6 7.1 -11% 9% 7% -12% -29% 31%

TCS 2,634 82,837 48.2 15,010 5.4 4.7 4.1 14.5% 18.7 16.5 14.3 14.5% 24.9 22.0 19.1 16% 13% 15% 5% 1% 23%

TechM # 2,892 11,146 23.5 3,521 3.0 2.4 2.1 20.6% 15.4 12.7 10.5 21.0% 22.5 18.6 15.3 9% 21% 21% 3% 7% 59%

Wipro (local) 669 26,327 18.0 7,000 3.6 3.3 2.9 11.5% 14.8 12.9 11.3 14.5% 19.5 16.8 14.7 11% 16% 14% 14% 17% 20%

Zensar* 743 524 0.5 427 1.2 1.1 NA NA 7.9 6.9 26.8 NA 12.7 10.9 NA 17% 16% NA 15% 23% 90%

Note: Estimates for companies marked with an asterisk (*) are consensus estimates provided by IBES. #Adjusted for treasury shares. Source: Company data, Thomson Reuters, Credit Suisse

estimates

19 February 2015


Companies Mentioned (Price as of 18-Feb-2015)

AT&T (T.N, $34.71) Accenture Plc (ACN.N, $89.3) Adobe Systems Inc. (ADBE.OQ, $77.13) Airbus Group (AIRG.F, €50.692) Allianz (AZSEY.PK, $16.88) Allstate Corporation (ALL.N, $71.27) Amazon com Inc. (AMZN.OQ, $375.43) American Express Co. (AXP.N, $79.08) Apple Inc (AAPL.OQ, $127.83) AstraZeneca (AZN.N, $69.61) Atos (ATOS.PA, €66.65) Audi (NSUG.F, €647.708) Aviva PLC (AVV.N, $27.8) Axa SA (AXAF.DE, €20.52) BASF SE (BASFY.PK, $94.29) BHP Billiton Ltd (BHP.N, $50.99) BMW (BMWG.F, €106.545) BNP Paribas (BNPP.PA, €49.52) BP (BP.N, $41.78) Bank of America (BAND.L, $14.0) Barclays (BCS.N, $15.93) Bayer (BAYRY.PK, $143.55) Boeing (BA.N, $149.92) Capgemini (CAPP.PA, €64.63) Cargills (CARG.CM, SLRs147.3) Carrefour (CARR.PA, €28.985) Chevron Corp. (CVX.N, $112.4) Cisco Systems Inc. (CSCO.OQ, $29.31) Citigroup Inc. (C.N, $51.69) Cognizant Technology Solutions Corp. (CTSH.OQ, $60.19) Comcast Corporation Inc. (CMCSA.OQ, $58.8) Credit Suisse (MLPN.P, $32.43) Cyient (CYIE.NS, Rs548.35) Daimler (DDAIY.PK, $94.34) Danske Bank (DANSKE.CO, Dkr169.2) Deutsche Bank (DB.N, $32.6) Deutsche Bank (DBKGn.F, €28.64) Deutsche Post DHL (DPWGn.DE, €28.66) Deutsche Telekom (DTEGY.PK, $17.96) EClerx (ECLE.NS, Rs1273.55) ExlService Holdings Inc. (EXLS.OQ, $31.67) ExxonMobil Corporation (XOM.N, $93.05) Firstsource (FISO.NS, Rs31.75) Ford Motor Company (F.N, $16.11) GE Captal (GEH.N, $25.08) General Electric (GE.N, $25.17) General Motors Corp. (GM.N, $37.24) Genpact (G.N, $21.68) Goldman Sachs Group, Inc. (GS.N, $190.02) HCL Technologies (HCLT.BO, Rs2033.15, OUTPERFORM, TP Rs2100.0) HSBC (HSBC.N, $46.26) Hewlett Packard (HPQ.N, $38.53) Hexaware Technologies (HEXT.BO, Rs268.1) Home Depot (HD.N, $112.0) Honeywell International Inc. (HON.N, $104.0) Indra (IDR.MC, €8.96) Infosys Limited (INFY.BO, Rs2295.75, NEUTRAL, TP Rs2125.0) Johnson & Johnson (JNJ.N, $100.44) KPIT Tech (KPIT.BO, Rs209.9) Lowe's (LOW.N, $72.47) MetLife (MLU.N, $72.47) Mindtree Ltd (MINT.BO, Rs1462.05) Morgan Stanley (MS.N, $36.92) Mphasis Ltd (MBFL.BO, Rs374.8) Munich Re (MUVGn.DE, €179.75) NIIT Technologies (NITT.NS, Rs372.25) Nestle (NSRGY.PK, $76.26) Oracle Financial (ORCL.BO, Rs3366.6) Persistent Systems (PERS.BO, Rs1737.75) Phillips 66 (PSX.N, $76.9) Procter & Gamble Co. (PG.N, $85.49) Prudential (PUK.N, $49.64) Rolls-Royce (RR.L, 922.5p) SanDisk Corp. (SNDK.OQ, $82.2) Shell (RDSb.N, $69.42) Siemens (SIES.L, €87.84) Statoil (STO.N, $19.62) Syntel (SYNT.OQ, $45.0) Target Corporation (TGT.N, $76.64) Tata Consultancy Services (TCS.BO, Rs2633.9, OUTPERFORM, TP Rs3100.0) Tech Mahindra Limited (TEML.BO, Rs2892.35, OUTPERFORM, TP Rs3300.0) Telefonica (TEF.N, $14.98)

19 February 2015


Tesco (TSCDY.PK, $11.22) Texas Instruments Inc. (TXN.OQ, $58.2) ThyssenKrupp (TYEKF.PK, $26.07) Tieto (TIE1V.HE, €23.26) Twitter (TWTR.N, $48.03) UBS (UBSN.S, SFr16.2) Unilvr (UL.N, $43.18) Verizon Communications Inc (VZ.N, $49.18) Vodafone Group (VOD.OQ, $35.47) Volkswagen (VLKPY.PK, $48.5) WNS Global Services (WNS.N, $23.75) Wal-Mart Stores, Inc. (WMT.N, $85.96) Wells Fargo (EAD.A, $8.82) Wells Fargo & Company (WFC.N, $55.37) Wipro Ltd (WIT.N, $13.99) Wipro Ltd. (WIPR.BO, Rs668.6, OUTPERFORM, TP Rs725.0) Zensar Tech (ZENT.NS, Rs742.7) iGate PA (IGTE.OQ, $38.89)

Disclosure Appendix

Important Global Disclosures

I, Anantha Narayan, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for HCL Technologies (HCLT.BO)

HCLT.BO Closing Price Target Price

Date (Rs) (Rs) Rating

20-Feb-12 487.66 555.68 O

18-Apr-12 491.72 575.52

06-Jul-12 486.17 570.56

25-Jul-12 509.78 644.98

01-Oct-12 577.41 694.60

17-Oct-12 575.82 734.29

03-Jan-13 620.57 759.09

17-Jan-13 697.87 853.36

04-Mar-13 709.38 922.82

17-Apr-13 745.35 942.67

31-Jul-13 930.51 1091.51

12-Aug-13 924.41 1190.74

26-Sep-13 1044.67 1265.16

17-Oct-13 1074.79 1414.00

16-Jan-14 1381.15 1662.07

17-Apr-14 1413.30 1736.49

31-Jul-14 1542.90 1850.00

30-Sep-14 1715.35 2050.00

30-Jan-15 1794.10 2100.00

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

19 February 2015


3-Year Price and Rating History for Infosys Limited (INFY.BO)

INFY.BO Closing Price Target Price


20-Feb-12 1475.30 1600.00 N

15-Apr-12 1201.65 1400.00

06-Jul-12 1221.92 1350.00

13-Jul-12 1113.90 1250.00

12-Oct-12 1197.82 1225.00

03-Jan-13 1168.15 1250.00

11-Jan-13 1356.30 1350.00

04-Mar-13 1451.50 1555.00

12-Apr-13 1147.72 1225.00

03-Jun-13 1256.98 1350.00

12-Jul-13 1401.38 1400.00

12-Aug-13 1502.62 1600.00

26-Sep-13 1506.68 1650.00

11-Oct-13 1636.95 1700.00

10-Jan-14 1774.45 1900.00

01-Apr-14 1655.30 1825.00

11-Jul-14 1662.90 1850.00

30-Sep-14 1873.82 2000.00

09-Jan-15 2073.60 2125.00


N EU T RA L

3-Year Price and Rating History for Tata Consultancy Services (TCS.BO)

TCS.BO Closing Price Target Price


21-Feb-12 1214.96 1398.20 O

24-Apr-12 1176.90 1378.51

13-Jul-12 1230.47 1427.74

14-Jan-13 1313.82 1476.98

04-Mar-13 1487.02 1732.98

18-Jul-13 1634.67 1944.68

12-Aug-13 1786.75 2117.00

27-Sep-13 1917.26 2215.46

15-Oct-13 2184.10 2609.32

16-Jan-14 2315.26 2707.79

18-Jul-14 2405.16 2850.00

30-Sep-14 2738.20 3100.00


O U T PERFO RM

19 February 2015


3-Year Price and Rating History for Tech Mahindra Limited (TEML.BO)

TEML.BO Closing Price Target Price


22-Mar-12 724.80 720.00 N

06-Jul-12 722.00 750.00

09-Aug-12 761.70 790.00

30-Aug-12 792.15 R

03-Sep-12 810.50 790.00 N

05-Nov-12 955.00 1020.00

12-Dec-12 910.80 R

20-Dec-12 926.85 1020.00 N

03-Jan-13 941.40 1040.00

06-Feb-13 979.10 1085.00

21-May-13 909.75 1040.00

12-Aug-13 1265.80 1500.00 O

26-Sep-13 1314.05 1550.00

07-Nov-13 1580.20 1925.00

04-Feb-14 1769.50 2200.00

14-May-14 1838.15 2300.00

31-Jul-14 2150.30 2350.00

06-Aug-14 2198.20 2600.00

30-Sep-14 2487.65 2850.00

09-Jan-15 2680.10 2950.00

02-Feb-15 2894.35 3300.00


N EU T RA L

REST RICT ED

O U T PERFO RM

3-Year Price and Rating History for Wipro Ltd. (WIPR.BO)

WIPR.BO Closing Price Target Price


20-Feb-12 394.75 377.88 N

12-Mar-12 384.16 R

15-Mar-12 375.29 377.88 N

25-Apr-12 360.44 369.09

06-Jul-12 344.57 355.91

24-Jul-12 304.06 338.33

29-Oct-12 302.96 364.70 O

02-Nov-12 320.71 373.49

03-Jan-13 349.23 386.67

04-Mar-13 368.39 430.61

19-Apr-13 368.65 400.00

08-Jul-13 356.05 440.00

12-Aug-13 454.85 525.00

26-Sep-13 477.50 540.00

22-Oct-13 514.90 600.00

17-Jan-14 552.45 650.00

17-Apr-14 585.55 675.00

30-Sep-14 596.35 725.00


N EU T RA L

REST RICT ED

O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and

19 February 2015


Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10 -15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 45% (54% banking clients)

Neutral/Hold* 38% (49% banking clients)

Underperform/Sell* 14% (45% banking clients)

Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperfo rm, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for HCL Technologies (HCLT.BO)

Method: Our target price of Rs2,100 for HCL is based on 16x (~25% discount to multiple implied by TCS TP) 24-month forward EPS.

Risk: Risks to our 12-month target price of Rs2,100 for HCL include the following: (1) slower than expected traction in the software business; (2) significant slowdown in IMS business because of greater competition; and (3) grater than expected margin contraction; and (4) adverse currency movement.

Price Target: (12 months) for Infosys Limited (INFY.BO)

Method: Our target price of Rs2,125 for Infosys is at 16x (~30% discount to implied multiple for TCS) our estimated EPS (earnings per share) for the next 24 months.

Risk: Downside risks to our Rs2,125 target price for Infosys include: (1) a weaker economic environment in the US or Europe leading to slower IT services spending; (2) lack of material pick-up in the revenue growth in FY16; (3) impact on margins due to the necessity of making further investments; and (4) adverse currency movements. Key upside risk is faster than expected turnaround by the management.

Price Target: (12 months) for Tata Consultancy Services (TCS.BO)

Method: Our target price of Rs3,100 for TCS is based on 22x 24-month forward EPS (earnings per share), in line with the stock's historical average.

19 February 2015


Risk: Potential risks to our target price of Rs3,100 for TCS include: (1) a slowdown in the global economies, which could lead to a slowdown in revenues, and (2) a sharp appreciation in the INR vs. the USD.

Price Target: (12 months) for Wipro Ltd. (WIPR.BO)

Method: Our target price of Rs725 for Wipro is based on 16x (~ 30% discount to the multiple implied by TCS's target price) 24-month forward EPS (earnings per share).

Risk: Risks that could impede achievement of our Rs725 target price for Wipro include: (1) a weaker economic environment in the US leading to slower IT services; (2) lack of revenue acceleration for Wipro; and (3) adverse currency movements.

Price Target: (12 months) for Tech Mahindra Limited (TEML.BO)

Method: Our target price of Rs3,300 for Tech Mahindra is based on 17x (~20% discount to implied TCS P/E [price-to-earnings]) 24M forward EPS (earnings per share), adjusting for treasury shares.

Risk: Key downside risk to our target price for Tech Mahindra of Rs3,300 is a sharp downturn in demand from telecom service providers and lower margins for longer due to the large deals signed by the company.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (HCLT.BO, TCS.BO, WIPR.BO, TEML.BO, CVX.N, WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, HON.N, TGT.N, AAPL.OQ, HPQ.N, PG.N, GE.N, HD.N, F.N, C.N, JNJ.N, XOM.N, GM.N, CMCSA.OQ, SNDK.OQ, CSCO.OQ, CAPP.PA, LOW.N, T.N, CTSH.OQ, TXN.OQ, GS.N, BNPP.PA, WMT.N, ADBE.OQ, MS.N, BA.N) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, AAPL.OQ, HPQ.N, PG.N, GE.N, HD.N, F.N, C.N, XOM.N, GM.N, CMCSA.OQ, CSCO.OQ, T.N, CTSH.OQ, GS.N, BNPP.PA, WMT.N, ADBE.OQ, MS.N, BA.N) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (WFC.N, DBKGn.F, DANSKE.CO, AXP.N, HON.N, GE.N, F.N, C.N, XOM.N, GM.N, TXN.OQ, GS.N, BNPP.PA, MS.N) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, AAPL.OQ, PG.N, GE.N, HD.N, F.N, C.N, XOM.N, GM.N, CMCSA.OQ, CSCO.OQ, T.N, GS.N, BNPP.PA, WMT.N, MS.N, BA.N) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, AAPL.OQ, HPQ.N, PG.N, GE.N, HD.N, F.N, C.N, XOM.N, GM.N, CMCSA.OQ, CSCO.OQ, T.N, CTSH.OQ, GS.N, BNPP.PA, WMT.N, ADBE.OQ, MS.N, BA.N) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (HCLT.BO, TCS.BO, WIPR.BO, TEML.BO, CVX.N, WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, HON.N, TGT.N, AAPL.OQ, HPQ.N, PG.N, GE.N, HD.N, F.N, C.N, JNJ.N, XOM.N, GM.N, CMCSA.OQ, SNDK.OQ, CSCO.OQ, CAPP.PA, ALL.N, LOW.N, T.N, MINT.BO, CTSH.OQ, TXN.OQ, GS.N, BNPP.PA, ATOS.PA, WMT.N, AMZN.OQ, ADBE.OQ, DPWGn.DE, MS.N, BA.N) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (WFC.N, DBKGn.F, DANSKE.CO, AXP.N, HON.N, GE.N, F.N, C.N, XOM.N, GM.N, TXN.OQ, GS.N, BNPP.PA, MS.N) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (CVX.N, WFC.N, PSX.N, VZ.N, AXP.N, HON.N, TGT.N, AAPL.OQ, HPQ.N, ACN.N, PG.N, GE.N, HD.N, F.N, C.N, JNJ.N, XOM.N, GM.N, CMCSA.OQ, SNDK.OQ, CSCO.OQ, ALL.N, LOW.N, T.N, CTSH.OQ, TXN.OQ, GS.N, WMT.N, AMZN.OQ, ADBE.OQ, MS.N, BA.N).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (DBKGn.F, RR.L, SNDK.OQ, CAPP.PA, ATOS.PA, MUVGn.DE, DPWGn.DE).

Credit Suisse has a material conflict of interest with the subject company (GE.N) . Credit Suisse is acting as financial advisor to General Electric Company (GE) in connection with the announced proposed acquisition of certain assets from Alstom S.A.

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (WFC.N). As of the date of this report, an analyst involved in the preparation of this report, Susan Katzke, has following material conflicts of interest with the subject company. The analyst or a member of the analyst's household has a long position in the preferred stock Wells Fargo & Company (WFC). As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company. The analyst is a member of the board of directors of Intervest Bancshares, a commercial bank.

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

19 February 2015


As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (PG.N). An analyst or a member of the analyst's household has a long position in the common stock of (PG).

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (C.N). As of the date of this report, an analyst involved in the preparation of this report, Susan Katzke, has following material conflicts of interest with the subject company. The analyst or a member of the analyst's household has a long position in the common and preferred stock Citigroup (C). As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company. The analyst is a member of the board of directors of Intervest Bancshares, a commercial bank.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (HCLT.BO, INFY.BO, TCS.BO, WIPR.BO, TEML.BO, CVX.N, WFC.N, WFC.N, PSX.N, DBKGn.F, VZ.N, NITT.NS, DANSKE.CO, AXP.N, HON.N, TGT.N, AAPL.OQ, HPQ.N, RR.L, ACN.N, PG.N, PG.N, GE.N, HD.N, F.N, C.N, C.N, JNJ.N, XOM.N, GM.N, CMCSA.OQ, SNDK.OQ, CSCO.OQ, CAPP.PA, UBSN.S, ALL.N, LOW.N, T.N, MINT.BO, CTSH.OQ, TXN.OQ, IDR.MC, GS.N, BNPP.PA, ATOS.PA, WMT.N, MUVGn.DE, AMZN.OQ, TIE1V.HE, ADBE.OQ, HEXT.BO, MS.N, BA.N) within the past 12 months

An analyst involved in the preparation of this report has visited certain material operations of the subject company (AAPL.OQ, DPWGn.DE) within the past 12 months

The travel expenses of the analyst in connection with such visits were not paid or reimbursed by the subject company, other than de minimus local travel expenses.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

The following disclosed European company/ies have estimates that comply with IFRS: (DBKGn.F, DANSKE.CO, RR.L, F.N, XOM.N, CAPP.PA, UBSN.S, IDR.MC, BNPP.PA, ATOS.PA, MUVGn.DE, TIE1V.HE, DPWGn.DE).

An analyst involved in the preparation of this report received third party benefits in connection with this research report from the subject company (HPQ.N)

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (WIPR.BO, TEML.BO, WFC.N, PSX.N, DBKGn.F, VZ.N, DANSKE.CO, AXP.N, AAPL.OQ, HPQ.N, PG.N, GE.N, HD.N, F.N, C.N, XOM.N, GM.N, CMCSA.OQ, CSCO.OQ, ALL.N, T.N, GS.N, BNPP.PA, WMT.N, MS.N, BA.N) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (India) Private Limited ......................................................................................................... Anantha Narayan ; Nitin Jain

Important MSCI Disclosures

The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.

19 February 2015


For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

19 February 2015


References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This information is being distributed by Credit Suisse AG, Dubai Branch, duly licensed and regulated by the Dubai Financial Services Authority (DFSA), and is directed at Professional Clients or Market Counterparties only, as defined by the DFSA. The financial products or financial services to which the information relates will only be made available to a client who meets the regulatory criteria to be a Professional Client or Market Counterparty only, as defined by the DFSA, and is not intended for any other person. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Copyright © 2015 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

TC2107.doc

https://www.credit-suisse.com/who_we_are/en/

Documents

India IT Services Sector