AFS Project

.........
AFS - A project report

Patni Computer Systems and Wipro

Technologies Ltd

A Financial Analysis Report

Presented by.......

Name Roll No.

Sanjog Shishupal 50
Kartik Modi 31
Dhanraj Parekh 37
Ankur Parikh 38
Sushmita Sanghai 46
Parag Tulasyan 58
Bhavana Bhanushali 03
Jigisha Pandit 35
Dimple Bhanushali 04
Nikunj Thakker 57

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Acknowledgements...
We take this opportunity to thank all those who have
helped and contributed towards the successful
completion of this report project.
We would like to express our sincere thanks and
gratitude to Prof. Ravindra Singh for his valuable
support and guidance throughout the project. His
teachings helped us apply the theories and concepts
into practical use.

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Overview
About PATNI
• Patni Computer Systems Ltd. (Patni) is one of the leading
global providers of information Technology services and
business solutions. Over 12,000 professionals service
clients across diverse industries, from 23 sales offices
across Americas, Europe and Asia Pacific and multiple
offshore development centers across 8 cities in India. We
have serviced more than 200 FORTURE 1000 companies,
for over two decades.

• Our vision is to achieve global IT services leadership in

providing value added high quality IT solutions to our
clients in selected horizontal and vertical segments, by
combining technology skills, domain expertise, process
focus and a commitment to long-term client relationships.

• Patni has vast experience in system and application

development projects, across all major software platforms
and environments. We have major software competency
centers throughout India, with our professionals employed
on onsite as well as offshore projects. We spend a
significant part of our revenue on training, ensuring that
our employees are constantly updated on new
technologies and skills.

• Committed to quality, Patni adds value to client

businesses through well established and structured
methodologies, tools and techniques backed by Six Sigma
processes. Patni is ISO 9001 : 2000 certified and is also
assessed at SEI-CMMI Level 5 and P-CMM Level 3

• Patni complements deep technology skills and focus on

business solutions with process frameworks and
applications outsourcing capabilities. We work with out

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clients through technology and business changes that

shape their competitive advantage.

About Wipro
• Wipro Tech is an information technology service company
established in India in 1980. It is the global IT services arm of
Wipro Limited (in operation since 1945, incorporated 1946). It is
headquartered in Bangalore and is the third largest IT services
company in India. It has more than 70,000 employees as of
September 2007, including its business process outsourcing
(BPO) arm which it acquired in 2002.

• Wipro Technologies has over 300 customers across USA,

Europe and Japan including 50 of the Fortune 500 companies.
Some of its customers are Boeing, BP, Cisco, Ericsson, IBM,
Microsoft, Prudential, Seagate, Sony, Windriver and Toshiba It is
listed on the New York Stock Exchange and is part of its TMT
(technology media telecom) index.

• With revenue in the excess of US $3 billion, Wipro is one of

India's major IT companies. It has dedicated development
centers and offices across India, Europe, North America, Latin
America and Asia Pacific. The current Chairman, Managing
Director and majority stake owner is Azim Premji, who has
headed the software and hardware divisions since Wipro's
inception.

• Wipro's Tagline is "Applying Thought", the ability to infuse

newer ideas and newer ways of doing things.

• Examples of Wipro's product design work include developing

an Internet-browsing phone for a Japanese telecom company in

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1998, helping chipmaker Texas Instruments produce digital

signal processing software, and creating an automotive display
unit for Italian manufacturer Magneti Marelli that combined
functions including cell phone capability, global position system
technology, a navigation system and a CD player.

PATNI COMPUTERS
SYSTEMS LTD

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TREND ANALYSIS
PROFIT AND LOSS STATEMENT: 2002-06
% % % % %
growth growth growth growth growth
Dec'02 on '02 Dec'03 on '02 Dec'04 on '02 Dec'05 on '02 Dec'06 on '02
Income:
Operating
income 448.21 100.00 537.01 119.81 702.07 156.64 875.60 195.35 997.83 222.63
Expenses
Material
consumed - 100.00 - -
Manufacturing
expenses 3.47 100.00 5.50 158.50 8.69 250.43 12.28 353.89 12.51 360.52
Personnel
expenses 166.70 100.00 233.30 139.95 286.08 171.61 392.80 235.63 446.15 267.64
Selling
expenses 1.07 100.00 2.98 278.50 3.60 336.45 4.25 397.20 4.45 415.89
Adminstrative
expenses 58.58 100.00 79.54 135.78 104.72 178.76 166.58 284.36 197.12 336.50
Expenses
capitalised - 100.00 - - - -
Cost of sales 229.81 100.00 321.32 139.82 403.09 175.40 575.91 250.60 660.23 287.29
Operating
profit 218.40 100.00 215.69 98.76 298.98 136.90 299.69 137.22 337.60 154.58
Other recurring
income 1.65 100.00 6.97 422.42 16.92 1025.45 17.93 1086.67 41.67 2525.45
Adjusted
PBDIT 220.05 100.00 222.67 101.19 315.90 143.56 317.62 144.34 379.27 172.36
Financial
expenses 1.93 100.00 0.13 6.74 4.76 246.63 4.08 211.40 8.88 460.10
Depreciation 29.73 100.00 39.21 131.89 47.00 158.09 60.03 201.92 72.56 244.06
Other write
offs 0.46 100.00 - - - -
Adjusted PBT 187.93 100.00 183.32 97.55 264.14 140.55 253.52 134.90 297.83 158.48

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Tax charges 26.83 100.00 23.99 89.41 25.71 95.83 38.51 143.53 100.13 373.20
Adjusted PAT 161.10 100.00 159.34 238.43 215.00 197.70
Non recurring 3.05 100.00 9.55 313.11 -7.89 -258.69 -4.93 -161.64 8.06 264.26
items Dec ' Dec ' Dec ' Dec ' Dec '
Other non - 02 % -2.8303 % - 04 % -15.66
05 % -06 %
cash of funds
Sources
adjustments
Owner's fund
Reported
Equity net share 164.15 100.00 166.06 101.16 230.54 140.44 194.41 118.43 205.76 125.35
profit
capital 14.86 100.00 22.28 149.93 25.00 168.24 27.56 185.46 27.66 186.14
Earnigs before
Share application 376.53 100.00 520.88 138.34 720.74 191.42 863.83 229.42 1010.61 268.40
appropriation
money - 100.00 - 0.40 - 0.27
Equity share 3.91
Preference 100.00 12.48 319.18 25.00 639.39 34.47 881.59 41.48 1060.87
dividend
capital - 100.00 - - - -
Preference
Reserves & 0.80 100.00 - - - -
dividend
surplus 681.17 100.00 823.81 120.94 1316.65 193.29 2013.57 295.60 2180.18 320.06
Dividend tax
Loan funds 0.58 100.00 1.60 275.86 3.27 563.79 5.07 874.14 5.82 1003.45
Retained
Secured loans 371.24 1.97 100.00
100.00506.802.46 136.52
124.87 692.47
2.86 186.53
145.18 824.29
3.18 222.04
161.42 963.30
3.06 259.48
155.33
earnings
Unsecured loans - 100.00 - - - -
Total 697.99 100.00 848.56 121.57 1344.91 192.68 2044.31 292.89 2211.17 316.79
Uses of funds
Fixed assets
Gross block 241.47 100.00 297.85 123.35 366.46 151.76 477.28 197.66 614.30 254.40
Less : revaluation
reserve 0.97 100.00 0.96 98.97 0.95 97.94 0.95 97.94 0.94 96.91
Less :
accumulated
depreciation 82.28 100.00 118.91 144.52 159.92 194.36 209.26 254.33 279.35 339.51
Net block 158.22 100.00 177.98 112.49 205.59 129.94 267.08 168.80 334.01 211.10
Capital work-in-
progress 2.89 100.00 4.36 150.87 24.14 835.29 120.93 4184.43 211.28 7310.73
Investments 364.51 100.00 422.12 115.80 682.07 187.12 804.97 220.84 1387.02 380.52
Net current
assets
Current assets,
loans & advances 268.05 100.00 417.34 155.69 650.64 242.73 1168.92 436.08 636.46 237.44
Less : current
liabilities &
provisions 95.68 100.00 173.23 181.05 217.53 227.35 317.58 331.92 357.60 373.75
Total net current
assets 172.37 100.00 244.10 141.61 433.12 251.27 851.34 493.90 278.86 161.78
Miscellaneous
expenses not
written - - - - -
Total 697.99 100.00 848.56 121.57 1344.91 192.68 2044.31 292.89 2211.17 316.79

BALANCE SHEET: 2002-06

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RATIO ANALYSIS OF PATNI COMPUTERS SYSTEMS

LTD

RATIOS 2002 2003 2004 2005 2006

LIQUIDITY RATIOS:
CURRENT RATIO 2.80 2.40 2.99 3.68 1.77
QUICK RATIO 2.80 2.40 2.99 3.68 1.77

PROFITABILITY RATIOS
OPERATING MARGIN 48.72 40.16 42.58 34.22 33.83
G.P MARGIN 42.09 32.86 35.89 27.37 26.56
NET MARGIN 36.48 30.52 32.06 21.75 19.79
Long term assets / total
Assets 0.74 0.48 0.56 0.57 0.66

TURNOVER RATIOS
Fixed assets turnover ratio 1.86 2.07 2.28 2.20 1.91
OWNERSHIP RATIOS
PRICE EARNING 18.03 25.51 21.17 25.46 23.34
CAPITALIZATION RATE 0.06 0.04 0.05 0.04 0.04
REPORTED EPS 26.06 18.42 22.20 18.46 20.13

PRICE EARNING RATIO 18.03 25.51 21.17 25.46 23.34

COVERAGE RATIOS
INTEREST COVERAGE
RATIO 98.61 1411.23 56.49 63.13 34.54
DIVIDEND PAYOUT 0.02 0.06 0.10 0.16 0.21

RETURN ON INVESTMENT 0.269 0.216 0.19 0.73 0.12

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Trend comparison of PATNI COMPUTERS:

The operating income of the company is good but has not been
increasing consistently. There has been a decline in the %
increase of the profits over the years especially in 2006. It has
only increased from Rs.875 cr to 997 in 2006 whereas the last
increase has been from 702 to 875.

Regarding the Overall expenses of Patni Computers we could

analyse a marginal increasing trend. This indicates the growth
phase and moreover by examining the profits earned between
2003-2007 we can judge the efficient resource management.
To summarise total expenses of the company have been made
keeping in mind to achieve an increasing profit ratio too.

Operating Profit in 2003 -1031CRS increased to 3270 in 2007.

The company’s major expense, account for the personnel
expense which contributes to almost 42% on an average of the
operating profit. This has been increasing steadily over the
years.

The non-recurring items in the years 05 and 06 have been

negative indicating that the company has suffered some losses
in case of sale of any asset or otherwise.

In case of net profit there has been an enormous jump in the

year 2004 from 166 to 230 in 04.

Since then the growth has been consistent but not much.

The preference dividend has been paid only in 02 and not after
that indicating that the shares were redeemed in the
subsequent years. The equity divided has been on the rise that
too significantly.

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The data is as follows:

12.4 25.0 34.4 41.4

Equity dividend 3.91 8 0 7 8

In the balance sheet we can see that there has been a fresh
issue of shares every year. The growth in the reserves has been
very high in the year 05. Increasing from Rs. 1316 to Rs 2013,
of about 80 to 85 %. Thus indicating the performance of the
company in that year.

The finance in form of loans for the company has been only
from secured sources, indicating that it is very cautious about
taking loans and about the interest rates.

The company’s fixed assets comprise of almost 25 to 30 % of

its finances used. The sale or purchase of assets has been such
to keep the overall investment in fixed assets at a fixed level.
The major part of the cash has been used for investment by the
company which make up for almost 50% of the balance sheet
total. The investment has also risen from Rs.365 2002 to
Rs.1.387 cr in 2006.

The current assets and liabilities of the company are in the ratio
of 2:1 (approx), indicating a good ratio which will be useful to
the company in paying of its short term or emergency
commitments. It is nearly ideal for any company to have such a
ratio.

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WIPRO LTD

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TREND ANALYSIS
PROFIT AND LOSS STATEMENT: 2003-07
%
growt % % % %
Mar ' h on growth Mar ' growth growth growth
Income 03 '02 Mar'04 on '02 05 on '02 Mar ' 06 on '02 Mar ' 07 on '02
7322.1 10227.1 13683.9
Operating Income 3992.02 100.00 5134.89 128.63 6 183.42 2 256.19 0 342.78

Expenses
1185.4
Material consumed 746.21 100.00 846.28 113.41 8 158.87 1367.67 183.28 1889.00 253.15
Manufacturing expenses 310.58 100.00 414.62 133.50 558.07 179.69 1020.70 328.64 120.50 38.80
2878.5
Personnel expenses 642.47 100.00 864.44 134.55 3 448.04 4279.03 666.03 5764.50 897.24
Selling expenses 54.00 100.00 77.02 142.63 107.15 198.43 171.05 316.76 -
Adminstrative expenses 1263.47 100.00 1804.06 142.79 685.80 54.28 904.78 71.61 2655.40 210.17
Expenses capitalised -15.60 100.00 -13.99 89.68 -37.12 237.95 - -
5377.9 10429.4
Cost of sales 3001.13 100.00 3992.43 133.03 2 179.20 7743.22 258.01 0 347.52
1855.2
Operating profit 990.89 100.00 1142.45 115.30 5 187.23 2483.90 250.67 3254.50 328.44
Other recurring income 35.30 100.00 88.05 249.43 75.44 213.71 113.59 321.78 288.70 817.85
1930.6
Adjusted PBDIT 1026.19 100.00 1230.50 119.91 8 188.14 2597.49 253.12 3543.20 345.28
Financial expenses 2.93 100.00 3.52 120.14 5.57 190.10 3.13 106.83 7.20 245.73
Depreciation 137.94 100.00 151.60 109.90 185.97 134.82 292.26 211.87 359.80 260.84
Other write offs - 100.00 - - - -
1739.1
Adjusted PBT 885.31 100.00 1075.39 121.47 5 196.45 2302.10 260.03 3176.20 358.77
Tax charges 89.30 100.00 141.27 158.20 255.15 285.72 286.10 320.38 334.10 374.13
1484.0
Adjusted PAT 796.01 100.00 934.12 117.35 0 186.43 2016.00 253.26 2842.10 357.04
Non recurring items 33.50 100.00 3.87 11.55 17.88 53.37 38.33 114.42 -
Other non cash
adjustments -16.27 100.00 -23.11 142.04 -7.06 43.39 -33.85 208.05 -
1494.8
Reported net profit 813.23 100.00 914.88 112.50 2 183.81 2020.48 248.45 2842.10 349.48
Earnigs before 1494.8
appropriation 813.23 100.00 914.88 112.50 2 183.81 2020.48 248.45 2842.10 349.48
2901.9 1512.4 3064.8
Equity dividend 23.26 100.00 675.00 8 351.79 2 712.88 3 873.70 3756.23
Preference dividend - 100.00 - - - -
2902.0 1655.7 3355.0
Dividend tax 2.98 100.00 86.48 1 49.34 0 99.98 3 126.80 4255.03
1093.7
Retained earnings 787.00 100.00 153.39 19.49 0 138.97 1207.62 153.45 1841.60 234.00

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BALANCE SHEET: 2002-06

% % % % %
Mar ' growth growth Mar ' growth Mar ' growth Mar ' growth
03 on '03 Mar'04 on '03 05 on '03 06 on '03 07 on '03

Sources of funds

Owner's fund
Equity share capital 46.51 100.00 46.55 100.09 140.71 302.54 285.15 613.09 291.80 627.39
Share application
money 0.12 100.00 - 1.21 1008.33 7.49 6241.67 -
Preference share
capital - - - - -
Reserves & surplus 3283.70 100.00 3461.04 105.40 4751.73 144.71 6135.30 186.84 9025.10 274.85

Secured loans 52.56 100.00 94.75 180.27 21.59 41.08 45.06 85.73 23.20 44.14
Unsecured loans 17.19 100.00 5.94 34.55 40.50 235.60 5.10 29.67 214.80 1249.56
Total 3400.08 100.00 3608.28 106.12 4955.74 145.75 6478.10 190.53 9554.90 281.02

Fixed assets
Gross block 1161.71 100.00 1333.68 114.80 1763.49 151.80 2364.53 203.54 1645.90 141.68
Less : revaluation
reserve - - - - -
Less : accumulated
depreciation 597.39 100.00 678.66 113.60 855.53 143.21 1246.27 208.62 -
Net block 564.32 100.00 655.02 116.07 907.96 160.89 1118.25 198.16 1645.90 291.66
Capital work-in-
progress 94.83 100.00 139.71 147.33 250.24 263.88 612.36 645.75 989.50 1043.45
Investments 1440.72 100.00 2456.03 170.47 2859.51 198.48 3459.20 240.10 4348.70 301.84

Current assets, loans

& advances 1967.64 100.00 2038.41 103.60 2672.86 135.84 4076.68 207.19 6338.40 322.13
Less : current
liabilities & provisions 667.42 100.00 1680.89 251.85 1734.83 259.93 2788.39 417.79 3767.60 564.50
Total net current
assets 1300.22 100.00 357.52 27.50 938.03 72.14 1288.29 99.08 2570.80 197.72
Miscellaneous
expenses not written - - - - -
Total 3400.08 100.00 3608.28 106.12 4955.74 145.75 6478.10 190.53 9554.90 281.02

NOTE:
Book value of
unquoted
investments 670.20 100.00 654.63 97.68 782.71 116.79 514.23 76.73 -
Market value of
quoted investments 782.18 100.00 1803.84 230.62 2088.71 267.04 2956.87 378.03 -
Contingent liabilities 133.46 100.00 387.99 290.72 676.65 507.01 509.18 381.52 318.40 238.57
Number of equity
shares outstanding
(Lacs) 2325.64 100.00 2327.59 100.08 7035.71 302.53 14257.54 613.06 14590.00 627.35

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RATIO ANALYSIS OF WIPRO TECHNOLOGIES LTD

RATIOS 2003 2004 2005 2006 2007

CURRENT RATIO 2.95 1.21 1.54 1.46 1.68

QUICK RATIO 2.79 1.13 1.45 1.40 1.62
INVENTORY TURNOVER 53.61 51.92 58.05 78.23 57.23

PROFITABILITY RATIOS
OPERATING MARGIN 24.82 22.24 25.64 24.28 23.78
G.P MARGIN 21.36 19.29 23.07 21.42 21.15
EARNING POWER 0.00 0.00 0.00 0.00 0.00
Long term assets / total
Assets 0.51 0.61 0.59 0.55 0.52
LEVERAGE RATIOS
DEBT-EQUITY 0.02 0.02 0.01 0.01 0.02
Fixed assets turnover ratio 3.46 3.89 4.14 4.35 8.31
OWNERSHIP RATIOS:
REPORTED EPS 34.97 39.31 21.25 14.17 19.48

PRICE EARNING RATIO

DIVIDEND PAYOUT 3.22 83.23 26.83 40.23 35.2

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Trend analysis of WIPRO Technologies

Ltd:
Looking at the operating income of Wipro over the 5 years
there has been a consistent growth in it at an average around
25-30%. The operating income in 2003 being 3992.02 crores
and that increasing to 13683.90 in 2007 can be regarded as a
significant growth.

The expenses of the company have been on a steady rise too

indicating that the growth has been organic as well as
inorganic. The personnel expenses have risen tremendously
thus giving a picture about the employment increase in the
firm. (03-Rs642.47 to 07-Rs5764.5)

The operating profit of Wipro has a consistent trend of increase

not indicating any sudden rise or any fall in between. It has
been Rs.3254.5 in 07 which have increased from around Rs.990
in 03.

In each of the years the company has had some or the other
form of non-recurring income coming either from sale of asset
or other sources, except in the year 2007.

The companies reported net profit has been impressive since

2005 and has increased almost by 30% in the year 2006 and in
2007. The profit in the year 2006-Rs.2020 increasing to
2842.10.

The margins of the company regarding the operating, GP, and

net profit have shown a trend of increase and decrease, but
have not changed significantly over the years, thus indicating
the company’s ability to maintain its profits even though there
has been rise in their expenses. They are:There has been no
preference dividend given by the company as no issue of
preference shares has been made by the company.

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There has been a decline in the interest payments of the

company in the year 2006 indicating repayment of any loan
which the company had taken earlier.

In the balance sheet it can be seen that there was a fresh issue
of equity shares in the year 2005 increasing the capital from
Rs.46.55 cr to 140.71 and after that there was a fresh issue in
each of the subsequent years. The company has a huge base of
reserves which keep on increasing accordingly each year
indicating a sound policy of the company to transfer its profits
to the reserves each year.

The loans taken by the company to finance its working were

majorly from secured sources in the early years but from 2005
the major finance was from unsecured sources thus showing
the companies reliability and goodwill in the market to repay its
loans.

The company’s fixed assets have been on a rise over the years
but there has been decline in the assets in the last year thus
indicating a huge sale in the last year.

The company has made sound investments over the years thus
increasing their investments. The trend of investments is given
below:

1440. 2456. 2859. 3459. 4348.7

Investments 72 03 51 20 0

Book value of
unquoted 670.2 654.6 782.7
investments 0 3 1 514.23 -
Market value of 782.1 1803. 2088. 2956.8
quoted investments 8 84 71 7 -

The current assets and liabilities of the company include

debtors, cash, inventories and loans and advances. The
inventories do not contribute much to the current assets
indicating a good sign for the current as well as quick ratio for

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the company to pay its short term payments. The company will
not have any problem in paying any sudden expenses as the
cash balances are adequate. (07-Rs.19,822 cr and 06-
Rs.8,858).

Ratio analysis and interpretation:

IMPORTANT RATIOS:

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1. Liquidity ratios:

Liquidity implies a firm’s ability to pay its debt in the short

run. This ability can be measured by the use of liquidity
ratios. If a firm has sufficient net working capital it is
assumed to have enough liquidity.

a. CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES

The current ratio measures the ability of the enterprise to

meet its current obligations. A current ratio by normal
standards is considered to be as 2:1. Higher the current
ratio higher the short term liquidity of the enterprise.

b. QUICK RATIO = CURRENT ASSETS-

INVENTORIES/CURRENT LIABILITIES

The quick ratio is a more stringent measure of liquidity

because inventories, which are least liquid of current
assets, are excluded from the ratio. The quick test is so
named because it gives the abilities of the firm to pay its
liabilities without relying on the sale and recovery of its
inventories. The standard so considered in this case is 1:1.

2. Turnover ratios:

Turnover ratios measure the liquidity of a firm in an

indirect way. Here the measure of liquidity is concerned
with the speed with which inventory is converted into
sales and accounts receivables converted into cash.

a. ACCOUNTS RECEIVABLE TURNOVER RATIO = NET CREDIT

SALES/AVG. ACCOUNTS RECEIVABLES

This ratio is normally useful for internal analysis. Higher

the receivables turnover ratio, greater the liquidity of
the firm.

As the companies do not disclose their credit sales information

we will assume all the sales to be on credit bases.

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b. AVERAGE COLLECTION PERIOD = 360/ AVG. ACCOUNTS

RECEIVABLE TURNOVER

This ratio gives a sense of speed of collections from receivables

turnover ratio and it is valuable for comparison purposes.

c. INVENTORY TURNOVER RATIO = C.O.G.S/ AVG. INVENTORY

The inventory turnover, or stock turnover, measures how fast

the inventory is moving through the firm and generating sales.
Higher the ratio, greater the efficiency of inventory
management. The importance of inventory turnover can also
be looked from different point of view i.e., it helps the analyst
measure the adequacy of goods available to sell in comparison
to the actual sales order.

3. Profitability or Efficiency Ratios: These measure the efficiency of

the firm’s activities and its ability to generate profits. There are
two types of profitability ratios.

• Profits in relation to sales: It is important from the point

standpoint that the firm be able to generate adequate
profit on each unit of sales. If sales lack a sufficient margin
of profit, it is difficult for the firm to cover its fixed charges
on dept and to earn a profit for shareholders. Two popular
ratios in this category are gross profit margin ratio, net
profit margin ratio.

• Profits in relations to assets: It is also important that profit

be compared to the capital invested by owners and
creditors. If the firm cannot produce a satisfactory profit
on its asset base, it might be misusing its assets.

a. GROSS PROFIT MARGIN RATIO = G.P/ NET SALES

It may be used as an indicator of the efficiency of the

production operation and the relation between production
costs and selling price.

b. NET PROFIT MARGIN = NET PROFIT/ NET SALES

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This ratio shows the earnings left for the shareholders as a

percentage of the net sales. It measures the overall
efficiency of the firm.

c. ASSET TURNOVER RATIO = SALES/ AVG. ASSETS

It highlights the amount of assets that the firm used to

produce its total sales. The ability to produce a large
volume of sales on a small asset base is an important part
of the firm’s profit picture.

d. EARNING POWER RATIO = PBIT/AVG.TOTAL ASSETS

This ratio is a measure of the operating business

performance which is not affected by interest charges and
tax payments. It is well suited for inter-firm comparison.

e. RETURN ON EQUITY RATIO = PAT/ AVG. EQUITY

This ratio measures the profitability of equity funds

invested in the firm. It is regarded as a very important
measure because it reflects the productivity of capital
employed in the firm.

f. OPERATING PROFIT RATIO= OPERATING PROFIT/ SALES

4. OWNERSHIP RATIOS:

Ownership ratios will help the stockholder in analysing his

present and future investment in a firm. Ownership ratios
are divided into three main groups. They are:
1. EARNINGS RATIOS

The earnings ratios give information on earnings of

the firm and their effect on price of common stock.
The earnings ratios are EPS, P/E RATIO,
CAPITALIZATION RATIO.

a. EPS = PAT/ NO. OF OUTSTANDING SHARES

b. PRICE EARNINGS MULTIPLE = MARKET PRICE OF

SHARE/ EARNINGS PER SHARE

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c. CAPITALIZATION RATE= EPS/ MARKET PRICE OF

SHARE*100
2. LEVERAGE RATIOS

• CAPITAL STRUCTURE RATIO

• COVERAGE RATIO

a. CAPITAL STRUCTURE RATIOS:

DEBT-EQUITY RATIO= DEBT/EQUITY

The debt-equity ratio indicates the relative contributions of

creditors and owners.

• DEBT-ASSET RATIO= DEBT/ ASSET

This ratio measures the extent to which borrowed funds

support the firm’s assets.

b. COVERAGE RATIOS:

These ratios give the relationship between the financial charges

of a firm and its ability

to service them.

• INTEREST COVERAGE RATIO= PBIT/INTEREST EXPENSES

This measures the ability to handle financial burdens.

It also tells how many times the firm can cover or
meet the interest payments associated with debt.
The greater the interest coverage ratio, the higher
the ability of the firm to pay its interest expense.

5. DIVIDEND RATIOS:

a. DIVIDEND PAY-OUT RATIO= DPS/EPS

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This ratio indicates what percentage of total earnings

is paid to shareholders. The percentage of earnings
which is not paid out (1- dividend pay-out) is retained
for future needs.

6. ASSET UTILIZATION RATIO:

a. RETURN ON INVESTMENT= PBT/ SHAREHOLDERS

FUND+ LONG TERM LOANS

WIPRO Vs PATNI RATIO COMPARISON:

Looking at the ratio comparison we must consider the liquidity

ratios, profitability ratios and EPS & dividend ratios for getting
an overall view of their performance visa-a-vie each other.

The current ratio data:

WIPRO

CURRENT RATIO 2.95 1.21 1.54 1.46 1.68

PATNI

CURRENT RATIO 2.80 2.40 2.99 3.68 1.77

Looking at the ideal ratio we can say that Wipro has less, ratio
as compared to Patni in the recent years from 2004, but it is
sufficient for the company as they have no or less inventory the
major part of the current asset comprise of cash. As for Patni
the ratio is good but in some years it has more assets in current
assets than it might need. The ratio of 3.68 was too much for

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the company but it has been reduced considerably from that

amount to 1.77 which is substantially better for the company.

In case of the quick ratio we can see that Wipro is in a better

position than Patni as they are much closer to the ideal ratio of
1:1 which is sufficient for paying off any of its current liabilities.

Wipro

2.7 1.1 1.4

QUICK RATIO 9 3 5 1.40 1.62

Patni

QUICK RATIO 2.80 2.40 2.99 3.68 1.77

The ratio for Patni in the year 2005 is much greater than
required by the company to fulfil its obligations.

In case of the profitability ratios we can have a direct

comparison by looking at the ratios:

Patni

48.7 40.1 42.5 34.2 33.8

OPERATING MARGIN 2 6 8 2 3
42.0 32.8 35.8 27.3 26.5
G.P MARGIN 9 6 9 7 6
36.4 30.5 32.0 21.7 19.7
NET MARGIN 8 2 6 5 9

Wipro

22.2
OPERATING MARGIN 24.82 4 25.64 24.28 23.78
19.2
G.P MARGIN 21.36 9 23.07 21.42 21.15
11.7
NET MARGIN 13.15 0 21.64 32.45 23.61

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The operating margins of Patni are better than Wipro also there
is a significant difference between their ratios and margins. The
ratios give Patni an edge over Wipro as it has a higher ratio but
the ratios are also saying that there is a need for Patni to keep
a high margin in order to retain its profits on the other hand
Wipro might be getting a higher level of sales than Patni
leading to low margins. The comparison shows us the overall
efficiency of production, selling, administration, pricing and tax
management.

EPS AND DIVIDEND RATIOS:

Wipro

39.3 19.4
REPORTED EPS 34.97 1 21.25 14.17 8

83.2 35.
DIVIDEND PAYOUT 3.22 3 26.83 40.23 2

Patni

26.0 18.4 22.2 18.4 20.1

REPORTED EPS 6 2 0 6 3

0.0
DIVIDEND PAYOUT 2 0.06 0.10 0.16 0.21

The earnings per share of Wipro had been better than Patni in
the beginning but later on over the years it has reduced a lot.
The EPS of both the companies have come down that of Wipro
has reduced by almost 45% over the years and that of Patni
has reduced by 30% (approx). Looking at the trend of EPS we
can forecast a brighter future for Patni.

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The dividend payments of both the firms has been consistent

but on a reducing trend. The dividends in case of Wipro had
been increased in between the years thus indicating good
profits for the firm but later on in the recent years have
decreased a lot thus giving us an idea that the company wants
its operations to expand and thus utilise its resources. Also it
indicates that there has been a slump in the industry which has
reduced their profits to some extent. In case of Patni the
dividend payout has been increased over the years but it is still
less than that offered by Wipro. Thus in case of dividend payout
Wipro definitely has an edge over Patni.

Thus, in conclusion we can say that the companies are close

competitors of each other as they have an edge over each
other in one scenario or the other.

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