Learning objectives
By the end of the week you can:
- Explain the people-leverage model from first principles: revenue = billable people × utilization × hours × realized rate; why the pyramid (few seniors, many juniors) and the offshore/onsite mix are where the margin actually lives; and why the model's growth has historically been linear in headcount.
- Compute constant-currency revenue growth from reported growth and a currency mix, and explain why an Indian IT company's INR growth, USD growth, and CC growth are three different numbers, only the last of which measures demand.
- Run the full IT-services KPI panel with thresholds: CC growth, EBIT margin (~20–26% for tier-1 India), TCV and book-to-bill (~1.0–1.2×+), attrition (>20% = pressure), utilization (82–87%), headcount net adds (the leading demand signal), revenue per employee, client/vertical concentration, DSO with unbilled revenue, offshore/onsite mix, and discretionary vs cost-takeout demand, computing each and judging it against its band.
- Work the growth–margin–pyramid triangle: show numerically how hiring freezes broaden margins today by narrowing the pyramid's base, and why that mortgages both future growth and future margin; recognize "margin held only via lower net adds" as harvesting, not efficiency.
- Assess the GenAI question evenhandedly: state the strongest bear case (productivity deflates billable hours) and the strongest bull case (every prior efficiency wave expanded the work), and name the specific indicators in the filings that will settle it.
- Explain why telecom returns are structurally hard: the capex treadmill (generational rebuilds before the prior generation pays back), spectrum auctions as upfront scarcity-rent extraction, and the arithmetic by which a 50% EBITDA margin coexists with ROIC below WACC. Then why consolidation to three players (India post-2016, the US) is the condition for repair.
- Run the telecom KPI panel with thresholds: ARPU (computed correctly off average subscribers), subscribers and net adds, churn (<2.5%/month healthy), data GB/user and MOU, subscriber vs revenue market share, AGR and the legacy of the Indian AGR dispute, net debt/EBITDA (<3× on the inclusive definition), capex and spectrum intensity, and VLR/active-SIM %. Then detect a phantom subscriber base.
- Apply the right valuation lens to each: P/E for IT services (because earnings ≈ free cash flow) with the growth-durability question made explicit via the key-value-driver formula; EV/EBITDA for telecom with the lease and spectrum adjustments done properly and cross-checked against EV/(EBITDA − capex); then run both sectors' red-flag panels from the brief.
Prerequisites & connections
Builds on. M1 (revenue recognition: Ind AS 115/ASC 606 over-time recognition is why IT firms carry unbilled revenue/contract assets on fixed-price work; Ind AS 116/ASC 842 leases, which sit inside every telecom EBITDA you will compare; intangible assets, where spectrum is a purchased intangible and the US/India difference in amortizing it moves EBIT). M2.02–M2.04 (DSO, working capital, DuPont: the IT DSO-plus-unbilled check and the telecom ROIC decomposition are direct applications). M2.05–M2.07 (forensics: unbilled ballooning, capitalizing network opex, phantom subscribers). M3.04–M3.07 (EV construction, where telecom is the hardest EV build in the market; the key-value-driver formula for reversing the IT P/E; reverse DCF). M4.03–M4.06 (five forces on an undifferentiated product; switching costs as the IT moat and efficient scale as the telecom moat; the capital cycle, of which telecom's 2016–2021 India consolidation is the textbook case). M5.04 (contrast: SaaS sells software at ~zero marginal cost; IT services sells hours at fully-loaded human cost, and the margin structures follow).
Feeds into. M5.07–M5.10 (each playbook sharpens the right-lens reflex; the M5.10 capstone mixes IT and telecom cases into the right-lens exam). Phase 7 (currency: the INR's structural slide is a tailwind for IT exporters and a headwind for dollar-capex telecom). Phase 8 (the 1–2 hour teardown of an IT major runs on the panel below; a telecom teardown without the EV rebuild is worthless). The AGR section is also your first full case of regulatory definition risk, a theme that returns in banks, pharma, and utilities.