Corporate Financial Reporting and Analysis

Financial Statement Analysis – Wipro, TCS & Infosys

Section A – Team 2

CFRA PROJECT
22/08/2018

Submitted by:

Ayush Agrawal (0015/55)

Kaushik Singh (0027/55)
Mayank Advani (0034/55)
Prasad Pochalwar (0046/55)
Srajan Gupta (0064/55)

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SUMMARY
Wipro: Wipro Limited is a leading global information technology, consulting and business process services company
incorporated on 29 December 1945 in Amalner, Maharashtra by Mohamed Premji. Current CEO is Abidali Neemuchwala
& is headquartered in Bengaluru, India. The company is consistently ranked among top 5 IT Consulting firms in India. The
firm has shown high adaptability to changing technological landscapes by constantly upskilling and training its workforce.

Service Sector Industry: The service sector is one of the dominant sectors of India and is one of the pillars of India’s
economic growth. This sector is estimated to contribute around 54.0% of India’s Gross Value Added in 2017-18 and
employed 28.6% of the total population. Net Services exports from India grew by 14.98% Y.o.Y to US$ 77,562.89 million in
2017-18 period. With the ever changing US foreign & trade policies and emerging trade wars with China & European
Countries, the future of International trade is unstable. Also, limits on H1-B visa was another setback to IT companies &
other industries in India. Contrary to these statements, according to software lobby group Indian Information Technology
& Software, services sector would grow at 7-9% in FY19. Major companies such as Infosys & Wipro have posted improved
earnings in the January-March’18 quarter and IT executives have expressed optimism about a continued recovery.

Financial Statements Analysis:

Balance Sheet: Wipro has the lowest current ratio (3.52) compared to 4.05 for Infosys and 6.40 for TCS.
Wipro’s share capital has decreased from Rs. 494 cr to 486 cr from Mar’16 to ‘17. Its share capital is considerably
smaller than that of TCS which is at Rs. 1,148cr. The reserves and surplus for Wipro has increased by Rs. 5,488cr. This
can be attributed to the huge reduction in dividends paid out (Rs. 3567cr in Mar’16 and Rs. 482 cr in Mar’17). In fact,
this trend of decrease in dividends paid and increase in reserves and surplus is consistent across all the 3 companies.
The Intangible Assets have increased by 42.5% for Wipro in FY17 and the Capital WIP has increased by 113.5% in
FY17. This shows that Innovation and R&D has been the prime focus of FY17. The Current Investments have
increased by 42.73% in FY17 but the Cash and Cash equivalents decreased by 58% and Trades Receivable decreased
by 3%. Thus the increase in Current Investments can be attributed to increase in Short term investments and
Marketable Securities etc. The Inventory has decreased by 32% for Wipro in FY17.

Income Statement: The Sales Revenue/Revenue from operations for Wipro has grown by 3% from 44,680 cr in FY16 to
Rs. 46,067 cr in FY17. In comparison, TCS has much larger Revenue from Operations at Rs. 92,693 cr in FY17. This can be
attributed to large number & size of TCS projects. The software development Expenses for Wipro have grown by 2.7%
from Rs. 21,267cr in FY16 to Rs. 21,854cr in FY17. The operating expense for Wipro are Rs. 14,636.5 cr for FY17. Even
though Infosys has larger Revenue from Ops, its operating expenses are smaller than Wipro (Rs 11,138 cr FY17). The
Depreciation and Amortization expense for Wipro has increased by 19.7%. The Finance Costs for Wipro (Rs 392 cr FY17)
are much higher than that of Infosys(Rs 0) and TCS (Rs. 16cr). The Tax Expense has grown by 5.5% for Wipro in FY17.

Cash Flow Statement: The CFO for Wipro is positive, CFI is negative and CFF is negative. This indicates that Wipro is
still in its growth phase.
CFO: For Wipro, 83.8% of the direct cash inflow from operating activities flows out due to operating expenses and taxes
paid. This is significantly higher than of Infosys (82%) and TCS (75%). The amount of taxes paid as percentage of operating
cash inflow is highest for Infosys at 8.4%. The CFO for Wipro (Rs 7,370.7 cr FY17) is one-third of TCS CFO (Rs. 23,132 cr).
CFI: The CFI of Wipro is Rs -7890 cr. TCS has the most negative CFI (Rs. -15782 cr) which can be attributed to the high
amount spent on purchase of investments followed by Infosys. Infosys has made huge payments for purchase of
assets like Liquid Mutual funds and fixed maturity plan securities.
CFF: The CFF of Wipro is Rs. -4367.6 cr. The company is mainly financed from Loans and borrowings rather than
equity which indicates poor financial health of the company. Infosys and TCS also have a negative CFF which is due to
high amounts of dividends paid out to shareholders (12% of the total operating cash inflow).

Key accounting policies: These financial statements have been prepared on historical cost convention and on accrual basis.
Investments in subsidiaries, goodwill & intangible assets are tested for impairment at least annually or when events occur or
changes in circumstances indicate that the recoverable amount of the asset or cash generating units to which these pertain is

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less than its carrying value. Inventories are valued at lower of cost and net realizable value, including necessary provision for
obsolescence. Cost is determined using the weighted average method. PPE are measured at cost less accumulated
depreciation and impairment losses, if any. Cost includes expenditures directly attributable to the acquisition of the asset.

Ratio and Comparative Analysis: The % increase in Current Ratio is around 73.4% of that in FY16. Similar trends could
be seen in the Quick Ratio where the increase is around 74.5% for Wipro over the span of 2 years. There has been a
substantial rise in Current as well as Quick ratio for all the three companies. The absolute value being the highest for
TCS and lowest for Wipro due to the companies being at different stages of operating life cycle. Net Profit Margin saw
a constant fall over FY16 to FY17 which can be attributed to constant profits as compared to increasing revenues. The
Net Profit margin has been highest for TCS, then for Infosys and least for the Wipro. A similar story of decline in ROA
could be seen across the sector where the decrease is around 9% for TCS, 7% for Wipro while Infosys has managed to
keep their ROA constant. The operating revenue saw a rise of nearly 22% over a span of 2 years for Wipro. The Net
Profit Margin as per the market trends has been on a decline for all the three firms over the period of two fiscal years.
Dividend Payout Ratio for Wipro has decreased by around 81% over a period of 2 fiscal years whereas we saw a rise
for Infosys of 21% and a rise of 11% for TCS with absolute value for Infosys being the highest (0.51) in FY17

Trend Analysis and Common Size : Balance sheet Trends- The total assets saw a steady growth over the year from
FY16 to FY17 of 7.18%. The growth is mainly attributed to increase in current assets in the form of financial
investments. Shareholders’ Equity shows more than 13% growth from FY16 to FY17. Total Liabilities have decreased
over the year because of reduction in the amount of borrowings and trade payables.
Income Statement Trends- Total Revenue and Total Expenses almost remained same over the year with no substantial
rise in profit noticed from FY16 to FY17 while total assets increased with funding received from equity.
Common Size Analysis- The component of non-current Liability has remained constant over the year FY16-FY17.
Shareholders’ equity and current liability saw minor fluctuations with an increase in equity being compensated by a similar
decrease in current liability component. The maximum increase in total assets is from the rise in shareholders’ equity.

Financial Performance and Position:

The revenue of Wipro has a CAGR of 10.1% over a span of 2 years and has reached Rs. 46,048 cr which is modest in
comparison to TCS’s revenue Rs. 92,693 cr. This was primarily driven by an 8.4% increase in revenue from IT services
which was offset partially by a 12.8% decrease in revenue from IT products segments. Cost of Revenues increased by
9.8% primarily on account of increase in employee compensation due to impact of Indian Rupee Depreciation, salary
increases, increases in headcount, increase in technical fee. Selling & Marketing Expense as a % of total revenue increased
by 0.8 % pts. This was primarily due to increase in employee compensation & amortization and impairment charges for
intangible assets. General & Administrative Expense increased by 11.9% primarily due to provisions for doubtful debts &
facility expenses & a civil money penalty related to SEC investigation partly offset by savings in travel costs. Finance
Expense decreased by Rs. 158 cr primarily due to decrease of Rs 90.5 cr in exchange loss on foreign currency borrowings &
related derivative instruments partly offset by an increase in interest expense. Operating margin decreased by 212 bps.
Market Price per share has decreased by 8.6% to Rs 515.7 in FY17. Goodwill increased by 23.3% in FY17 due to
acquisitions of HealthPlan Services(BPaaS), Appirio (cloud service)
Strengths:
· Wipro has adapted itself with changing technologies like Cloud Computing, Automation by investing heavily in R&D
(R&D exp 340cr) and acquiring 4 new startups. 603 patents were filed by Wipro and 1662 patents are held till date.
· Wipro has a better trained workforce than Infosys and TCS (headcount 1,81,482) and has a high gross utilization
ratio of 71.5%.
· Wipro has a low cost advantage as it generally offers its services cheaper than Infosys and TCS.
Weaknesses:
· Wipro lags behind in International outsourcing market and its presence is mainly in India. In comparison, TCS and
Infosys have strong presence in the UK and US IT markets. Moreover Wipro lacks expertise and specialized projects
· High Employee attrition at top and mid-level in Wipro means that the company always faces a shortage of quality
upper management which leads to uncertainty and high costs.
· Poor Strategy and execution in comparison to other major IT players like TCS and Infosys

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Service Sector Industry Overview
The service sector is one of the dominant sectors of India and is one of the pillars of India’s economic growth.
This sector is estimated to contribute around 54.0% of India’s Gross Value Added in 2017-18 and employed 28.6% of
the total population. Net Services exports from India grew by 14.98% Y.o.Y to US$ 77,562.89 million in 2017-18 period.
The top 10 categories of Indian services sector attracted FDI equity inflows in the period of Apr’2000-Dec’2010,
amounting to about US$ 22,095.51 billion according to the Department of Industrial Policy and Promotion (DIPP).
The Government of India recognises the importance of promoting growth in services sectors and provides
several incentives in wide variety of sectors such as health care, tourism, education, engineering, communications,
transportation, information technology, banking, finance, management, among others. The Government of India has
adopted a few initiatives in the recent past. Some of these are as follows:
● Under the Mid-Term Review of Foreign Trade Policy (2015-20), the Central Government increased incentives
provided under Services Exports from India Scheme (SEIS) by 2%
● Government of India is working to remove many trade barriers to services and tabled a draft legal text on Trade
Facilitation in Services to the WTO in 2017

Domestic and Global factors govern the service sector growth. The introduction of Goods and Services Tax (GST) acted
as boon to the Service sector. A common national market has been created by the implementation of GST that reduced
the overall tax burden on goods. It is expected to reduce costs in the long run, which will result in the reduction in prices
of services.

Wipro Overview

Brief Company Background

Wipro Limited is a leading global information technology, consulting and business process services company
incorporated on 29 December 1945 in Amalner, Maharashtra by Mohamed Premji. Current CEO is Abidali Neemuchwala
& headquartered in Bengaluru, India.

Key Highlights of 2016-2017

1. Intellectual capital: R&D expenses 3,338 Mn. 603 Patents filed in 2017 up from 514 & Investments in 4 new
startups.
2. Social and relationship capital: CSR spend 1,863 Mn. Net promoter score of 740 basis point increase YoY, 98%
Revenue generated from existing customers.
3. Human capital: 334 employees with disability, 100+ nationalities, 33% Women employees & 181,482 headcount in
IT Services.
4. Natural Capital: 11,000 tons of CO2 eq. reduction of
GHG emissions, 152 Mn. Ltr freshwater reduction,
completed second biodiversity project in Pune which
includes 5 thematic gardens

Industry Outlook: With ever changing US foreign & trade

policies and emerging tradewars with China & European
Countries the future of International trade is
unstable.Also, with limits on H1-B visa was another
setback to IT companies & other industries in India.
Contrary to these statements according to software

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lobby group Indian Information Technology & Software services sector would grow at 7-9% in FY19.
Major companies such as Infosys & Wipro have posted an improved earnings in the January-March’18 quarter and IT
executives have expressed optimism about a continued recovery as the sector diversifies into more lucrative digital
segments such as cloud computing and big data.

Quarterly Revenue, Net Income and Adjusted Share Price

Analysis:
Wipro is an IT services provider with two
segments Services and Products.
Excellent consistent profit margins, excellent
ROE, lots of free cash flow, low debt.

Good revenue growth and EPS growth in the

last 10 years. Wipro did a buyback in 2017 at
a price of 343 Rs per share. With the rise of
cloud solutions like AWS, Azure and
increased automation, more work can be
done at cheaper costs with fewer people.

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Key Accounting Policies
• Basis of Accounting and preparation of Financial Statements: These financial statements have been prepared on a
historical cost convention and on an accrual basis. These financial statements are prepared in accordance with Indian
Accounting Standards (Ind AS), the provisions of the Companies Act, 2013 (“The Company’s Act”)as applicable and
guidelines issued by the Securities and Exchange Board of India (“SEBI”). Up to the year ended March 31, 2016, the
Company prepared its financial statements in accordance with the requirements of the Indian GAAP, which included
Standards notified under the Companies (Accounting Standards) Rules, 2006.
• Foreign currency transactions and translation: Foreign exchange gains and losses resulting from the settlement of
such transactions and translation at the exchange rates prevailing at the reporting date of monetary assets and
liabilities denominated in foreign currencies are recognized in the statement of profit and loss and reported within
foreign exchange gains/(losses), net within results of operating activities except when deferred in other
comprehensive income as qualifying cash flow hedges. Nonmonetary assets and liabilities denominated in foreign
currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Translation differences on nonmonetary financial assets measured at fair value at the reporting date, such as
equities classified as FVTOCI are included in other comprehensive income, net of taxes.
• Impairment testing: Investments in subsidiaries, goodwill and intangible assets are tested for impairment at least
annually and when events occur or changes in circumstances indicate that the recoverable amount of the asset or
cash generating units to which these pertain is less than its carrying value. The recoverable amount of cash enerating
units is higher of value-in-use and fair value less cost to dispose.
• Income taxes: The major tax jurisdictions for the Company are India and the United States of America. Significant
judgments are involved in determining the provision for income taxes including judgment on whether tax positions
are probable of being sustained in tax assessments.
• Inventories: Inventories are valued at lower of cost and net realizable value, including necessary provision for
obsolescence. Cost is determined using the weighted average method.
• Impairment: A) Financial assets: The Company applies the expected credit loss model for recognizing impairment
loss at FVTOCI B) Non- financial assets: The Company assesses long-lived assets such as PPE and acquired intangible
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or
group of assets may not be recoverable.
• Revenue: The Company derives revenue primarily from software development, maintenance of software/hardware
and related services, business process services, sale of IT and other products. The Company uses the percentage of
completion method using the input (cost expended) method to measure progress towards completion in respect of
fixed price contracts
• Property, plant and equipment: PPE are measured at cost less accumulated depreciation and impairment losses, if
any. Cost includes expenditures directly attributable to the acquisition of the asset. General and specific borrowing
costs directly attributable to the construction of a qualifying asset are capitalized as part of the cost.
• Amendment to Ind AS 7: In Mar 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting
Standards Amendments) Rules, 2017. These amendments are in accordance with the amendments made by
International Accounting Standards Board (IASB) to IAS 7, ‘Statement of cash flows’ in Jan 2016, requiring the entities
to provide disclosures to enable users of financial statements to evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a
reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing
activities to meet the disclosure requirement.
• Finance cost: Finance cost comprise interest cost on borrowings, gain or losses arising on re-measurement of
financial assets at FVTPL, gains/ (losses) on translation or settlement of foreign currency borrowings and changes in
fair value and gains/ (losses) on settlement of related derivative instruments.

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Classified Financial Statements
Income Statement:

Analysis:
• The Sales Revenue/Revenue from operations for Wipro has grown by 3% from 44,680 cr in FY16 to Rs. 46,067
cr in FY17. In comparison, TCS has much larger Revenue from Operations at Rs. 92,693 cr in FY17. This can be
attributed to larger number & size of TCS projects.
• The software development Expenses for Wipro have grown by 2.7% from Rs. 21,267cr in FY16 to Rs. 21,854cr
in FY17.
• The operating exp for Wipro are Rs. 14,636.5 cr for FY17. Even though Infosys has larger Revenue from Ops, its
operating expenses are smaller than Wipro (Rs 11,138 cr FY17).
• The Depreciation and Amortization expense for Wipro has increased by 19.7%.
• The Finance Costs for Wipro (Rs 392 cr FY17) are much higher than that of Infosys (Rs 0) and TCS (Rs. 16cr).
The Tax Expense has grown by 5.5% for Wipro in FY17.

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Balance Sheet:

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Analysis:
• Wipro has the lowest current ratio (3.52) compared to 4.05 for Infosys and 6.40 for TCS. This shows that
Wipro has the lowest amount of current assets for every rupee of current liability
• Wipro’s share capital has decreased from Rs. 494 cr to 486 cr from Mar’16 to ‘17. Its share capital is
considerably smaller than that of TCS which is at Rs. 1,148cr
• The reserves and surplus for Wipro has increased by Rs. 5,488cr. This can be attributed to the huge reduction
in dividends paid out (Rs. 3567cr in Mar’16 and Rs. 482 cr in Mar’17). In fact, this trend of decrease in
dividends paid and increase in reserves and surplus is consistent across all the 3 companies.
• The Intangible Assets have increased by 42.5% for Wipro in FY17 and the Capital WIP has increased by 113.5%
in FY17. This shows that Innovation and R&D has been the focus of FY17.
• The Current Investments have increased by 42.73% in FY17 but the Cash and Cash equivalents decreased by
58% and Trades Receivable decreased by 3%. Thus, the increase in Current Investments can be attributed to
increase in Short term investments and Marketable Securities etc.
• The Inventory has decreased by 32% for Wipro in FY17

Cash Flow Statement

Analysis:
• The CFO for Wipro is positive, CFI is negative and CFF is negative. This indicates that Wipro is still in its growth
phase.
• CFO: For Wipro, 83.8% of the direct cash inflow from operating activities flows out due to operating expenses
and taxes paid. This is significantly higher than Infosys and TCS for which the percentages are 82% and 75%.
The amount of taxes paid as a percentage of operating cash inflow is highest for Infosys at 8.4% followed by
TCS at 7% and Wipro at 5.2%.The CFO for Wipro (Rs 7,370.7 cr for FY17) is almost a third of TCS CFO (Rs.
23,132 cr FY17).
• CFI: The CFI of Wipro is Rs -7890 cr. TCS has the most negative CFI (Rs. -15782 cr) which can be attributed to
the high amount spent on purchase of investments followed by Infosys. Infosys has made huge payments for
purchase of assets like Liquid Mutual funds and fixed maturity plan securities.
• CFF: The CFF of Wipro is Rs. -4367.6 cr. Most of the financing of the company is from Loans and borrowings
rather than equity which indicates poor financial health of the company. Infosys has a negative CFF which is
due to high amounts of dividends paid out to shareholders (12% of the total operating cash inflow). The CFF of
TCS is also attributable to the high dividends paid out to shareholders

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10
Trend Analysis and Common size
Balance sheet Trend analysis:
Trend analysis of Balance sheet
(in '000)
Total Assets: The total assets saw a steady growth over
120
100 the year from FY16 to FY17 of 7.18%. The growth is mainly
80 attributed to increase in current assets in the form of
60
40 financial investments
20
0 Shareholders’ Equity shows more than 13% growth from
Total
Total Total FY16 to FY17. However, higher growth is not seen
shareholde
Liability Assets
rs' equity because of any major change in share capital.
2016-2017 92.9493988 107.182023 113.292437 Total Liabilities have decreased over the year because of
2016-2015 100 100 100
reduction in the amount of borrowings and trade
2016-2017 2016-2015 payables.

Income Statement Trend analysis: Total Revenue and Total Expenses almost remained same over the year with no
substantial rise in profit noticed from FY16 to FY17 while total assets increased with funding received from equity
.
Trend Analysis of Income
Statement (in '000)
104
103
102
101
100
99
98
97
Total Total
Profit/Loss
Revenue Expenses
2016-2017 102.587811 103.080397 99.5268581
2015-2016 100 100 100

2016-2017 2015-2016

Common Size Analysis:

Vertical Analysis of Liability and • The component of non-current liability
Equity has remained constant over the year FY16
-FY17
1.2
1 • Shareholders’ equity and current liability
0.8 saw minor fluctuations with an increase in
0.6 0.74 0.7
0.4
equity being compensated by a similar
0.2 0.041 0.042 decrease current liability component.
0.22 0.26
0 • The maximum contribution for increase in
2016-2017 2016-2015
Share holders' equity 0.74 0.7 total assets are from the rise shareholders’
Non-current Liability 0.041 0.042 equity.
Current Liability 0.22 0.26

Current Liability Non-current Liability Share holders' equity

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Ratio Analysis

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COMPARATIVE ANALYSIS

LIQUIDITY RATIOS: The changes in liquidity ratios, which is the

Current Ratio situation of company with regards to presence of liquid assets
7 compared to its liabilities, on the increasing sides of the curve for the
6 last five financial years from FY16 to FY17. The percentage increase
5 in Current Ratio is around 73.4% of the value in FY16. Similar trends
4 could be seen in the Quick Ratio where the increase is around 74.5%
3
over the span of 2 years.
2
1
0
CURRENT AND QUICK RATIO: There has been a substantial rise in
Wipro Infosys TCS Current as well as Quick ratio for all three companies. Where the
absolute value being the highest for TCS at 6.4 and lowest for Wipro
2017 2016
2.98 due to the companies being at different stages of operating life
cycle. In the case of Wipro, the rise could be accounted to the rise in
the current assets and fall in the current liabilities with short term trade receivables being constant over the span of 2
years from FY16 to FY17.

PROFITABILITY RATIOS: The Profitability ratio helps us to determine the profit-making capabilities of the firm as
compared to the various factors such assets, owner’s equity, etc. The primary ratio considered would be the Net Profit
Margin which saw a constant fall over FY16 to FY17 can be attributed to constant profits as compared to the increasing
revenues. The other ratio for analysis can be ROA i.e., Return on Assets which again have seen a considerably fall in
value. The change is around 3.92% over 2 years.

NET PROFIT MARGIN: The Net Profit Margin as per the market trends has been on decline for all the 3 firms over the
period of two fiscal years. The margin has been highest for TCS, then for Infosys and least for Wipro. This could be
attributed to the rise in revenues from operations against the constant PBT. The operating revenue saw a rise of nearly
22% over a span of 2 years for Wipro and similar analysis could be drawn for the other two companies.

RETURN ON ASSETS (ROA): A similar story of decline in ROA could be

seen across the sector where the decrease is around 9% for TCS, 7% Return on Equity
for Wipro while Infosys has managed to keep its ROA constant.
40% 35%
Same picture is shown by Asset Turnover Ratio. The rate of increase
35% 30%
of net profits is comparatively very low as compared to the average 30%
assets. Return on Equity (ROE) also depicts a similar picture due to 25% 23%
20% 21%
increase in Owners’ Equity (OE) as compared to Net Income. 20% 17%
15%
PROFITABILITY RATIOS: The Profitability ratio helps us to determine 10%
the profit-making capabilities of the firm in comparison to various 5%
factors such as assets, owner’s equity, etc. The primary ratio 0%
Wipro Infosys TCS
considered would be the Net Profit Margin which saw a constant fall
over FY16 to FY17 can be attributed to constant profits as compared 2017 2016
to the increasing revenues. The other ratio for analysis can be ROA
i.e., Return on Assets which again has seen a considerable fall in value. The change is around 3.92% over 4 years.

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FINANCIAL LEVERAGE MULTIPLIER: Wipro is funding their assets
using debts and hence lower FLM and the advantage of this can be Financial Leverage
seen in their effective tax rates which is lower. The other two fund Multiplier
their assets completely by equity. However, Wipro has a higher
200%
FML as it keeps the large number of long term provisions, trade
150% 135%143%
payables and do not raise debt. 115%119% 117%119%
DIVIDEND PAYOUT RATIO: Wipro has decreased by around 81% over 100%
a period of 2 fiscal years whereas we saw rise in ratio for Infosys of
50%
21% and arise of 11% for TCS and the absolute value for Infosys
being the highest at 0.51 in FY17. The analysis would be the 0%
saturation attained by Infosys being in its maturity stage as Wipro Infosys TCS
compared to Wipro which is in its growth stage. Hence Infosys tends 2017 2016
to give out dividends whereas Wipro invests the amount back into
its operation cycle.

DU PONT ANALYSIS
Year 2016-17 2015-2016
ROE 17% 19%
Net Profit Margin 17% 18%
Financial Leverage Multiplier 135% 143%
Asset Turnover 73% 76%
NPM*FLM*ROA 16.75% 19.56%

Financial Performance and Position:

· Revenue: The revenue of Wipro has a CAGR of 10.1% over a span of 2 years and has reached Rs. 46,048 cr which is
modest in comparison to TCS’s revenue Rs. 92,693 cr. This was primarily driven by an 8.4% increase in revenue from IT
services which was offset partially by a 12.8% decrease in revenue from IT products segments.
· Profitability: Cost of Revenues increased by 9.8% primarily on account of increase in employee compensation due to
impact of Indian Rupee Depreciation, salary increases, increases in headcount, increase in technical fee
· Selling & Marketing Expense: S&M expense as a % of total revenue increased by 0.8 % pts. This was primarily due to
increase in employee compensation & amortization and impairment charges for intangible assets.
· General & Administrative Expense increased by 11.9% primarily due to provisions for doubtful debts & facility
expenses & a civil money penalty related to SEC investigation partly offset by savings in travel costs.
· Finance Expense decreased by Rs. 158 cr primarily due to decrease of Rs 90.5 cr in exchange loss on foreign currency
borrowings & related derivative instruments partly offset by an increase in interest expense.
· Operating margin decreased by 212 bps. Market Price per share has decreased by 8.6% to Rs 515.7 in FY17
· Goodwill increased by 23.3% in FY17 due to acquisitions of HealthPlan Services (BPaaS), Appirio (cloud service)

Strengths:
· Wipro has adapted itself with changing technologies like Cloud Computing, Automation by investing heavily in R&D
(R&D exp 340cr) and acquiring 4 new startups. 603 patents were filed by Wipro and 1662 patents are held till date.
· Wipro has a better trained workforce than Infosys and TCS (headcount 1,81,482) and has a high gross utilization ratio
of 71.5%. It upskilled 39,000 employees to meet the changing demands of industry which shows adaptability.
· Wipro has a low-cost advantage as it generally offers its services cheaper than Infosys and TCS.
Weaknesses:
· Wipro lags behind in International outsourcing market and its presence is mainly in India. In comparison, TCS and
Infosys have strong presence in the UK and US IT markets. Moreover, Wipro lacks expertise and specialized projects
· High Employee attrition at top and mid-level in Wipro means that the company always faces a shortage of quality
upper management which leads to uncertainty and high costs.
· Poor Strategy and execution in comparison to other major IT players like TCS and Infosys

Sources: Annual reports of respective companies for the period 2016-2017

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