INTRODUCTION TO THE PROJECT:-

This project comprises of a study on fundamental analysis of

WIPRO and contains economic, company and industry analysis.

SCOPE OF THE STUDY:

The study basically makes fundamental analysis of WIPRO and

contains economic, company and industry analysis in IT sector and

tries to identify the intrinsic value of the company by using the

published financial details of the company. The study is

restricted to one particular company in the sector. The study

also includes testing the intrinsic value of the company.

OBJECTIVES OF THE STUDY:-

To understand the meaning of fundamental analysis

To understand the strength and weakness of fundamental

analysis.

To make a fundamental analysis, economic analysis and

industrial analysis of IT sector with specific reference to

WIPRO.

1

To recommend whether to buy, hold or sell the stock based on

the analysis of p&l account, financial ratios and comparison

with peer companies.

RESEARCH METHODOLOGY:-

This project is prepared by using secondary data obtained

from various websites.

LIMITATIONS OF THE STUDY:-

The study was confined only to one particular sector and one

company.

The study was more confined with secondary data.

CHAPTER 1: AN INTRODUCTION TO FUNDAMENTAL ANALYSIS

What Is Fundamental Analysis?

Fundamental analysis is a stock valuation methodology that uses

financial and economic analysis to envisage the movement of stock

prices. The fundamental data that is analysed could include a

company’s financial reports and non-financial information such as

estimates of its growth, demand for products sold by the company,

industry comparisons, economy-wide changes, changes in government2

policies etc.The outcome of fundamental analysis is a value (or a

range of values) of the stock of the company called its

‘intrinsic value’ (often called ‘price target’ in fundamental

analysts’ parlance). To a fundamental investor, the market price

of a stock tends to revert towards its intrinsic value. If the

intrinsic value of a stock is above the current market price, the

investor would purchase the stock because he believes that the

stock price would rise and move towards its intrinsic value. If

the intrinsic value of a stock is below the market price, the

investor would sell the stock because he believes that the stock

price is going to fall and come closer to its intrinsic value.To

find the intrinsic value of a company, the fundamental analyst

initially takes a top-down view of the economic environment; the

current and future overall health of the economy as a whole.

After the analysis of the macro-economy, the next step is to

analyse the industry environment which the firm is operating in.

One should analyse all the factors that give the firm a

competitive advantage in its sector, such as, management

experience, history of performance, growth potential, low cost of

production, brand name etc. This step of the analysis entails

3

finding out as much as possible about the industry and the inter-

relationships of the companies operating in the industry .The

next step is to study the company and its products.

Strengths and Weakness of Fundamental Analysis

Strength

Long-term Trends:

Fundamental analysis is good for long-term investments based on

long-term trends, very long-term. The ability to identify and

predict long-term economic, demographic, technological or

consumer trends can benefit patient investors who pick the right

industry groups or companies.

Value Spotting:

Sound fundamental analysis will help identify companies that

represent good value. Some of the most legendary investors think

long-term and value. Graham and Dodd, Warren Buffett and John

Neff are seen as the champions of value investing. Fundamental

4

analysis can help uncover companies with valuable assets, a

strong balance sheet, stable earnings and staying power.

Business Acumen:

One of the most obvious, but less tangible, rewards of

fundamental analysis is the development of a thorough

understanding of the business. After such painstaking research

and analysis, an investor will be familiar with the key revenue

and profit drivers behind a company. Earnings and earnings

expectations can be potent drivers of equity prices. Even some

technicians will agree to that. A good understanding can help

investors avoid companies that are prone to shortfalls and

identify those that continue to deliver. In addition to

understanding the business, fundamental analysis allows investors

to develop an understanding of the key value drivers and

companies within an industry. Its industry group heavily

influences a stock’s price. By studying these groups, investors

can better position themselves to identify opportunities that are

high-risk (tech), low-risk (utilities), growth oriented

5

(computer), value driven (oil), non-cyclical (consumer staples),

cyclical (transportation) or income oriented (high yield).

Knowing Who's Who:

Stocks move as a group. By understanding a company's business,

investors can better position themselves to categorize stocks

within their relevant industry group. Business can change rapidly

and with it the revenue mix of a company. This happened to many

of the pure internet retailers, which were not really internet

companies, but plain retailers. Knowing a company's business and

being able to place it in a group can make a huge difference in

relative valuations.

Weakness

Time Constraints:

Fundamental analysis may offer excellent insights, but it can be

extraordinarily time consuming. Time-consuming models often

produce valuations that are contradictory to the current price.

6

Industry/Company Specific:

Valuation techniques vary depending on the industry group and

specifics of each company. For this reason, a different technique

and model is required for different industries and different

companies. This can get quite time consuming and limit the amount

of research that can be performed.

Subjectivity:

Fair value is based on assumptions. Any changes to growth or

multiplier assumptions can greatly alter the ultimate valuation.

Fundamental analysts are generally aware of this and use

sensitivity analysis to present a base-case valuation, a best-

case valuation and a worst-case valuation. However, even on a

worst case, most models are almost always bullish, the only

question is how much so.

Analyst Bias:

7

The majority of the information that goes into the analysis

comes from the company itself. Companies employ investor

relations managers specifically to handle the analyst community

and release information.

CHAPTER 2: CASE STUDY OF WIPRO

8

Overview of Wipro

Wipro Infotech is a leading manufacturer of computer hardware and

provider of IT services in India and the Middle East region. Part

of Wipro Ltd, the $6.98 billion conglomerate and global leader in

technology enabled solutions, the company leverages on the

parent's philosophy of 'Applying Thought' to enable business

results by being a transformation catalyst.

Backed by our strong quality processes and rich experience

managing global clients across various business verticals, we

align IT strategies to your business goals. From simple changes

in process to innovative solutions, we help our customers harness

the power of IT to achieve profitable growth, market leadership,

customer delight and sustainability. Along with our best of breed

technology partners, Wipro Infotech also helps you with your

hardware and IT

infrastructure needs.

9

Listing Information of Wipro

Listing Information

SECT: Information Technology

Face Value2.0

Market Lot Of Equity Shares1

BSE Code507685

BSE GroupA

 NSE:WIPROEQ 

10

Company Background

IndustryName: ComputersSoftware

HouseName: WiproGroup

Incorporation Date: 29/12/1945

FaceValue: 2.0

ISIN: INE075A01022

Market Lot: 1

 

Various Indian Stock Exchange Where Wipro Is Listed

Listed On

Bangalore Stock Exchange Ltd.

Calcutta Stock Exchange Association Ltd.

Cochin Stock Exchange Ltd.

Delhi Stock Exchange Assoc. Ltd.

Hyderabad Stock Exchange Ltd

Inter-connected Stock Exchange of India

Madras Stock Exchange Ltd.,

MCX Stock Exchange

National Stock Exchange of India Ltd.

Over The Counter Exchange Of India Ltd.

The Stock Exchange, Ahmedabad

The Stock Exchange, Mumbai

11

CHAPTER 3: FUNDAMENTAL ANALYSIS OF WIPRO

A.Economic Analysis

Overview of the economy

The Indian economy is estimated to have registered a growth rate

of 5.0 per cent in 2012-13 in terms of gross domestic product at

factor cost at constant 2004-05 prices, following a growth of 6.2

percent in 2011-12. Growth in 2011-12 and 2012-13 is on the lower

side, in the context of the decadal average of 7.9 per cent

during 2003-04 to 2012-13. This is attributable mainly to

weakening industrial growth in the context of tight monetary

policy followed by the Reserve Bank of India (RBI) through most

of 2011-12, and continued uncertainty in the global economy. With

12

some moderation in headline WPI inflation, there has been a

reduction in the repo rate by the RBI by 50 basis points in

April, 2012 and by 25basis points in January 2013. The impact of

tight monetary policy has been reflected in the quarterly growth

rates of GDP. Quarterly GDP growth declined in each of the

successive quarters between the fourth quarter of 2010-11, and

the fourth quarter of 2011-12. The slowdown in the economy,

particularly in the industry sector has entailed a lower-than

budgeted growth in government revenues. However, measures

undertaken as part of mid-course correction have helped in

improving the expenditure outcome in 2012-13. Measures including

the increase in the price of diesel by ` 5 per litre, allowing

oil marketing companies (OMCs) to raise diesel prices by small

amounts regularly, and a cap on the number of subsidized LPG

cylinders are expected to rein in the fiscal deficit. Growth of

exports for most of the current year remained in negative

territory, and with imports picking up in recent months, the

trade deficit increased to US$ 147 billion during April-December

2012. The current account deficit (CAD) at 4.6 per cent of GDP in

the first half of 2012-13 is a cause for concern. The widening of

13

the trade and current account deficits has been accompanied by a

decline in the value of the Rupee since August 2011. After

attaining an all-time low of ` 57.22 per US$ on June 27, 2012 the

Rupee rebounded and was in the range of 53-55 per US$ in the

month of January 2013. WPI inflation, after remaining

persistently high during 2010-11 and 2011-12, has shown signs of

moderation since. December 2011. However, it has remained sticky

at around 7 to 8 per cent over the last 12 months. With

widespread reform measures initiated in recent months and the

global economy poised for a moderate recovery in 2013-14, the

Indian economy is expected to witness an improved outlook in

2013-14.

GDP Growth

As per the Advance Estimates released by the Central Statistics

Office (CSO), the Indian economy is estimated to register a

growth rate of 5.0 per cent in 2012-13 in terms of GDP at factor

cost as against 6.2 per cent in 2011-12 and 9.3 per cent in 2010-

11.

14

The growth is on the lower side not only as compared to the

recent past but also in the context of growth trends witnessed

since 2003-04. The slowdown in the growth of the economy in 2012-

13 is mainly on account of the slowdown in the industrial sector

which is estimated to grow at 3.1 per cent in 2012-13 as against

3.5 per cent in 2011-12 and significantly lower growth of 1.8 per

cent in agriculture sector on top of a growth rate of 3.6 per

cent achieved in 2011-12.

Services sector is estimated to grow at a rate of 6.6 per cent in

2012-13, which is also lower than that achieved in 2011-12. The

slowdown in 2011-12 and 2012-13 has been precipitated by domestic

factors as well as factors emanating from the rest of the

world,particularly advanced economies and India’s major trading

partners. The crisis in the Euro-zone area and slow growth in

many other advanced economies have affected growth in India

through dynamic linkages. Domestic factors, including the

tightening of monetary policy, in order to control inflation and

rein in inflationary expectations, resulted in slowing down of

investment and growth, particularly in the industrial sector.

15

As per the quarterly data released by CSO, growth in the economy

was 5.3 per cent in the second quarter of the current year. This

growth has been the lowest since fourth quarter of 2008-09. The

growth of agriculture, industry and services sectors is estimated

to be 1.2 per cent, 2.8 per cent and 7.2 per cent respectively in

the second quarter of 2012-13 as against 3.1 per cent, 3.7 per

cent and 8.8 per cent respectively in the corresponding quarter

of 2011-12. Cumulative growth in the first two quarters of the

current year put together works out to 5.4 per cent as against

7.3 per cent in the corresponding period last year.

16

Inflation

Overview of Inflation

In terms of expenditure method of estimation,GDP at constant

market prices is projected to register, a growth of 3.3 per cent

in 2012-13 as against a growth of 6.3 per cent in 2011-12. This

slowdown in growth could be attributed to three major components

the growth of consumption expenditure, gross fixed.

1. Growth since Q4 of 2012-13 is expected to stage a gradual

recovery aided by some revival in investment demand and the

favourable effect of some moderation in inflation on consumption.

Inflation in Q3 of 2012-13 has trended down, though upside risks

remain from suppressed inflation which could impart stickiness to

inflation trajectory in 2013- 14. Core inflation pressures have

receded markedly and are unlikely to re-emerge quickly on demand

considerations. However, high food and fuel inflation still

remain a concern and this in part is reflected in high CPI

inflation.

17

2. Since the beginning of 2012, the Reserve Bank has worked

towards easing monetary and liquidity conditions in a calibrated

manner so as to not jeopardise the trend of moderating inflation.

The strategy yielded dividends, as headline and core inflation

moderated during Q3 of 2012-13. However, monetary policy needs to

continue to be calibrated in addressing growth risks as inflation

remains above the Reserve Bank’s comfort level and macroeconomic

risks from twin deficits persists.

Global Economic Conditions

Fiscal Adjustments Likely To Keep Global Recovery Muted

In 2013

3. Though the US registered high growth in Q3 of 2012 and the

pace of economic contraction moderated in the euro area, growth

prospects for advanced economies (AEs) in 2013 remain subdued.

While the immediate risk of the fiscal cliff in the US has been

averted due to a hurried deal on tax rate hikes, the debt ceiling

18

limit and the sequester issue pertaining to expenditure reduction

are still unsettled. Growth in emerging market and developing

economies (EMDEs) may have bottomed out, but an enduring recovery

hinges on global headwinds.

Global commodity price inflation likely to remain soft,

although with some risks from QE

4. Inflation in AEs is likely to remain moderate as demand

remains weak, leaving the global inflation scenario benign in the

near term. As a baseline case, improved supply prospects in key

commodities such as oil and food are also likely to restrain

commodity price pressures. However, upside risks persist,

especially on the back of some recovery in EMDEs and large

quantitative easing (QE) by AE central banks. In the presence of

significant excess global liquidity, triggers for supply

disruptions or incremental news flow on reduced slack could

exacerbate price volatility and become a source of inflationary

pressure.

19

Unconventional Monetary Policies Reduce Global

Financial Stress in The Interim, But Risks Remain Ahead

5. International financial market stress moderated greatly

following aggressive monetary easing measures by the central

banks of AEs, as also recent policy initiatives on fiscal

consolidation in the euro area economies, encouraging capital

flows into EMDEs. However, in the absence of credible long-term

fiscal consolidation in the US, and generally reduced fiscal

space in AEs, the efficacy of monetary policy actions may get

subdued. Risks to the global financial sector, although

moderating, are likely to persist

.

Indian Economy: Developments and Outlook

Output

Growth Remains Below Trend, Recovery Likely In 2013-14

6. The Indian economy further decelerated in the first half (H1)

of 2012-13, with moderation in all three sectors of the economy.

20

The weak monsoon dented agricultural performance. Policy

constraints, supply and infrastructure bottlenecks and lack of

sufficient demand continued to keep industrial growth below

trend. Subdued growth in other sectors and weak external demand

pulled down the growth of services as well. Though a modest

recovery may set in from Q4 of 2012-13 as reforms get

implemented, sustaining recovery through 2013-14 would require

all-round efforts in removing impediments to business activity.

Aggregate Demand

Improvement in Investment Climate Is a Pre-Requisite

for Economic Recovery

7. Demand weakened in H1 of 2012-13. There was significant

moderation in consumption as private consumption decelerated even

as government expenditure accelerated. On the fiscal side, near-

term risks have diminished due to the government’s repeated

avowal of commitment to the revised fiscal deficit target of 5.3

per cent of gross domestic product (GDP) for the year. However,

sustainable fiscal consolidation would require bringing current

21

spending, especially on subsidies, under control and protecting,

if not enhancing capital expenditure. Going forward, the key to

demand revival lies in improving the investment climate as well

as investor sentiments through sustained reforms.

External Sector

Widening Of CAD and Its Financing Remains a Key Policy

Challenge

8. The current account deficit (CAD) to GDP ratio reached a

historically high level of 5.4 per cent in Q2 of 2012-13. Low

growth and uncertainty in AEs as well as EMDEs continued to

adversely impact exports in Q3 of 2012-13. This, combined with

continuing large imports of oil and gold, resulted in a

deterioration of the trade balance. For the time being, strong

capital flows have enabled financing of CAD without a significant

drawdown of foreign exchange reserves. However, the possibility

of volatility in these flows, which may put further pressure on

the external sector, cannot be ruled out. A two-pronged approach,

of lowering CAD in the medium term while ensuring prudent

22

financing of CAD in the interim, is necessary from the policy

perspective.

Monetary and Liquidity Conditions

With tightening cycle gradually impacting inflation,

the Reserve Bank takes measures to combat tight

liquidity conditions

9. Monetary policy in India has sought to balance the growth-

inflation dynamics that included a frontloaded policy rate cut of

50 basis points (bps) in April 2012 and several liquidity

enhancing measures. These included lowering of the cash reserve

ratio (CRR) by 50 bps on top of a 125 bps reduction in Q4 of

2011-12 and the statutory liquidity ratio (SLR) by 100 bps in a

bid to improve credit flows. The Reserve Bank also infused

liquidity of over `1.3 trillion through outright open market

operation (OMO) purchases during 2012-13 so far. However, growth

in monetary aggregates remains below the indicative trajectory.

Financial Markets

23

Domestic Reform Initiatives and Surging Capital Flows

Improve Market Sentiment and Revive the IPO Market

10. Improved global sentiments along with recent policy reforms

by the government beginning September 2012, and market

expectations of a cut in the policy rate in the face of

moderation in inflation, aided FII flows into the domestic

market. The equity markets showed significant turnaround, while

the rupee remained range-bound. In addition, revival is witnessed

in the IPO segment. Although Indian financial market sentiments

improved significantly in Q3 of 2012-13, some macroeconomic

concerns persist, as witnessed in the inverted yield curve.

Sustained commitment to curtail twin deficits and nurture growth

without fuelling inflation is critical to support investor

confidence.

Price Situation

Headline and Core Inflation Moderated, But Suppressed

Inflation Poses Risks

24

11. Headline inflation moderated in Q3 of 2012-13 with

significant moderation in nonfood manufactured products

inflation. Both weakening domestic demand and lower global

commodity prices contributed to the softening of headline

inflation. Though the recent hike in diesel prices will put some

pressure on the overall price level, the near-term inflation

outlook indicates that the moderation may continue through Q4 of

2012-13. While the pressure from generalized inflation remains

muted at the current juncture, risks from suppressed inflation,

pressure on food prices and high inflation expectations getting

entrenched into the wage-price spiral need to be reckoned with.

The inflation path for 2013- 14 could face downward rigidity as

some of the risks from suppressed inflation materialize.

Macroeconomic Outlook

Balance of Macroeconomic Risks Suggest Continuation of

Calibrated Stance

12. Reforms since September 2012 have reduced immediate risks,

but there is a long road ahead to bring about a sustainable

25

turnaround for the Indian economy. Business sentiments remain

weak despite reform initiatives and consumer confidence is edging

down. The Reserve Bank’s survey of professional forecasters

anticipates a slow recovery in 2013-14 with inflation remaining

sticky. Fiscal risks have somewhat moderated in 2012-13, but a

sustained commitment to fiscal consolidation is needed to

generate monetary space. Widening CAD, which is at historically

high level, remains a constraint on monetary easing. Against this

backdrop, while growth can be supported by monetary policy if

inflation risks recede, credible fiscal correction with improved

execution in infrastructure space to boost investment would be

needed for a sustained revival. The balance of macroeconomic

risks suggest continuation of the calibrated stance while

increasingly focussing on growth risks

26

B.Company analysis

Quarterly Profit & Loss of Wipro

Rs in cr. Jun-13 Mar-13 Dec-12 Sep-12Jun-

12

Net Sales 9733 9613 9588 10620 9248

27

Other Operating Income 0 0 0 0 0

Total Income 9733 9613 9588 10620 9248

% change 0 0 0 0 0

Total Expenditure 7713 7657 7537 8482 7256

EBITDA 2020 1956 2050 2138 1991

% change (EBITDA) 3 -5 -4 7 9

EBITDA Margin (%) 21 20 21 20 22

Depreciation 250 243 248 280 245

EBIT 1770 1713 1803 1859 1746

Interest 50 40 47 54 129

Other Income 336 461 417 323 356

PBT 2057 2135 2173 2128 1973

Tax 425 397 447 508 383

% PBT 21 19 21 24 19

28

Reported Profit After

Tax1632 1737 1725 1621 1590

Minority Interest 8 9 9 10 10

Net Profit afer

Minority Int.1623 1729 1716 1611 1580

Extra-ordinary Items 0 0 0 0 0

Adjusted Profit 1623 1729 1716 1611 1580

Equity 493 493 493 492 492

Face Value 2 2 2 2 2

EPS (Unit Curr.) 7 6 7 7 6

EPS TTM (Unit Curr.) 26 25 25 25 23

29

Financial Ratios of Wipro

Praticular

s

Mar-

13

Mar-

12

Mar-

11

Mar-

10Particulars

Mar-

13

Mar-

12

Mar-

11

Mar-

10

Valuation

Ratios:

(x)

Per share

Data:(Rs.)

P/E18.7

9

20.0

8

21.2

6

24.3

7EPS(Basic)

24.2

6

22.7

5

21.5

2

31.3

9

EV/Total

Assets3.46 3.32 3.95 4.56 Cash EPS

28.0

6

26.7

1

24.7

4

36.5

4

P/BV 5.31 5.55 6.58 8.69 DPS 7.00 6.00 6.00 6.00

EV/Sales 2.90 2.98 3.61 4.12 BookValue85.8

5

82.2

8

69.5

5

88.0

0

EV/EBITDA14.1

6

15.7

5

17.3

7

18.8

3

Dividend

Yield (%)1.63 1.31 1.31 0.78

Growth:(%) Solvency

30

Ratios:

Sales

Growth1.00

20.0

0

14.0

06.00

Interest

Coverage

(EBIT /

Interest)

23.2

1

17.6

1

29.2

8

42.1

7

EBITDA

Growth9.00 9.00 8.00

22.0

0

Net debt to

EBITDA

-

0.51

-

0.21

-

0.05

-

0.04

Net Profit

Growth7.00 6.00

15.0

0

20.0

0

Net Debt to

equity

-

0.15

-

0.05

-

0.01

-

0.01

Current

Ratio2.14 2.64 2.44 2.26

Margins:

(%)Returns:(%)

EBITDA

Margin

20.0

0

19.0

0

21.0

0

22.0

0

Angel ROIC

*

66.0

0

43.0

0

51.0

0

64.0

0

PBT Margin21.0

0

19.0

0

20.0

0

20.0

0ROCE

21.0

0

18.0

0

20.0

0

21.0

0

Net Profit 16.0 15.0 17.0 17.0 ROE 22.0 21.0 23.0 25.0

31

Margin 0 0 0 0 0 0 0 0

Quarterly

Ratios:

Growth

rate yoy:

(%)

Jun-

13

Mar-

13

Dec-

12

Sep-

12

Growth rate

qoq:(%)

Jun-

13

Mar-

13

Dec-

12

Sep-

12

32

YOY EBITDA

Growth1.46 7.18 3.32

22.9

0

QoQ EBITDA

Growth3.00

-

5.00

-

4.007.00

YOY Sales

Growth5.00

13.0

0

-

4.00

17.0

0

QoQ Sales

Growth1.00 0.00

-

10.0

0

15.0

0

YOY Net

Profit

Growth

3.0017.0

0

18.0

0

24.0

0

QoQ Net

Profit

Growth

-

6.001.00 7.00 2.00

33

C.Industry Analysis

Analysis of Indian IT Companies

Peer Comparison:-

Company

Market

Cap

(Rs. in

Cr.)

P/E

(TTM)

(x)

P/BV

(TTM

)

(x)

EV/

EBIDTA

(x)

ROE

(%)

ROCE

(%)

D/E

(x)

TCS 382,211.8

0 28.84

11.7

7 18.37 44.6 53.7

0.0

0

Infosys 172,016.4

6 19.88 4.77 10.93 27.7 37.5

0.0

0

Wipro 117,156.7

0 19.83 4.84 12.83 23.3 25.0

0.2

3

HCL

Technologis 74,047.05 20.51 7.24 11.74 31.3 32.3

0.1

7

34

TCS:

TCS is the bell weather in IT sector and has maintained to be the

large cap stock among all the IT stocks on the Indian Bourses.

Recently TCS has earned the Xclent customer base award 2012 for

its TCS BaNCS banking software.

It  sees  better IT  spends, ramp-up in its clients in the US as

compared to earlier and the fact that TCS has 8% wage hike is

showing that the company is expecting more revenue growth

compared to its peers.

35

This is the company that was affected by the recession during

2008-09 because of its diversified network, at that point of time

it decreased its cost by firing 300000 employees and maintained

46.7 EPS higher compared to other years.

Looking at TCS financials:

TCS is allocating 15% of its income to its contingent liability

which shows the ability of the company to maintain its growth

even in its aggressive acquisitions.

It has maintained good reserves and decreasing debt which will be

the safest parameters for the investor to look at to invest.

 

Looking at TCS ratios:

Debt to Equity ratio is 0.01 this means TCS has one paisa of debt

to equity which shows it has low debt and the PAT is 415 times

higher than the interest paid by the company.

36

It is a low beta stock which means it will not be affected by the

market forces, rather its performance is the key, it has shown a

consistent EPS growth rate of 6% and the PE growth rate of 10%,

using this parameter it is projected that the share price may

stand at Rs.1372 in a year if the company maintains to continue

its exports which inversely gain revenues from the dollar

appreciation.

The return on net worth is 37% which is the highest in the

sector.

37

INFOSYS:

India’s second-largest software services exporter by Revenue’s

and which is another Bellwether IT stock, has been weak in

keeping its financials than other IT companies and also Analysts

estimates., In spite of the initiative of leading a government

effort to give every Indian citizen an ID number, a crucial

initiative in a country where most people have no driver’s

license, passport or even birth certificate.

Apart from this the other factor that drove Infosys share price

by 10% decrease in share price over the last year was due to Visa

fraud charges leveled in the United States. It has continued to

maintain the name of “company with politics” and bad reputation

in the eyes of employees with regards to the salary hikes and

work pressure.

38

The company has been good to give employee appraisal rather than

rewards, on the other side of the coin it has the ability to make

any employee proficient to work in another company.

Looking at INFOSYS Financials:

There is a perception among the accountants and the investors

that in the presentation of the financial statement by Infosys is

the best with its Zero Debt, increased revenues and reserves.

Infosys has an average income growth rate of 19% and it has

allocated 4% of its income to its contingent liability which is

higher than past year and has been increasing YOY.

Among all the other giants in the IT sector Infosys has the

highest FII holding of 37.36% (as on 1 May 2012), If the company

gives high growth rate in the next quarter it can become a good

stock after HCL Technologies.

Looking at INFOSYS ratios:

39

Infosys is a low beta stock. Infosys has 10% average EPS growth

rate and 6% P/E over the years.

If the company continues to maintain the same momentum in

generating more revenues and along with the continuity in its

reserves and income, it is projected that the share price could

be at Rs.3772 in a year with its current average growth rate.

40

Wipro: 

The company that started with the innovation and integrity in the

consumer product business is now the 3rd largest IT services

company in India and entered into the Forbes top 500 companies

list.

Wipro’s IT services and Hardware accounted for 75% of its total

revenues till the year 2011 and its results has come in line with

the expert expectations.

 After tasting sweet success with its Glucose Powder Brand

Glucovita, Wipro Consumer Care & Lighting (WCCL) now plans to

launch the product in the tablet form as well, where an

individual can have two tablets and get instant energy.

WCCL’s first major overseas acquisition was the Singapore-based

Unza Holdings for around Rs 1,000 crore in 2007, through which it

operates in 40 countries.

Looking at Wipro’s financials:

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The consolidated result takes into account all the segments, in

which the Consumer Care and Lighting accounted for more than the

IT services during the year ended 2012.

Wipro has 1% of its income as its contingent liability which is

a good parameter for investment, it has good reserves, it has

negative cash flows, and company is going to invest 100 crores

this fiscal to increase the capacity in various categories, be it

lighting, soaps or personal care, to meet demand.

Looking at Wipro’sRatios

Wipro is a low beta stock. Wipro has 22 Paisa debt for every

rupee of its equity.

The average growth of EPS is 4% and P/E is 5% the estimated price

stood at Rs.527, company has PAT 82 times to its interest cost.

 

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HCL Technologies: 

It occupied 4th place in the top IT companies in INDIA and it is

after the Giant TCS in generating revenues, HCL consistently has

been increasing its quarterly performance, through better revenue

visibility and winning the market share.

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The share price has gained around 25% over the past and they won

about USD 2.5 billion of deals over the last couple of quarters,

it is expected that in the next two quarters HCL is going to

outperform in the industry over the others.

According to the Technical Analysis the resistance is at 519-521

now it is trading at 512(as on 30 April 2012) which can shoot up

in the future.

It is the hot stock in the IT sector of INDIA. It granted

employee stock options of around 206.70crores which is the

different treatment of employees in the entire sector.

Looking at HCL Technologies financials:

It is maintaining 4% of its income as contingent liability which

is the average of the industry, it has shown good income,

reserves and the company have high debt when compared to the

other companies so, compare with the return on the investment it

has Rs.10 return on every one rupee it spends.

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Looking at HCL Technologies ratios:

Return on net worth is 22% which shows that the company has good

managerial abilities.

It has 22 paise of debt for every rupee it spends.

It maintained average EPS growth rate of 15% and P/E of 26% which

is highest in the sector, using these parameters it can be said

that the price of the share will stand at Rs.687 in the future,

keeping a look on its financials and ratios it is for a short

term investment until and unless it decreases it debt.

 

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CONCLUSION:

Analysis of the economy

The IT sector earns income in dollars as they are

mainly the exporters. In past 4 months rupee

depreciated against dollar. So the entire it sector

specially WIPRO has made good amount of profit in last

quarter.

Analysis of the company

Looking at the P&L account:

According to the current scenario for past six months, WIPRO has

made net profit of rupee 1623 had depreciated in terms of dollar.

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It can be seen that year on year the sales and revenue (total

income) has also increased. It can be seen that in June 2012 the

sales and total income were rupees 9248 and by June 2013 it

increased to rupees 9733.

The EBIT of company in June 2012 was rupees 1746 whereas by June

2013 it increased to rupees 1770.the reported profit after tax in

June 2012 was rupees 1590 and in June 2013 was rupees 1632.all

this indicates that the company has good sales and valuation .the

company’s future seems to be attractive. All this gives is an

indication that we should buy WIPRO for long term.

Looking at financial ratios

P/E ratio of the company is less compared to the peer. So the

returns seem to be good and we should invest in WIPRO.

All the above ratios shows the company’s overall performance was

good in 2010.in 2012 the performance deteriorated but it again

improved in 2012.

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Analysis of the industry

Among the top four companies of the IT sector in India, TCS is

the good going stock and it has ability to double its share price

in the near future by its outstanding numbers.

It is a stock for long term holding, next is the HCL

technologies which is in the race to occupy the top rank in the

sector though it is a short term investment stock and can

generate more revenues in the near future with its upcoming deals

and it continued in paying dividends.

Wipro is expected to grow in the near future by its investment

activities and it is better to don’t step onto Wipro and Infosys

till they show big numbers like TCS.

BIBLIOGRAPHY

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www.stockmarketinstitute.org

http://stockmarketinstitute.org/blog/?tag=wipro-fundamental-

analyis

http://www.rbi.org.in/scripts/PublicationsView.aspx?

id=14923#top

http://www.slideshare.net/sivapriya28/wipro-technologies-

ltd?from_search=4

http://indiabudget.nic.in/ub2013-14/frbm/frbm1.pdf

http://www.angelbroking.com/

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