Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
By
Lairenlakpam Mangal Singh
Shubhika
Rajpriya Singh
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.
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A comparative study on IT Industry
TABLE OF CONTENTS
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A comparative study on IT Industry
LIST OF TABLES
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
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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.
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:
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A comparative study on IT Industry
Chapter 1
Introduction to Industry
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A comparative study on IT Industry
Industry Overview
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.
According to Gartner, the Top five Indian IT Services providers are Tata Consultancy
Services, Infosys, Cognizant, Wipro, and HCL Technologies.
Industry Analysis
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
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A comparative study on 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
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
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A comparative study on IT Industry
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A comparative study on IT Industry
Chapter 2
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A comparative study on IT Industry
1. Tech Mahindra
Type Public
Founded 1986
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.
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A comparative study on IT Industry
The company is being managed by its Board of Directors consisting of 10 board members.
1.3 Milestones
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.
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.
1986 Created as a joint venture of Mahindra & Mahindra and British Telecommunications
(later BT Group)
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A comparative study on IT Industry
2. Infosys
2.1 Company Profile
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A comparative study on IT Industry
3. Wipro
3.1 Table 5: Company Profile
Wipro Technologies
STP
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.
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A comparative study on IT Industry
Chapter 3
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A comparative study on IT Industry
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
460.6 652.5
51.1
36.27 33.4
23.58
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A comparative study on IT Industry
Cognizant Technology
2 Solutions 65,779 18 55,894
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.
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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.
High
Low
High Low
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A comparative study on IT Industry
Tech Mahindra
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
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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):
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
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A comparative study on IT Industry
Long Term Borrowings 0.00 170.90 The company has lease obligations
which are repayable in EMI.
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A comparative study on IT Industry
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A comparative study on IT Industry
2. Infosys
Strengths
Strong financial
Over-reliance on US economy
Market growth
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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
Mar '17 Mar '16 Mar '15 Mar '14 Mar '13
Application Of Funds
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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
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
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A comparative study on IT Industry
Strategies
Staff
Skills
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A comparative study on IT Industry
Systems
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.
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A comparative study on IT Industry
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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
SWOT Analysis
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A comparative study on IT Industry
Table 16: Balance Sheet Five Year Trend Analysis (Rs. cr)
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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
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A comparative study on IT Industry
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
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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
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A comparative study on IT Industry
Chapter 4
Summaries of Findings and Conclusion
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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.
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A comparative study on IT Industry
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.
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A comparative study on IT Industry
Bibliography
Martin Reeves, S. M. (2014). BCG Classics Revisited: The Growth Share Matrix.
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