Вы находитесь на странице: 1из 38

INDUSTRIAL REVIEW PROJECT REPORT

A COMPARATIVE STUDY ON IT INDUSTRY

EVIDENCE FROM SELECT IT COMPANIES - TECH MAHINDRA,


INFOSYS AND WIPRO

By
Lairenlakpam Mangal Singh

Shubhika

Rajpriya Singh

Department of Management Studies,

Christ University, Bengaluru - 560 029

2017
A comparative study on IT Industry

ACKNOWLEDGEMENT

We would like to express our deepest appreciation to all those who provided us the
possibility to complete this report. We would like to extend our sincere thanks to all of them
for their guidance and constant supervision as well as for providing necessary information
regarding the project and also for their support in completing the project.

A special gratitude to our class teacher, Prof. Stella Mary, whose contribution in stimulating
suggestions and encouragement, helped us in writing and completing this report.

2
A comparative study on IT Industry

TABLE OF CONTENTS

Chapter Title Page No.


1 Industry Overview 8
Industry Analysis
Porters Five Forces Analysis of Indian IT Industry
Advantage India
Segment of Indias IT Sector
2 Industry and Company Profile 13
Tech Mahindra
Infosys
Wipro
3 Data Analysis and Interpretation 18
Tech Mahindra
Infosys
Wipro
4 Summaries of findings and conclusion 37
5 Bibliography 40

3
A comparative study on IT Industry

LIST OF TABLES

Sl. No. Title Page No.


Table 1 Porters Five Forces Analysis of Indian IT Industry 11

Table 2 Advantage India 12


Table 3 Segment of Indias IT Sector 12
Table 4 Tech Mahindra 14
Table 5 Wipro 17
Table 6 Competitors 20
Table 7 Balance Sheet Five Year Trend Analysis 22
Table 8 Statement of Income Five Year Trend Analysis 23
Table 9 Cash Flow Statement Five Year Trend Analysis 24
Table 10 Summary of Balance Sheet 24
Table 11 Summary of Profit and Loss Statement 25
Table 12 Balance Sheet Five Year Trend Analysis 27
Table 13 Cash Flow Statement Five Year Trend Analysis 28
Table 14 Competitors 28
Table 15 SWOT Analysis 32
Table 16 Balance Sheet Five Year Trend Analysis 33
Table 17 Statement of Income Five Year Trend Analysis 34

LIST OF CHARTS
Chart 1 Tech Mahindra 19
Chart 2 BCG Matrix 21
Chart 3 EVA over time 21
Chart 4 Peer group comparison 28
Chart 5 Infosys BCG Matrix 31
Chart 6 Market capitalization 31
Chart 7 BCG Matrix 33
Chart 8 Peer Group Comparison 33

4
A comparative study on IT Industry

EXECUTIVE SUMMARY

Subject Matter:

This report will focus on the Information Technology Industry analysis and critical evaluation
of the financial performance of Tech Mahindra, Infosys and Wipro for the last five years,
highlighting the solvency positions, turnovers, efficiency ratios and cash flow statements.

At the end, there will be trend analysis of the key financial indicators of the company and
other quantitative and qualitative aspects that are necessary for managerial decisions.

Methods of Analysis:

Methods of analysis include vertical analysis as well as ratios analysis such as Current,
Quick, Debt ratios, etc. Other calculations include rates of Return on Equity and Total Assets
and Earnings before Interest and Tax. Many other calculations can be found in the project.

Findings:

Results of data analyzed show that most of the ratios are in a good and safe position. The
growth of the company is well above the Industry average. The company is the fifth largest
Indian IT company in terms of market capitalisation. The company is the fifth largest Indian
IT company in terms of market capitalisation. Infosys has not taken any long term
borrowings from any sources. Wipro, on the other hand has some long term borrowings.
These companies have not raised money through further public offer.

Assets are increasing as investments are increasing.


Liquidity position is good.
Tech Mahindra and Infosys have maintained very low inventory as compared to
Wipro.

Conclusion:

The report finds that the IT industry in India is not growing at a diminishing rate due to
several factors. The firms should focus on consistently earning more profits in the coming
years by taking care of internal as well as external factors. With regard to resources, these
firms are not properly maintaining its assets to generate more income as this can be observed
from the efficiency ratios.

Limitations:

Problems faced while making this report are

There is an absence of universally accepted terminology in financial analysis.


Lack of exhaustive skills related to Management Accountancy.
The report is prepared based on secondary data. Hence, there is lack of accuracy.

5
A comparative study on IT Industry

Chapter 1
Introduction to Industry

6
A comparative study on IT Industry

Industry Overview

The information technology industry in India consists of two major components: IT


services and business process outsourcing (BPO). The sector has increased its contribution to
India's GDP from 1.2% in 1998 to 9.3% in 2015. According to NASSCOM, the sector
aggregated revenues of US$147 billion in 2015, where export revenue stood at US$99 billion
and domestic at US$48 billion, growing by over 13%.

The growth in the IT sector is attributed to increased specialization, and an availability of a


large pool of low cost, highly skilled, educated and fluent English-speaking workers, on
the supply side, matched on the demand side by increased demand from foreign consumers
interested in India's service exports, or those looking to outsource their operations.

The IT sector in India is generating 2.5 million direct employments. India is now one of the
biggest IT capitals of the modern world and all the major players in the world IT sector are
present in the country.

Bangalore is considered to be the Silicon Valley of India because it is the leading IT


exporter. Exports dominate the industry and constitute about 77% of the total industry
revenue.

According to Gartner, the Top five Indian IT Services providers are Tata Consultancy
Services, Infosys, Cognizant, Wipro, and HCL Technologies.

Services offered by IT industry


Indian IT industry has tapped mainly two service lines i.e. application development and
application outsourcing. But other service lines are:

Packaged Software Support and ITeS opportunities include


Installation
HR services
IT consulting
Customer care
Network Infrastructure
Payment services
management
Content development
Systems Integration
Administration
IS outsourcing
Finance
IT training and education

Hardware support and Installation

Network consulting and


integration
7
A comparative study on IT Industry

Industry Analysis

The IT-BPM sector in India expanded at a CAGR of 13.7 per


Strong growth cent over 201016, which is 34 times higher than the global
opportunities IT-BPM growth & is estimated to expand at a CAGR of 9.1
per cent to USD350 billion by 2025

As of 2015, India is a prominent sourcing destination across


the world, accounting for approximately 56 per cent market
Leading sourcing share in the global services sourcing business.
destination India acquired a share of around 38 per cent in the overall
Business Process Management (BPM) sourcing market

Indias highly qualified talent pool of technical graduates is


one of the largest in the world, facilitating its emergence as a
Largest pool of preferred destination for outsourcing, computer
ready to hire talent science/information technology accounts for the biggest
chunk of India' fresh engineering talent pool, with more than
98 per cent of the colleges offering this stream

Most lucrative The sector ranks 4th in Indias total FDI share & accounts for
sector for approximately 37 per cent of total Private Equity and Venture
investments investments in the country

In FY16, revenues of Indian IT-BPM market is estimated to


touch USD160 billion
In 2015, Indian IT companies have helped clients to save
Cash Cow USD200 billion in the last 5 years
Indias IT-BPM sector includes 670 offshore development
centres around 78 countries

Indias IT market is experiencing a significant shift from a


few large-size deals to multiple small-size ones
Changing business The number of start-ups in technology is expected to reach
50,000, adding to around 2 per cent of GDP
dynamics Delivery models are being altered, as the business is moving
to capital expenditure (capex) based models from operational
expenditure (opex), from a vendors frame of reference

Disruptive technologies, such as cloud computing, social media &


data analytics, are offering new avenues of growth across verticals
New Technologies for IT companies
The SMAC (social, mobility, analytics, cloud) market is expected to
grow to USD225 billion by 2020

8
A comparative study on IT Industry

Table 1: Porters Five Forces Analysis of Indian IT Industry

Competitive Rivalry
Most of the bigger Indian firms
Intense competitive rivalry exists
offer same services and there is
due to low switching costs
little product differentiation

Threat of New Entrants


Large players, however, toughen
Easy entry as the capital required
prospects of small and medium
is low
players to win large deals

Substitute Products
Threat is medium as new centers, such as Phillipines and China, are
fast gaining ground among investors due to their low costs advantages

Bargaining Power of Suppliers


Bargaining power of suppliers is
less as most of their businesses Price taker rather than price maker
come from the same geographies

Bargaining Power of Customers

Firms are mostly dependent on


Bargaining power is high as many
same geography, which increases
IT firms fight for a similar project
customer power

9
A comparative study on IT Industry

Table 2: Advantage India

Table 3: Segment of Indias IT Sector

10
A comparative study on IT Industry

Chapter 2

Industry and Company profile

11
A comparative study on IT Industry

1. Tech Mahindra

1.1 Table 4: Company Profile

Type Public

Industry IT Services, IT Consulting

Founded 1986

Headquarters Pune, India

Services IT, Business Consulting and Outsourcing

Parent Mahindra Group

Tagline/Slogan Create the next wave

Website www.techmahindra.com

Tech Mahindra Ltd is a mid-size Indian IT services company providing software solutions to
telecom, IT and network services, consulting, application outsourcing, infrastructure
outsourcing, engineering services, BPO, platform solutions, and mobile value added products
and services. The company was formed as a joint venture between Mahindra & Mahindra and
British Telecom Plc.

It provides services to customers which include Fortune 500 companies. It is also one of the
Fab 50 companies in Asia, a list compiled by Forbes. Tech Mahindra was ranked #5 in India's
software services (IT) firms and overall #111 in Fortune India 500 list for 2012. Tech
Mahindra, on 25 June 2013, announced the completion of a merger with Mahindra Satyam.
Tech Mahindra has 825 active clients as of March 2016.

Tech Mahindra Limited was founded in 1986 and its headquarters are in Pune, India. It has
offices in more than 50 countries.

Tech Mahindra provides services in the field of Banking, Insurance, Communications,


Energy, Manufacturing, Public Sector, Retail, Sports, Consumer Goods, Technology, Media,
Entertainment, Travel Transportation, Logistics, Healthcare and Life Sciences.

12
A comparative study on IT Industry

1.2 Board of Directors

The company is being managed by its Board of Directors consisting of 10 board members.

Anand Mahindra, Chairman


Vineet Nayyar, Vice Chairman
CP Gurnani, Managing Director and CEO
Anupam Puri, Director
Ulhas Yargop, Group President (IT Sector)
M. Damodaran, Director
Ravindra Kulkarni, Director
M. Rajyalakshmi Rao, Director
TN Manoharan, Director
V S Parthasarathy, Director

1.3 Milestones

2017 Tech Mahindra launches Makers Lab to boost innovation.

2016 Tech Mahindra in the Forbes Asias Fab 50 2016 list. Govt. of Jharkhand selects Tech
Mahindra as its strategic technology partner.

2015 Tech Mahindra acquires Geneva based SOFGEN Holdings Ltd. Official technology
partner of International Day of Yoga supported by Ministry of Ayush.

2014 Tech Mahindra is the winner of BusinessWorld Fastest Growing Companies


amongst companies with revenue between INR 10,000-50,000 crore.

2013 Tech Mahindra and Mahindra Satyam merging process completed and the name of the
parent company was retained for the merged entity.

2005 Merged MBT with Axes Technologies (India) Private Limited, including its US and
Singapore subsidiaries. Assessed at Level 3 of SEI CMMI by KPMG.

1995 Established UK branch office.

1994 Awarded ISO 9001 certification by BVQI.

1986 Created as a joint venture of Mahindra & Mahindra and British Telecommunications
(later BT Group)

13
A comparative study on IT Industry

2. Infosys
2.1 Company Profile

Infosys Limited (formerly Infosys Technologies Limited) is an Indian multinational


corporation that provides business consulting, information technology and outsourcing
services. It has its headquarters in Bengaluru, India.
Infosys is the second-largest Indian IT firm by 2016 revenues. On January 12, 2017, its
market capitalisation was $34.38 Billion.
It provides software development, maintenance and independent validation services to
companies in banking, finance, insurance, manufacturing and other domains.
One of its known products is Finacle which is a universal banking solution with various
modules for retail & corporate banking.
Its key products are:
NIA - Next Generation Integrated AI Platform (formerly known as Mana)
Infosys Information Platform (IIP)- Analytics platform
EdgeVerve Systems
Finacle- Global banking platform by EdgeVerve Systems
PanayaCloud Suite
Skava
In 1996, Infosys established the Infosys Foundation, to support the underprivileged sections
of society. At the outset, the Infosys Foundation implemented many programs in Karnataka.
It subsequently covered Tamil Nadu, Telangana, Andhra Pradesh, Maharashtra, Odisha and
Punjab in a phased manner. A team at the Foundation identifies all the programs in the areas
of Healthcare, Education, Culture, Destitute Care and Rural Development.

2.2 List of CEOs


Name Period
Narayan Murthy 1981 to March 2002
Nandan Nilekani March 2002 to April 2007
S Gopalakrishnan April 2007 to August 2011
S D Shibulal August 2011 to July 2014
Vishal Sikka August 2014 to August 2017
UB Pravin Rao- Interim CEO & MD August 2017 to till date

14
A comparative study on IT Industry

3. Wipro
3.1 Table 5: Company Profile

Wipro Technologies

Parent Company Wipro Limited

Category IT programming and services

Sector IT and Technology

Tagline/ Slogan Applying Thought

Wipro provides complete range of IT services to the


USP organization

STP

Segment Enterprises seeking IT solution and services

Big International Enterprises requiring IT solution and


Target Group services

Positioning Company with High quality standards

Wipro Limited (Western India Palm Refined Oils Limited or more recently, Western India
Products Limited) is an Indian Information Technology Services corporation headquartered
in Bengaluru, India

In 2013, Wipro demerged its non-IT businesses into separate companies to bring in more
focus on independent businesses. Wipro Limited (NYSE: WIT, BSE: 507685, NSE: WIPRO)
is a leading global information technology, consulting and business process services
company. We harness the power of cognitive computing, hyper-automation, robotics, cloud,
analytics and emerging technologies to help our clients adapt to the digital world and make
them successful. A company recognized globally for its comprehensive portfolio of services,
strong commitment to sustainability and good corporate citizenship, we have over 160,000
dedicated employees serving clients across six continents. Together, we discover ideas and
connect the dots to build a better and a bold new future.

15
A comparative study on IT Industry

Chapter 3

Data Analysis and Interpretation

16
A comparative study on IT Industry

Charts and Graph 1: Tech Mahindra

5th largest Indian INR 41788.32 cr INR 20649.90 cr


IT Industry. Balance Sheet
Market Size as on 31st
Capitalization March, 2017

INR 12273.60 cr
Working
INR 20969.80 cr 2.29:1
Capital for the
Total Sales for
Current Ratio year ended
the year ended
March, 2016
March, 2016

Profit after Tax (cr. in INR)


3220
2685.5
2256.2

460.6 652.5

2012 2013 2014 2015 2016

Earning Per Share (INR)


115.5

51.1
36.27 33.4
23.58

2012 2013 2014 2015 2016

17
A comparative study on IT Industry

1.1 Table 6: Competitors

Rank 2014-15 Revenues 2013-14 Revenues


2014-15 Company (Rs Cr) Growth% (Rs Cr)

1 TCS 94,648 16 81,809

Cognizant Technology
2 Solutions 65,779 18 55,894

3 Infosys Technologies 53,319 6 50,133

4 Wipro 47,318 8 43,763

5 Hewlett-Packard India 37,985 4 36,697

1.2 McKinseys 7S Model Approach


Strategy

Formulation of three pronged strategy under which it would offer a new set of services to its
customers Run Better, Change Faster, and Grow Greater, under which new services would
be bucketed. Tech Mahindra is setting up of Centers of Excellence around the world and also
partnering with smaller disruptive companies from India, Israel, and the US to tap into
capabilities in emerging technologies to provide these to its clients.

Structure

It consists of various departments that contribute to the companys overall mission and goals.
It is a reflection of the companys culture, policies, relationship with stakeholders,
commitment to values and ethical business conduct. In the same spirit, timely and accurate
disclosure of information regarding the financial situation, performance, ownership and
governance of the company is an important part of corporate governance. Tech Mahindra
benchmarks its corporate governance practices and structure with the best in the world.

Systems

They are the processes, procedures and routines that characterize how to get the job done,
such as financial systems; hiring, promoting and performance appraisal systems; information
system.

Shared Values

Tech Mahindra, it is driven by four aspects - Core Values , CAPable Associates , Freedom
to Explore and Core Purpose. Core Values guide the action, both personal and corporate.
Capable Associates demonstrate rise behavior. Freedom to explore inspires its associates to
experiment and embrace opportunities and finally deriving motivation from their core
purpose.

18
A comparative study on IT Industry

Style

Team support is appreciated in Tech Mahindra. There is a scope to learn a lot of things
through internal trainings. Employees get exposure to other things which are not their
domain.

Chart 2: BCG Matrix

High

Low

High Low

Chart 3: EVA over time

19
A comparative study on IT Industry

Tech Mahindra

Table 7: Balance Sheet Five Year Trend Analysis

Rs. (in crores)

Particulars Mar'16 Mar'15 Mar'14 Mar'13 Mar'12


EQUITY AND LIABILITIES
Shareholders Fund
a) Share Capital 483.90 480.40 233.50 128.10 127.50
b) Reserves & Surplus 13068.30 10775.40 8355.10 4054.40 3315.70
Net Worth 13552.20 11255.80 8588.60 4182.50 3443.20
Application Money Pending Allotment(1) 1.4 0.30 1.50 0.30 0.00
Non Current Liabilities
a) Long Term Borrowings 170.90 0.00 5.00 300.00 600.00
b) Other Long Term Liabilities 0.00 0.00 374.10 227.00 430.90
c) Long Term Provisions 346.60 329.30 320.30 169.20 170.60
Current Liabilities
a) Short Term Borrowings 0.00 0.00 0.00 804.50 526.60
b) Trade Payables 2183.70 1833.10 1431.90 638.60 468.40
c) Other Current Liabilities 1015.30 890.30 1698.00 719.70 583.10
d) Short Term Provisions 2149.40 1477.30 1089.40 216.70 138.80
Total Current Liabilities 5348.40 4200.70 4219.30 2379.50 1716.90
Suspense Account (Net) (2) 1230.40 1230.40 1230.40 0.00 0.00
TOTAL LIABILITIES 20649.90 17016.50 14739.20 7258.50 6361.60

ASSETS
Non Current Assets
a) Fixed Assets
Tangible Assets 2256.90 1948.50 1793.9 713.30 646.30
Intangible Assets 22.80 32.50 39.70 6.80 6.30
Capital Work-in-Progress 627.50 551.10 264.00 28.40 162.70
Total Fixed Assets 2907.20 2532.10 2097.60 748.50 815.30
b) Non Current Investments 3796.30 3630.90 2294.00 3807.50 3133.20
c) Deferred Tax Asset 385.70 288.00 310.90 94.40 82.00
d) Long-term Loans and Advances 1260.60 1076.50 940.60 449.60 334.10
e) Other Non-Current Assets 26.50 0.10 15.70 0.00 0.00
Total Non Current Assets 8376.30 7527.60 5658.80 5100.00 4364.60
Current Assets
a) Current Investments 1049.00 456.80 0.00 0.00 120.30
b) Trade Receivables 5154.40 4240.80 3927.80 1372.50 1243.10
c) Cash and Bank Balances 3284.80 1819.50 2826.30 271.10 138.90
d) Short Term Loans and Advances 1556.30 1745.20 1348.00 331.00 274.70
e) Other Current Assets 1229.10 1226.60 978.30 183.90 220.00
Total Current Assets 12273.60 9488.90 9080.40 2158.50 1997.00
TOTAL ASSETS 20649.90 17016.50 14739.20 7258.50 6361.60

20
A comparative study on IT Industry

Notes -
1. Share application money pending allotment
The amount received from employees on exercise of stock options is accounted as Share
application money pending allotment. Upon allotment, the amount received corresponding to
the shares allotted against the options exercised is transferred to Share capital and Securities
premium account (if applicable) and taxes (if applicable) recovered from employees. An
amount of INR14 Million is outstanding as at March 31, 2016 (March 31, 2015: INR 3
Million) representing amounts received from employees of the Company on exercise of stock
options towards face value, securities premium and perquisite tax recovered by the Company
from the employees, pending allotment.
2. Certain matters relating to erstwhile Satyam Computer Services Limited (erstwhile
Satyam):

Table 8: Statement of Income Five Year Trend Analysis


Rs. (in Crores)

Particulars Mar'16 Mar'15 Mar'14 Mar'13 Mar'12


INCOME:
A. SALES 20969.80 19162.70 16295.10 6001.90 5243.00
Other Income (net) 1108.40 124.50 70.30 -95.20 67.70
B. TOTAL INCOME 22078.20 19287.20 16365.40 5906.70 5310.70
EXPENDITURE:
Employee Benefits Expense 7410.10 7201.20 6971.50 2513.80 2262.50
Subcontracting Expenses 7802.80 6418.20 3401.20 1552.40 1252.80
Other Expenses 2343.20 2277.40 2361.10 757.30 896.80
Finance Costs/ Interest 53.30 47.9 86.80 109.00 102.50
Depreciation and Amortisation Expense 545.50 473.30 427.00 157.00 150.50
C. TOTAL EXPENDITURE 18154.90 16418.00 13247.60 5089.50 4665.10
Operating Profit/ EBIT (B - C) 3923.30 2869.20 3117.80 817.20 645.60
Exceptional Item 0.00 61.30 120.00 0.00 -67.90
Profit Before Tax 3923.30 2930.50 3237.80 817.20 577.70
Tax Expense :
a) Current Tax 794.10 648.70 843.30 177.10 145.90
b) Earlier years excess provision 0.00 0.00 (226.60) 0.00 0.00
W/B
c) Deferred Tax (90.80) 25.60 (64.40) (12.40) (28.80)
Total Taxes 703.30 674.30 552.30 164.70 117.10
Profit After Tax 3220.00 2256.20 2685.50 652.50 460.60

KEY ITEMS
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 1161.40 576.50 466.90 64.10 51.00
Shares in Issue (Lakhs) 9640 9571 2325 1277 1270
EPS - Annualised (Rs) 33.40 23.58 115.50 51.10 36.27

21
A comparative study on IT Industry

Table 9: Cash Flow Statement Five Year Trend Analysis


Rs. (in crores)

Particulars Mar'16 Mar'15 Mar'14 Mar'13 Mar'12


Profit Before Tax 3923.30 2930.50 3237.80 817.20 577.70
Net Cash Flow from Operating Activity 2882.80 2068.50 1294.20 642.70 665.40
Net Cash Used in Investing Activity -1088.90 -1701.70 -455.00 -595.40 -400.90
Net Cash Used in Financing Activity -791.80 -731.00 -917.40 88.90 -321.60
Net Inc/Dec In Cash and Cash 1002.10 -364.20 -78.20 136.20 -57.10
Equivalent
Cash and Cash Equivalent - Beginning 705.80 1064.50 2366.70 134.70 191.80
of the Year
Cash and Cash Equivalent - End of the 1707.90 700.30 2288.50 270.90 134.70
Year

SUMMARY OF BALANCE SHEET AND PROFIT & LOSS STATEMENT

Table 10: Summary of Balance Sheet


(Rs. in crores)

PARTICULARS 2015 2016 Remarks

Current Assets 9488.90 12273.60 There is a substantial increase in


current assets.

Fixed Assets 2532.10 2907.20 Fixed Assets have increased mostly


due to purchase of tangible assets.

Shareholders Fund 11255.80 13552.20 It is increased due to issue of new


shares and on account of
amalgamation.

Current Liabilities 4200.70 5348.40 Substantial increase in liabilities.


Liquidity position is not good.

Long Term Borrowings 0.00 170.90 The company has lease obligations
which are repayable in EMI.

22
A comparative study on IT Industry

Table 11: Summary of Profit & Loss Statement

PARTICULARS 2015 2016 Remarks

Net Income 2256.20 3220.00 Income has increased by 42.71%

Total Expenditure 16418.00 18154.90 Expenditure has increased by 9.5%

Sales 19162.70 20969.80 Sales have increased by 8.6%

Operating Profit 2869.20 3923.30 Operating Profit has increased by


36.73%

23
A comparative study on IT Industry

2. Infosys

2.1 SWOT Analysis

Strengths

Operational excellence to deliver GDM

Capability to attract and keep talents

Strong financial

Strong relationship with large corporations


Weaknesses

Over-reliance on US economy

Limited position in value chain (i.e no presence or relationship with consulting


business)
Opportunities

More cost/speed conscious customers.

Market growth

Higher awareness on off- shore model


Threats

Wage inflation due to competition on talents

Newer disruptive business models (i.e. web services, web 2.0)

24
A comparative study on IT Industry

Table 12: Balance Sheet Five Year Trend Analysis (Rs. cr)

Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Sources Of Funds

Total Share Capital 1,148.00 1,148.00 574.00 286.00 287.00

Equity Share Capital 1,148.00 1,148.00 574.00 286.00 287.00

Reserves 66,869.00 56,009.00 47,494.00 41,806.00 35,772.00

Net Worth 68,017.00 57,157.00 48,068.00 42,092.00 36,059.00

Total Liabilities 68,017.00 57,157.00 48,068.00 42,092.00 36,059.00

Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Application Of Funds

Gross Block 16,210.00 14,709.00 12,827.00 10,374.00 8,029.00

Less: Accum. 7,605.00 6,461.00 5,480.00 4,642.00 3,576.00


Depreciation

Net Block 8,605.00 8,248.00 7,347.00 5,732.00 4,453.00

Capital Work in Progress 1,247.00 934.00 769.00 954.00 1,135.00

Investments 24,977.00 11,113.00 6,857.00 6,717.00 4,344.00

Sundry Debtors 10,960.00 9,798.00 8,627.00 7,336.00 6,365.00

Cash and Bank Balance 19,153.00 29,176.00 27,722.00 24,100.00 20,401.00

Total Current Assets 30,113.00 38,974.00 36,349.00 31,436.00 26,766.00

Loans and Advances 14,943.00 13,498.00 10,491.00 7,873.00 6,330.00

Total CA, Loans & 45,056.00 52,472.00 46,840.00 39,309.00 33,096.00


Advances

Current Liabilities 11,518.00 6,801.00 5,700.00 4,503.00 3,181.00

Provisions 350.00 8,809.00 8,045.00 6,117.00 3,788.00

Total CL & Provisions 11,868.00 15,610.00 13,745.00 10,620.00 6,969.00

Net Current Assets 33,188.00 36,862.00 33,095.00 28,689.00 26,127.00

Total Assets 68,017.00 57,157.00 48,068.00 42,092.00 36,059.00

25
A comparative study on IT Industry

Table 13: Cash Flow Statement Five Year Trend Analysis Rs. (in crore)

Mar '17 Mar '16 Mar '15 Mar '14 Mar '13

Net Profit Before Tax 13818.00 20693.00 16798.00 14002.00 12274.00


Net Cash From Operating 10478.00 9399.00 7955.00 9148.00 6942.00
Activities

Net Cash (used in)/from -13494.00 -1028.00 665.00 -2307.00 -2824.00


Investing Activities

Net Cash (used in)/from -6968.00 -6908.00 -4961.00 -3177.00 -3319.00


Financing Activities

Net (decrease)/increase In -10023.00 1454.00 3622.00 3698.00 844.00


Cash and Cash
Equivalents
Opening Cash & Cash 29176.00 27722.00 24100.00 20402.00 19557.00
Equivalents

Closing Cash & Cash 19153.00 29176.00 27722.00 24100.00 20401.00


Equivalents

Table 14: Competitors

Name Last Price Market Cap. Sales Net Profit Total Assets
(Rs. cr.) Turnover
TCS 2,487.30 476,140.75 92,693.00 23,653.00 78,266.00
Infosys 941.00 216,142.49 59,289.00 13,818.00 68,017.00
Wipro 290.70 141,458.94 46,047.80 8,161.70 52,870.50
HCL Tech 867.65 120,775.83 19,318.31 6,872.69 21,537.10

Chart 4: Peer Group Comparison

26
A comparative study on IT Industry

2.2 Adoption of McKinseys 7S

Strategies

Client-Focused Strategy to Achieve Growth


a) Focuses on Limited number of large organizations
b) Commands Premium Margins

Favours Expansions into new Developing and Globally-Connected Geographies


Develops Deep Industry Knowledge
Invests on Brand-Building
Believes in Organic Growth Through Risk Averse Strategy

Staff

Focuses on Quality of Human Resources


90% of the Workforce are Engineers
At the Entry Level, Infosys Hires Candidates with Superior Academic Record,
Technical Skills and High Learning ability
Spends 3% of revenue on Up gradation of Employees skills

Skills

Focus on continuous Skill Improvement


Mandatory Certification for Domain and Technology
Projects at Capability Maturity Model Integration (CMMi) level 5
Knowledge Management given special focus
Style

Emphasis on Developing Leadership Qualities


Established Infosys Leadership Institute (ILI) for the same
Open Door Policy & Continuous Sharing of Information
Inputs from the Employee in Decision Making

27
A comparative study on IT Industry

Shared Values (C-LIFE )

Client value: To surpass client expectations consistently


Leadership by example: To set standards in our business and transactions, and be an
exemplar for the industry and ourselves
Integrity and transparency: To be ethical, sincere, and open in all our transactions
Fairness: To be objective and transaction-oriented, and thereby earn trust and respect
Excellence: To strive relentlessly, constantly improve ourselves, our teams
Structure

Free Form Organizational Structure


Industry Business Unit (IBU) Concept
a) Features a large no of Small Business Units
b) IBU operates independently

Systems

Infosys has always been keen on the quality systems


Internal K-Shop portal to share knowledge and latest technologies is one of the
biggest advantages for Infosys
Infosys has recently developed a performance portal to bring the transparency and the
evaluation criteria visible to manage the large no. of human resources.
2.3 EVA

Economic Value Added is to effectively put a cost to equity capital and make it a pre-tax
charge while calculating returns. In effect, a company is said to be EVA-positive as long as
its net operating profit after tax (NOPAT) is higher than the cost of the capital.

Others have customized EVA for their own purposes. Marico Industries, makers of Parachute
coconut oil, has worked out a simplified version of EVA (styled Seva) but uses it more as a
signaling device to tell people that capital is important, that investments and acquisitions
must have a justification in terms of shareholder value. At Infosys, EVA is used as a tool to
calculate the value delivered to customers. Infosys reasons that if it can tell its customers that
what it is delivering in terms of value is higher than what the customer pays Infosys for the
service, the customer will be less worried about price alone.

28
A comparative study on IT Industry

Chart 5: Infosys BCG Matrix

Chart 6: Market Capitalization

29
A comparative study on IT Industry

3. Wipro
Product Line

1) Infrastructure technology solutions: Businesses today are looking for domain specific
integrated technology solutions that can help improve asset productivity. With over 20
years of experience and strong alliances, Wipro Infrastructure Technology Solutions
helps cater to your IT infrastructure providing latest technology products and services
at competitive costs.
Our enterprise products are customized based on a requirement analysis of your IT
environment and include the following:
Networking Solutions
Platforms & Storage
Enterprise Information Security
Emerging Technologies
Enterprise Management
Contact Centre Infrastructure

Table 15: SWOT Analysis

SWOT Analysis

1. Low cost advantage and High quality standards


2. Broad range of research and development Services
3. Wipro has impressive list of clientele and mega partnership
with Cisco, Oracle, EMC, Microsoft and SAP
4.One of the top IT Companies in India employing over
Strengths 130,000 employees

1. Low operating margin of other group of companies


Weaknesses 2. Free floating stock is very less for the investor

1. Company has good opportunity since the sector is growing


2. Can diversify in brand product category and consulting
services
Opportunities 3. Huge potential in domestic market

1. Slowdown in US economy as major client base is from US


2. Attrition and Employee loyalty
Threats 3. Increasing cost of Human capital

30
A comparative study on IT Industry

Chart 7: BCG Matrix

Table 16: Balance Sheet Five Year Trend Analysis (Rs. cr)

Mar 17 Mar 16 Mar 15 Mar 15 Mar 14


EQUITIES AND LIABILITIES
SHAREHOLDER'S FUNDS
Equity Share Capital 486.10 494.10 493.70 493.70 493.00
Total Share Capital 486.10 494.10 493.70 493.70 493.00
Reserves and Surplus 51,184.10 44,194.50 36,598.30 36,598.30 31,635.70
Total Reserves and 51,184.10 44,194.50 36,598.30 36,598.30 31,635.70
Surplus
Total Shareholders Funds 51,670.20 44,688.60 37,092.00 37,092.00 32,128.70
Minority Interest 239.10 222.40 164.60 164.60 138.70
NON-CURRENT LIABILITIES
Long Term Borrowings 1,961.10 1,736.10 1,270.70 1,270.70 1,090.90
Deferred Tax Liabilities 657.80 64.40 26.90 26.90 167.90
[Net]
Other Long Term 1,081.20 319.50 67.90 67.90 260.40
Liabilities
Long Term Provisions 424.10 463.20 306.70 306.70 303.60
Total Non-Current 4,124.20 2,583.20 1,672.20 1,672.20 1,822.80
Liabilities
CURRENT LIABILITIES
Short Term Borrowings 11,674.10 10,265.00 6,444.10 6,444.10 3,943.30
Trade Payables 4,867.30 6,839.00 5,848.60 5,848.60 5,216.10
Other Current Liabilities 4,842.70 3,612.90 2,949.40 2,949.40 2,729.10
Short Term Provisions 1,564.40 2,531.90 4,205.90 4,205.90 3,709.50
Total Current Liabilities 22,948.50 23,248.80 19,448.00 19,448.00 15,598.00
Total Capital And 78,982.00 70,743.00 58,376.80 58,376.80 49,688.20
Liabilities

31
A comparative study on IT Industry

ASSETS
NON-CURRENT ASSETS
Tangible Assets 6,066.70 5,807.20 4,969.30 4,969.30 4,767.10
Intangible Assets 1,592.20 10,199.10 63.10 5,867.80 5,882.00
Capital Work-In-Progress 737.70 380.60 395.10 395.10 369.10
Fixed Assets 8,396.60 16,386.90 5,427.50 11,232.20 11,018.20
Non-Current Investments 710.30 442.20 340.40 340.40 271.20
Deferred Tax Assets [Net] 309.80 221.00 83.40 83.40 155.30
Long Term Loans And 2,089.70 3,476.60 3,137.60 3,137.60 3,046.30
Advances
Other Non-Current Assets 1,358.20 324.10 364.20 364.20 552.10
Total Non-Current 25,092.20 20,850.80 15,157.80 15,157.80 15,043.10
Assets
CURRENT ASSETS
Current Investments 29,203.00 12,733.00 5,191.70 5,191.70 5,875.20
Inventories 391.50 539.10 484.90 484.90 229.30
Trade Receivables 9,484.60 10,239.00 9,154.80 9,154.80 8,546.70
Cash And Cash 5,271.00 13,503.90 16,619.00 16,619.00 11,420.10
Equivalents
Short Term Loans And 7,327.50 6,178.60 5,719.00 5,719.00 3,350.50
Advances
Other Current Assets 2,212.20 6,698.60 6,049.60 6,049.60 5,223.30
Total Current Assets 53,889.80 49,892.20 43,219.00 43,219.00 34,645.10
Total Assets 78,982.00 70,743.00 58,376.80 58,376.80 49,688.20

Table 17: Statement of Income Five Year Trend Analysis


Rs. (in Crores)
Mar 17 Mar 16 Mar 15 Mar 14 Mar 13
INCOME
Revenue From Operations [Gross] 45,639.60 44,684.60 41,210.00 38,765.10 33,229.60
Less:Excise/Service Tax/Other Levies 0.00 0.00 0.20 7.90 3.10
Revenue From Operations [Net] 45,639.60 44,684.60 41,209.80 38,757.20 33,226.50
Other Operating Revenues 408.20 0.00 0.00 0.00 0.00
Total Operating Revenues 46,047.80 44,684.60 41,209.80 38,757.20 33,226.50
Other Income 2,570.00 2,771.50 2,499.00 1,611.20 1,325.30
Total Revenue 48,617.80 47,456.10 43,708.80 40,368.40 34,551.80
EXPENSES
Cost Of Materials Consumed 0.00 0.20 3.40 205.30 354.20
Purchase Of Stock-In Trade 2,186.90 2,655.50 2,456.40 2,285.80 2,347.20
Changes In Inventories Of FG,WIP 164.00 -53.10 -254.30 0.90 -18.20
And Stock-In Trade
Employee Benefit Expenses 21,854.40 21,379.70 19,726.30 18,337.50 15,904.20
Finance Costs 392.10 527.80 362.90 374.70 352.40
Depreciation And Amortisation 1,047.70 868.80 778.40 736.70 701.30
Expenses
Other Expenses 12,285.60 11,595.10 10,078.70 8,819.30 7,705.60
Total Expenses 37,930.70 36,974.00 33,151.80 30,760.20 27,346.70

32
A comparative study on IT Industry

Chart 8: Graphical Peer Comparison

70000
60000 57157

50000
40905.2
40000
30000
20000 13552.2
10000
0
Tech Mahindra Infosys Wipro

Shareholder's Fund

18000
15610
16000
14000
11575.3
12000
10000
8000
5348.4
6000
4000
2000
0
Tech Mahindra Infosys Wipro

Current Liabilities

60000
52472
50000

40000 36199.7

30000

20000
12273.6
10000

0
Tech Mahindra Infosys Wipro

Current Assets

33
A comparative study on IT Industry

60000 53983
50000 44684.6

40000

30000
20969.8
20000

10000

0
Tech Mahindra Infosys Wipro

Sales

18000
15786
16000
14000
12000
10000
8099
8000
6000
4000 3220

2000
0
Tech Mahindra Infosys Wipro

Net Income

2000 1454
1002.1
1000
0
-1000 Tech Mahindra Infosys Wipro

-2000
-3000
-4000
-5000
-6000
-7000 -6533.7
Net Inc/Dec In Cash and Cash Equivalent

34
A comparative study on IT Industry

Chapter 4
Summaries of Findings and Conclusion

35
A comparative study on IT Industry

Findings

This report work has identified various financial dealings and outcomes of Tech Mahindra,
Infosys and Wipro after thoroughly analyzing the qualitative and quantitative data of the
company.

Tech Mahindra has not taken any loans or borrowings from banks and government or
has not issued any debentures. According to the annual report, the Company has not
defaulted in the repayment of loans or borrowings to financial institutions. Infosys,
similarly has not taken any long term borrowings from any sources. Wipro, on the
other hand has some long term borrowings.
These companies have not raised money through further public offer (including debt
instruments).
As per the information and annual report, no fraud by these companies and no
material fraud on the Company by its officers or employees has been noticed or
reported during the year.
Infosys has the highest EPS amongst these 3 companies followed by Tech Mahindra
and Wipro.
EPS of all the 3 companies are stable and it is more on a positive side which assures
us that the companys stock price will follow.
These companies have consistently paid Dividends to its shareholders which is a good
sign for the companys financial well being.
Operating Cash Flow is positive for Tech Mahindra and Infosys which is an indication
of the company making efficient use of its assets to generate income. Wipro has a
negative cash inflow which is not a good sign.
Earnings Retention Ratio has decreased by 14.06 % which indicates that the company
has reduced the earnings retained and increased the dividend payment.
Tech Mahindra and Infosys have maintained very low inventory as compared to
Wipro.

36
A comparative study on IT Industry

Conclusion and suggestions

Analysis and interpretation of financial statements is an important tool in assessing


companys performance. It reveals the strengths and weaknesses of a firm. It helps the clients
to decide in which firm the risk is less or in which one they should invest so that maximum
benefit can be earned. It is known that investing in any company involves a lot of risk. So
before putting money in any company, one must have thorough knowledge about its past
records and performances. Based on the data available, the trend of the company can be
predicted in near future.

This report on the comparative study on IT Industry is not merely a work of the project but to
gain knowledge and experience of how to analyze the financial performance of a firm.

This report mainly focuses on the critical evaluation of different types of financial statements
- Balance Sheet, Profit & Loss Statements and Statement of Cash Flows of Tech Mahindra,
Infosys and Wipro. The study undertaken has brought in to the light of the following
conclusions.

After analyzing the financial statements of these companies, we came to know that the IT
industry in India is not growing at a diminishing rate due to several factors. The firms should
focus on consistently earning more profits in the coming years by taking care of internal as
well as external factors. With regard to resources, these firms are not properly maintaining its
assets to generate more income as this can be observed from the efficiency ratios.

Tech Mahindra is relatively a new company but its growth rate has outpaced most of its
peers growth rate. Tech Mahindras annual growth rate is 18% which is higher than the
Indian IT Industrys annual growth rate of 9.2%. It can be seen from the peer analysis that
Tech Mahindra is in a better position in terms of Fixed Assets Turnover Ratio. Infosys should
settle its directors disputes as quickly as possible so that it can focus more on operations and
services. Wipro needs to manage its cash flows properly.

37
A comparative study on IT Industry

Bibliography

ACCA. (2014). Economic value added versus profit-based measures.

Dudovskiy, J. (2017). McKinsey 7S Model.

Fallon, N. (2017). SWOT Analysis: What It Is and When to Use It.

Martin Reeves, S. M. (2014). BCG Classics Revisited: The Growth Share Matrix.

Annual reports of Tech Mahindra for the last Five years

Annual reports of Infosys for the last Five years

Annual reports of Wipro for the last Five years

38