Retail and E-commerce

1.1 INTRODUCTION OF INFORMATION TECHNOLOGY

INDUSTRY
Information Technology (IT) is a business sector that deals with computing, including hardware, software,
telecommunications and generally anything involved in the transmittal of information or the systems that
facilitate communication.

IT involves many things. Take, for instance, an IT department in a company. There are many people with
many jobs and varied responsibilities. These responsibilities range from keeping systems and data secure
to keeping networks up and running. There are people who input data, people who manage databases and
people who do programming. There are also the decision makers, such as Chief Information Officers
(CIOs), who decide how an IT department will operate and what components will be purchased.

IT also includes the management of data, whether it is in the form of text, voice, image, audio or some
other form. It can also involve things related to the Internet. This gives IT a whole new meaning, since the
Internet is its own realm. IT involves the transfer of data, so it makes sense that the Internet would be a
part of IT. IT has become a part of their everyday lives and continues to proliferate into new realms.
1.1.1 INDUSTRY OVERVIEW

The global information technology industry is on pace to reach $5 trillion in 2019, according to the
research consultancy IDC. The enormity of the industry is a function of many of the trends discussed in
this report. Economies, jobs, and personal lives are becoming more digital, more connected, and
increasingly, more automated. Waves of innovation build over time, powering the technology growth
engine that appears to be on the cusp of another major leap forward.

The United States is the largest tech market in the world, representing 31% of the total, or approximately
$1.6 trillion for 2019. In the U.S., as well as in many other countries, the tech sector accounts for a
significant portion of economic activity. CompTIA’s Cyberstates report reveals the economic impact of
the U.S. tech sector, measured as a percentage of gross domestic product, exceeding that of most other
industries, including notable sectors such as retail, construction, and transportation.
Among global regions, Asia-Pacific is the largest, accounting for approximately one of every three
technology dollars spent worldwide. Many APEC countries enjoy the twofold effect of closing the gap
in categories such as IT infrastructure, software, and services, along with leadership positions in
emerging areas such as robotics. If these patterns hold, APEC will continue to grow its share of the
global technology pie at the expense of slower growing markets.

The bulk of technology spending stems from purchases made by corporate or government entities. A
smaller portion comes from household spending, including home-based businesses. With the blurring of
work and personal life, especially in the small business space, along with the shadow IT phenomenon, it
can be difficult to precisely classify certain types of technology purchases as being solely business or
solely consumer.

CompTIA projects the global information technology industry will grow at a rate of 4.0% in 2019. The
optimistic upside forecast is in the 6.4% range, with a downside floor of 1.5%. This is a broader forecast
range than what has been seen in the past couple of years, meaning industry executives see the possibility
of more extreme divergence in growth scenarios. To the upside, if customer-buying patterns for core tech
products and services maintain, and spending on emerging tech accelerates, growth of 6% or more is
attainable. Conversely, a global slowdown in demand, or any slowdown in the adoption of emerging
technologies could dampen growth enough to push it towards the 1.5% pessimistic side.

Other factors that influence revenue growth projections include currency effects, pricing, and product mix.
The tech space is somewhat unique in that prices tend to fall, which may result in large numbers of units
shipped, but modest revenue growth. In the year ahead, the product mix will be an especially important
factor, as the high growth rates of emerging categories are expected to more than offset the slow growth
mature categories.
1.1.2 INDIAN I.T. INDUSTRY

The Information Technology & Information Technology Enabled Services (IT-ITeS) sector is a field
which is undergoing rapid evolution and is changing the shape of Indian business standards. This sector
includes software development, consultancies, software management, online services and business
process outsourcing (BPO).

According to an article in the Times of India, India's liberalization was possible due to its IT industry. In
the 1990s, the industry started off with an export of nearly $100 million with around 5,000 employees.
Now it is an industry that thrives globally and India's IT exports are now around $70 billion with 2.8
million employees working in this sector. The article states that the IT sector is one of the top two
industries in the country today.

India's IT industry is expected to grow at a rate of 12 - 14% during 2016 - 2017 as per a report by India's
software industry body National Association of Software and Services Companies (NASSCOM.) This
clearly shows that information technology is a sector which will likely be one of the emerging markets in
the days to come as India's economy requires more hardware, software and other IT services. In a
NASSCOM-McKinsey report, India's position in the global offshore IT industry is based on five factors -
abundant talent, creation of urban infrastructure, operational excellence, conducive business environment
and finally, continued growth in the domestic IT sector.

The IT industry is heavily influenced by factors like the global market and sustenance of its rate of growth.
The recession in the United States also impacted the IT community in India negatively. This segment is
promising and has vast potential, but there are concerns regarding the demand-supply gap, which is
widening.

Some challenges which the industry is facing are inadequate infrastructure, tax issues and limited
preferential access for local firms. China and Taiwan are examples of low cost destinations, and India
needs to change its current tax structure so that it can outdo competition from other countries.

One of the biggest benefits that the computer and IT industry provides in India is the employment it can
generate. Other benefits are export and Foreign Direct Investments (FDI). New markets have opened up
in the Middle East, Africa, Eastern Europe, and South and South East Asia. India is now a major
destination for IT outsourcing. There is no dearth of IT job opportunities in India. In fact, India is expected
to overtake the US to have the most number of software developers in 2018 (52 lakh developers in India
against America’s 42 lakhs).
Digital Innovation Hub- INDIA
India is emerging as the hub for “Digital Skills”. The country spends $ 1.6 bn annually on training
workforce in the sector. The industry is the largest employer within the private sector, employing 3.9 mn
people. India is transforming into a digital economy with over 450 mn plus internet subscribers; only
second to China.

Indian IT industry has more than 17,000 firms, of which over 1,000 are large firms with over 50 delivery
locations in India. The country's cost competitiveness in providing IT services, which is approximately 3-
4 times more cost-effective than the US, continues to be its unique selling proposition in the global
sourcing market.

The National Optical Fibre Network (NOFN) aims to connect all 250,000 Gram Panchayats (village
council) in the country with high-speed broadband.

 India’s domestic tech-market is the fastest growing in Asia-Pacific, witnessing growth of over 11%
in 2016-17.
 The revenue of Information Technology and Business Process Management (IT and BPM)
industry in India is estimated to reach $ 350 bn by 2025.
1.2 BIRLASOFT LTD.
Birlasoft combines the power of domain, enterprise and digital technologies to reimagine business
processes for customers and their ecosystem. Its consultative and design thinking approach makes
societies more productive by helping customers run businesses. As part of the multibillion dollar
diversified The CK Birla Group, Birlasoft with its 10,000 engineers, is committed to continuing our 157-
year heritage of building sustainable communities.

Incorporated in 1995, Birlasoft is a multi-shore business application global IT services provider with a
presence in the United States, Europe, Asia-Pacific and India. It operates development centres in the
United States, China, Poland and India. Birlasoft counts Fortune 100 enterprises across manufacturing,
banking & financial services, insurance, media and healthcare industries as clients.
Birlasoft has a structured approach to global delivery and deploys a host of innovative solutions and
service architectures. In a fast-paced market, the company closely follows customer needs and responds
swiftly to deliver ever greater value. It is committed to the success of its clients, and their specific needs
around language, cost, legal compliance and risk.
The company features in the Top 100 global IT companies recognized by the International Association of
Outsourcing Professionals (IAOP). Birlasoft is already addressing the next wave of globalization to
deliver accelerated technology solutions with a focus on value and innovation.
The CK Birla Group is a growing US $2 billion conglomerate with interests across industries such as
automotive, global IT services, infrastructure, home & building products, education and healthcare.

Their companies are guided by the values of the Group. They create enduring value for all stakeholders;
and forge long-term relationships with customers and partners. They invest deeply in people, and support
their professional growth and personal wellbeing. As a result, their companies have received numerous
customers, peer and industry awards recognizing their quality standards, workplace excellence and
environmental consciousness.

The CK Birla Group is known for long-lasting business relationships, many of which have been built over
decades of collaboration. Their associations with customers, technology partners and sales partners are
defined by trust, mutual respect and outstanding teamwork. Strong collaboration underlines all their
partnerships. For instance, they have signed two joint-venture agreements with the PSA Group to produce
and sell vehicles and components in India by 2020. This partnership will bring state of the art technology
for an eco-friendly and safe new product range in line with future industry norms and customers’
expectations. They manufacture entire engines for Daimler—the first time the automotive major has
trusted a partner with such a responsibility.

They own multiple Superbrands, thanks to enduring customer goodwill. They work closely with alliance
partners in IT, including SAP and Oracle. Their technical collaborations include a more than 30-year
association with BRENCO for railway equipment. And their unique relationship with Caterpillar has
continued unbroken for the last 27 years. Group companies have also received customer awards year after
year recognizing excellence in service, manufacturing and standards.
Birlasoft has a structured approach to global delivery and deploys a host of innovative solutions and
service architectures. In a fast-paced market, the company closely follows customer needs and responds
swiftly to deliver ever greater value. It is committed to the success of its clients, and their specific needs
around language, cost, legal compliance and risk.
The company features in the Top 100 global IT companies recognized by the International Association of
Outsourcing Professionals (IAOP). Birlasoft is already addressing the next wave of globalization to
deliver accelerated technology solutions with a focus on value and innovation.

KPIT, a well-established technology company with deep expertise in Auto Engineering and Mobility
Solutions, and strong presence in Business IT with significant ERP expertise and niche digital competency
and, Birlasoft, a part of the USD 1.6 billion diversified CK Birla Group, today announced the coming
together of KPIT and Birlasoft, to create a USD 700+ million combined entity that will later demerge into
two separate companies, focused on ‘Automotive Engineering and Mobility Solutions’ (the new KPIT
Technologies) and ‘Digital Business IT Services’ (Birlasoft) respectively. During the period prior to
completion of the deal, KPIT and Birlasoft will continue to be run by their current management, in addition
to which management from KPIT and Birlasoft will work together to familiarize Birlasoft with the ITSS
business.
At the conclusion of the deal, two new companies will be created. The new KPIT Technologies will be a
USD 200+ million focused Engineering Services company that will be created by tapping into the current
Engineering business of KPIT to create a global leader in Automotive Engineering and Mobility Solutions.
The new ‘Birlasoft’ will be a USD 500+ million Digital Business IT Services company that will be created
by combining the KPIT ITSS business and the current Birlasoft creating a new leader in the mid-tier IT
services space, which will also be called Birlasoft.
Ravi Pandit, Chairman of KPIT, added that “The tremendous value created by KPIT over the last 27 years
will continue in two new avatars and become leading companies in their respective spaces. Over the years,
we have gained reputation as one of the global leaders in Automotive Embedded Software. We will be
focused on building the KPIT brand as the foremost organization in the world for Automotive Engineering
and Mobility Solutions. The world of Automotive and Mobility are at the cusp of great change and we are
excited to be at the technology forefront in this global movement. While transitioning the “Business IT
Services” business to Birlasoft in the next year, our team will continue to work with Birlasoft to ensure
the best service to the KPIT Business IT customers.”
Commenting on the partnership, Amita Birla, Chairman of Birlasoft said “Digital solutions are today not
confined to the periphery of business but are transforming the very core of business processes. The digital
age requires each organization to re-invent itself to address and lead the disruption and opportunities it
brings. With this, Birlasoft will expand its industry leading capability in Enterprise solutions with
unmatched digital capability. We will become the leading ‘Enterprise Digital’ company in the country
that will advise its customers in unlocking value in their digital journey.”
The new KPIT Technologies will leverage KPIT’s expertise in Automotive and Mobility, and will be led
by Kishor Patil as the CEO and MD. This company will deepen the relationship with global Automotive
and Mobility leaders in fulfilling their engineering needs. KPIT will continue to enhance its expertise in
all the features to deliver cleaner, safer and smarter solutions to the world of Automotive and Mobility.
The new ‘Birlasoft’, that will emerge over the next year, will combine the management team and the IT
Services business of KPIT with the current Birlasoft. It will be led by Anjan Lahiri as the CEO and MD
The highest percentage of business coming from core enterprise systems vis-à-vis any other competitor
Unique, industry leading capabilities from the Enterprise Product and Cloud companies: SAP, Oracle,
JDE and Salesforce.com. The company will have the highest level of partnership with SAP, Oracle as well
as with Salesforce, a position unmatched by any other similar company

1.2.1 INDUSTRIES THEY SERVE

i) AUTOMOTIVE

The automobile industry has been spinning in revolution by technology-driven trends, thus dynamically
effecting the way in which automotive industry players react to the fluctuating needs and behaviors of
consumers, or partnerships, and even bring about a change.

As a result of the emergence of new aspects of connected cars, self-driving cars, apps, the Internet of
Things, the User Experience (UX), Big Data, and more, the possibilities in a vehicle are enormous.

Our Automotive Solutions enable automotive industry clients to cope with rapidly changing market
scenarios and in some cases, completely new business models.

Moreover, our solutions also empower auto industry OEM's suppliers, sales and service organizations to
simplify and optimize their core processes.

Birlasoft helps Auto OEMs and Tier 1s in their Industry 4.0 transformation journey, from automation to
autonomous with connected products and closed loop manufacturing. We provide end-to-end offerings
from helping customers defining the Industry 4.0 roadmap, to business case prioritization, package
selection and implementation leveraging the latest and relevant digital technologies -
 ii) BANKING

Millions of transactions take place every moment in the world. Capturing the data, validating the details
and executing the transactions in milliseconds are made possible by technology. Banking industry often
finds itself on the brink of a newer revolution. Experimenting, bringing out new solutions, durability
testing and scalability are the need of the hour. Birlasoft's services aim to simplify and automate the life
of a banker by touching each and every aspect of the transaction.

Capabilites / Services

 Deposits
 Loans
 Remittances
 Debit Cards
 Trade Finance
 Clearing and Payments
 Customer Management

Banking, a technology-intensive industry, has been at the forefront in adapting to newer tech trends. Our
banking expertise and the solution prowess is bringing change across Retail, Corporate, Cards & Payment
and Treasury segments via our service portfolio.

iii) MANUFACTURING

Industry 4.0 has been the bedrock of digital disruption in the industrial manufacturing space. Massive
amounts of data volume, connected value chains, advanced analytics and digital-to-physical transfer have
been the key pillars of this revolution. To get the most out of this opportunity, manufacturers need to
reimagine their traditional business models, transform their product lifecycles, digitalize operations and
drive best-in-class customer experience.

iv) CAPITAL MARKET

Asset and Wealth Management industries are undergoing a significant change. This change has been
instrumental in creating a demand for new investment products, increased transparency and regulatory
requirements. It has compelled industries to adapt, improve on their front, middle and back-office
operations and optimize. Birlasoft works with customers to help achieve these objectives.

Capabilites / Services

 Risk Profiling
 Asset Allocation
 Portfolio Construction
 Portfolio Rebalancing
 Reporting
v) INSURANCE

P&C insurance companies are facing disruptive change in the form of digital technologies, such as social
media, analytics and telematics. They will continue to transform the market landscape, recalibrating
customer expectations and opening new ways to reach and acquire clients. There are numerous IT
initiatives that insurers have in hand to sail through the changing times and take their organization to the
next level.

Capabilites / Services

 Core Product Evaluation

In any P&C Insurance transformational journey, selection of the right core system is the fundamental
step. A misstep here would result in the selection of inadequate, expensive and unreliable software for
their business. Birlasoft helps its clients in this transformation journey by using its proprietary
evaluation methodology along with expertise in industry leading core IT systems and its value-added
consultants.

 Enabling legacy sunset

For the insurers who have recently invested or are looking to invest in the implementation of a PAS
(Policy Administration System), there arises an inevitable need for migrating from their legacy
systems. However, it is often a challenging task to facilitate a robust, timely, stable and exhaustive
migration from your legacy system to the new PAS solution. Birlasoft helps its clients by using its
proprietary PAS migration enabling legacy sunset methodology.
 Policy Admin System: Speed to Market for New Product Launch

Often, there is a lack of adequate testing and QA efforts which put a significant impact on Insurer's IT
budgets due to delay in quality solution delivery. Further, poor testing may lead to various internal
audit compliance issues which will increase stakeholder disappointment. Birlasoft helps its clients by
using its test assets consisting of more than 2400 re-usable test cases and various proprietary
methodologies to ensure near zero defect delivery whether it is a new product implementation or a
new state rollout for an existing product.

 Document Management: Admitted and Non-Admitted Lines Forms Processing

P&C Insurers have hundreds of forms to deal with across admitted and non-admitted lines of business.
The policy admin system handling the LOBs needs to rigorously test all types of forms i.e. static,
dynamic and declaration pages. The forms are mandatory, optional, conditional mandatory, etc.
Birlasoft helps its clients to sail through this humungous amount of QA effortlessly.

 Claims Transformation

Claims processing is another core function that P&C Insurers have been modernizing after policy. The
entire life cycle from FNOL/FROI to reserving and adjustment to payment & settlement including
litigation and salvage management needs to be automated to process claims faster and achieve higher
levels of customer satisfaction. Birlasoft helps its clients with automation framework for industry
leading claim processing solutions.

 Usage based Insurance

Insurance companies around the world are more attracted to the concept of usage-based insurance.
Global UBI market penetration is currently less than one percent. However, expected market
penetration in Europe, Asia and America is expected to reach 15% by 2020. Our Insurance SMEs are
on the job for our clients to provide consulting with respect to your foray into usage-based insurance
as you work out the underwriting on pay as you drive and pay how you drive models.

 Predictive Analytics for Fraud Detection

Birlasoft business analytics solution helps P&C insurers to generate advanced analytics out of existing
data. The solution works on the premise of natural exploration of data and allows insurers to identify
 patterns based on query to help identify potential fraud-prone claims. The queries are simple English
and don't need developers to create them.

 Testing & QA
 Guidewire Services: The guidewire is the system of choice for the P&C Insurance industry as
evident by its ongoing implementations across the US and another geography. It has a strong
partner eco-system both for implementation and for the various surround system, like document
management, portal and analytics. It has done several acquisitions in underwriting and analytics
space to complement its core insurance suite offering.
o Guidewire Competency focused on Policy Center and Claim Center automation and
manual Testing across commercial and specialty lines.
o A repository of 4500+ test cases that are re-usable and lets you hit the ground running.
 DuckCreek Services: The DuckCreek Suite gives the system functionality Insurers require and
the Software lets them focus on their insurance business.
o DuckCreek competency focused on Policy Administration automation and manual Testing
across commercial and specialty lines of Property and Casualty.
o A repository of 13,500+ test cases that are re-usable and lets you hit the ground running.
vi) MEDIA AND ENTERTAINMENT

The Media and Broadcasting industry is undergoing a paradigm shift due to the way content is created
and consumed. The shift imminently demands re-visiting the technology infrastructure. The key focus for
next years will be: Creation of Digital-centric processes to accelerate time-to-market, boost productivity
and minimize costs, Leverage data and analytics to stay relevant to consumer (contextual content), deliver
seamless offerings for viewers as well as advertisers on multiple screens (Mobile channels) and Storage
and distribution of content on the cloud to enable anytime, anywhere access.

Capabilites / Services

 TruView CLM - Contract Lifecycle Management solution for Media Industry

 Data Science & Connected BI
 Content Management (Adobe, Drupal, Sitecore)
 UX Design
 Cloud solution for Content publishing
  Testing Accelerators in TV & Broadcast, Scheduling & Airing, Sales & Research, Films etc.
vii) ENERGY AND RESOURCES

Birlasoft provides ways to modernize business processes, better connect systems with newer technologies,
gain insights for quick and better decision making, and optimally utilize resources and skills. Energy have
unique requirements for supply chain, contracts, procurement, material planning, asset management and
revenue accounting.

Technologies that can bring a transformational change to the business span Cloud, Mobility, Internet of
Things (IoT), Big Data and Analytics, PLM, M2M, GIS, Product and Portfolio Management, Asset
Management, RFID and Barcoding, High Performance Computing, End User Computing, Portals, In-
memory Database, Robotics/Drones, ERP, Social Media/Collaboration, CRM, and Modern Supply Chain
solutions, among others.

viii) LIFE SCIENCE AND HEALTH CARE

Birlasoft provides a complete set of offerings across the entire value chain of Pharmaceutical and Medical
Device companies - from discovery, trials, and production to sales and marketing, field service and
support.

Rising Cost of Healthcare

Leveraging technology to help our clients innovate faster to deliver more effective therapeutic products
and services, while reducing real-world costs.

Product Service and Innovation

Enabling our clients to understand and improve their customers' experience with their brand by extending
"beyond the pill or device" with value-added services to gain new revenue opportunities and better serve
their customers.

Compliance

Helping clients simultaneously address their local and global regulatory compliance needs and achieve
business benefits.
1.3 WORKING CAPITAL MANAGEMENT
The term ‘working capital management’ primarily refers to the efforts of the management towards
effective management of current assets and current liabilities. Working capital is nothing but the difference
between the current assets and current liabilities. In other words, an efficient working capital management
means ensuring sufficient liquidity in the business to be able to satisfy short-term expenses and debts.

In a broader view, ‘working capital management’ includes working capital financing apart from managing
the current assets and liabilities. That adds the responsibility for arranging the working capital at the lowest
possible cost and utilizing the capital cost-effectively.

To calculate the working capital, compare a company's current assets to its current liabilities. Current
assets listed on a company's balance sheet include cash, accounts receivable, inventory and other assets
that are expected to be liquidated or turned into cash in less than one year. Current liabilities include
accounts payable, wages, taxes payable, and the current portion of long-term debt. Current assets are
available within 12 months. Current liabilities are due within 12 months.

Working capital that is in line with or higher than the industry average for a company of comparable size
is generally considered acceptable. Low working capital may indicate a risk of distress or default.

Most major new projects, such as an expansion in production or into new markets, require an investment
in working capital. That reduces cash flow. But cash will also fall if money is collected too slowly, or if
sales volumes are decreasing – which will lead to a fall in accounts receivable. Companies that are using
working capital inefficiently can boost cash flow by squeezing suppliers and customers.

There are several types of working capital based on the balance sheet or operating cycle view. The balance
sheet view classifies working capital into net (current liabilities subtracted from current assets featuring
in the company’s balance sheet) and gross working capital (current assets in the balance sheet).

On the other hand, operating cycle view classifies working capital into temporary (difference between net
working capital & permanent working capital) and permanent (fixed assets) working capital. Temporary
working capital can be further broken down into reserve and regular working capital as well. These are
the types of working capital depending on the view that is chosen.

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital:

1. Gross working capital

2. Net working capital

The gross working capital is the capital invested in the total current assets of the enterprises

current assets are those assets which can convert in to cash within a short period normally one

accounting year.

CONSTITUENTS OF CURRENT ASSETS

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances

5) Inventories of stock as:

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

6. Temporary investment of surplus funds.

7. Prepaid expenses

8. Accrued incomes.

9. Marketable securities.

In a narrow sense, the term working capital refers to the net working capital. Net working capital is the

excess of current assets over current liability, or, say:

 NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the current

liabilities are more than the current assets. Current liabilities are those liabilities, which are

intended to be paid in the ordinary course of business within a short period of normally one

accounting year out of the current assts or the income business.

CONSTITUENTS OF CURRENT LIABILITIES

i. Accrued or outstanding expenses.

ii. Short term loans, advances and deposits.
iii. Dividends payable.
iv. Bank overdraft.
v. Provision for taxation, if it does not amt. to app. of profit.
vi. Bills payable.
vii. Sundry creditors.

1.3.1 OBJECTIVES OF WORKING CAPITAL MANAGEMEN

The primary objectives of working capital management include the following:

i. Smooth Operating Cycle: The key objective of working capital management is to ensure a smooth
operating cycle. It means the cycle should never stop for the lack of liquidity whether it is for
buying raw material, salaries, tax payments etc.
ii. Lowest Working Capital: For achieving the smooth operating cycle, it is also important to keep
the requirement of working capital at the lowest. This may be achieved by favorable credit terms
with accounts payable and receivables both, faster production cycle, effective inventory
management etc.
iii. Minimize Rate of Interest or Cost of Capital: It is important to understand that the interest cost of
capital is one of the major costs in any firm. The management of the firm should negotiate well
with the financial institutions, select the right mode of finance, maintain optimal capital structure
etc.
iv. Optimal Return on Current Asset Investment: In many businesses, you have a liquidity crunch at
one point of time and excess liquidity at another. This happens mostly with seasonal industries. At
 the time of excess liquidity, the management should have good short-term investment avenues to
take benefit of the idle funds.

1.3.2 IMPORTANCE OF EFFECTIVE WORKING CAPITAL MANAGEMENT

Although the importance of working capital is unquestionable in any type of business. Working capital
management is a day to day activity, unlike capital budgeting decisions. Most importantly, inefficiencies
at any levels of management have an impact on the working capital and its management. Following are
the main points that signify why it is important to take the management of working capital seriously.

i. Ensures Higher Return on Capital

ii. Improvement in Credit Profile & Solvency
iii. Increased Profitability
iv. Better Liquidity
v. Business Value Appreciation
vi. Most Suitable Financing Terms
vii. Interruption Free Production
viii. Readiness for Shocks and Peak Demand
ix. Advantage over Competitors

Strong working capital management aids a company in having a higher operational efficiency and hence,
higher profitability. For this, Bajaj Finserv offers special working capital loans which will help your
business meet its short-term liquidity smoothly.
CHAPTER-2: RESEARCH OBJECTIVE AND
METHODOLOGY
2.1 RESEARCH OBJECTIVES

PRIMARY OBJECTIVES

i. To examine the effectiveness of working capital management polices of Birlasoft ltd. with the help
of accounting ratio.
ii. To study liquidity position of the company by taking various measurements.
iii. To evaluation the financial performance of Birlaoft ltd.
iv. To make suggestions for policy makers for effective management of working capital

SECONDARY OBJECTIVES

i. Analyze how theoretical concept taught and applied/not applied in real situations
ii. Enhance analytical application ability.
iii. Develop skills in technical reports, writing through data collection, data analysis, data
iv. presentation and draw conclusions of the given topic.

2.2 RESEARCH METHODOLOGY

To achieve these objectives I focused on the financial statement of Birlasoft ltd..

Methodology is the systematic, theoretical analysis of the methods applied to a field of study. It comprises
the theoretical analysis of the body of methods and principles associated with a branch of knowledge,
typically, it encompasses concepts such as paradigm, theoretical model, phases and quantitative and
qualitative techniques.

A methodology does not set out to provide solutions- it is, therefore, not the same thing as a method.
Instead, it offers the theoretical underpinning for understanding which method, set of methods or so called
’best practices’ can be vapplied to specific case, for example, to calculate a specific result.

It has been defined also as follows:

i. Analysis of the principles of methods, rules and postulates employed by a discipline.

ii. The systematic study of methods that are, can be, or have been applied within a discipline.
iii. The study or description of methods.
2.3 RESEARCH DESIGN

A research design is a systematic plan to study a scientific problem. The design of a study defines the
study type (descriptive, correlation, semi-experimental, experimental, review, meta-analytical) and sub-
type, research questions, hypothesis, independent and dependant variables, experimental design, and, if
applicable, data collection methods and a statistical analysis plan.

The research design is purely and simply the framework of plan for a study that guides the collection and
analysis of data. Types of research design:

i. Exploratory research- the main purpose of such studies is that of formulating a problem for more
precise investigation or of developing the working hypothesis from an operational point of view
ii. Descriptive research- those studies which are concerned with describing the characteristics of a
particular individual, or of a group.
iii. Hypothesis testing research- they are those where the researchers tests the hypothesis of casual
relationship between the variables.

Exploratory research design was used for this research.

2.4 SOURCES OF DATA COLLECTION

Primary data collection sources:

It has been collected by forming a proper questionnaire. Questionnaire is a systematic and structured
manner of collecting data for conducting experiment. The nature of questionnaire is very inductive and
fundamental. It has been kept in proper framework to make it clear to the retailers. Primary data can be
collected in five main ways:

i. Observation
ii. Focus groups
iii. Surveys
iv. Behavioral data
v. Experiments
Secondary data collection sources

Information was collected from secondary sources such as customer servey, newspaper advertisements,
newsletters, etc.

Besides these the use of internet was also made in collecting relevant information. The data collected from
the above-mentioned sources had been adequately structured and used at appropriate places in report. The
information gathered included:

i. Their annual report.

ii. Pamphlets.
iii. Newsletters.
iv. Pictures.
v. Exchange schemes

The data which is collected for this project will be classified as secondary data because it is made through
the information provided from secondary sources.

2.5 UNIVERSE/ POPULATION

Universe analysis is the simplest form of quantitative analysis. The analysis is carried out with the
description of a single variable in in termes od applicable unit of analysis. For example, if the variable age
was the subject of the analysis, the researchers look at how many fall into given attribute categories.

2.6 TOOLS USED FOR DATA ANALYSIS

i. Ratio analysis.
ii. Fund flow analysis.
iii. A bar chart or bar graph is a chart or graph that presents categorical data with rectangular bars with
heights or lengths proportional to the values that they represent. The bars can be plotted vertically
or horizontally.
iv. A pie chart is a circular statistical graphic which is divided into slices to illustrate numerical
proportion. In a pie chart, the arc length of each slice, is proportional to the quantity it represents
CHAPTER 3: DATA PROCESSING, ANALYSIS &
INTERPRETATION OF DATA
3.1 FINAL ACCOUNTS OF BIRLASOFT LTD- 2018-29
ACCOUNTING RATIOS
Accounting ratio is the comparison of two or more financial data which are used for analyzing the financial
statements of companies. It is an effective tool used by the shareholders, creditors and all kinds of
stakeholders to understand the profitability, strength and financial status of companies.

This is also widely known as financial ratios based on which business performance can be monitored and
important business decisions are made.

A. LIQUIDITY RATIO

Liquidity ratio helps in measuring the cash sufficiency of an enterprise to pay off its short-term liabilities.
A High liquidity ratio ensures the company is in a good position to pay its creditors. The liquid ratio of 2
or more is considered acceptable. Listed below are some of the commonly used liquidity ratios:

CURRENT RATIO

CURRENT RATIO = (Current Assets)/(Current Liabilities)

2018-19= 2.66

Industry average= 3.18

INTERPRITATION:

One of the commonly used liquidity ratios is the current ratio which compares the current assets to current
liabilities held by the business. This ratio is used to check if the company will be able to pay its debts
which are due in next 12 months. The ideal current ratio is 2:1 which is very close to Birlasoft’s current
ratio at 2.66:1.
QUICK RATIO

QUICK RATIO= (Quick Assets)/(Current Liabilities)

2018-19= 2.01:1

Industry average= 3.2

INTERPRITATION:

The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to
meet its short-term obligations with its most liquid assets. It is similar to current ratio except that this uses
only quick assets which are easy to liquidate. Since it indicates the company’s ability to instantly use its
near-cash assets (that is, assets that can be converted quickly to cash) to pay down its current liabilities, it
is also called the acid test ratio. An acid test is a quick test designed to produce instant results—hence, the
name. The ideal ratio is 1:1 which means the short-term financial position of Birlasoft is good at 2.01:1.

CASH RATIO

CASH RATIO= (Cash + Marketable securities) / (Current Liabilities)

2018-19 = 0.18:1

INTERPRITATION:

The cash ratio is a measurement of a company's liquidity, specifically the ratio of a company's total cash and cash
equivalents to its current liabilities. The metric calculates a company's ability to repay its short-term debt with
cash or near-cash resources, such as easily marketable securities. This information is useful to creditors when they
decide how much money, if any, they would be willing to loan a company. This ratio considers only those
current assets which are immediately available to the company to pay its debts. Business is considered as
financially sound if it has a cash ratio of 1 or more which is not the case for Birlasoft at 0.18:1.
 B. PROFITABILITY RATIO

Profitability ratio is generally used to determine how well the business is generating profits from its
operations. Profit is the balance of income earned after deducting all related expenses. Profitability ratios
are a class of financial metrics that are used to assess a business's ability to generate earnings relative to
its revenue, operating costs, balance sheet assets, and shareholders' equity over time, using data from a
specific point in time.

Profitability ratios also show how well companies use their existing assets to generate profit and value for
shareholders. Higher ratio results are often more favorable, but ratios provide much more information
when compared to results from other, similar companies, the company's own historical performance, or
the industry average.

Given below are some of the commonly used profitability ratios:

GROSS PROFT MARGIN

GROSS PROFT MARGIN = {(Revenue – Cost of Goods Sold (COGS))/(Revenue)}* 100

2018-19= 19.42%

Industry average – 64.9%

INTERPRITATION:

Gross profit margin is a metric used to assess a company's financial health and business model by revealing the
amount of money left over from sales after deducting the cost of goods sold. The gross profit margin is often
expressed as a percentage of sales and may be called the gross margin ratio. Higher the gross profit margin,
more efficient is the business operation. Gross Profit ratio is used to compare the business performance
with its previous period or even with its competitors. The gross profit ratio of birlasoft is 19.42, performing
way too poor for an industry average of 64.9%.
OPERATING MARGIN

OPERATING MARGIN = (Gross Profits- Operating Expense)/(Revenue) * 100

2018-19= 8.63%

5 year average = 24.05%

Industry average= 64.55%

INTERPRITATION:

The operating margin measures how much profit a company makes on a dollar of sales, after paying for
variable costs of production, such as wages and raw materials, but before paying interest or tax. It is
calculated by dividing a company’s operating profit by its net sales. Highly variable operating margins
are a prime indicator of business risk. By the same token, looking at a company’s past operating margins
is a good way to gauge whether a big improvement in earnings is likely to last. Birlasoft's operating ratio
is 8.63 against the industry average of 64.55%.

PROFIT MARGIN

PROFT MARGIN = (Revenue – Operating expense + non-operating income-Interest Expense- Income

taxes)/(Revenue) * 100

2018-19= 6.43%

5 year average=8.25

Industry average= 20.37%

INTERPRITATION:

This ratio helps an investor to know how much profit is generated from the total revenue of the business.
The overall functional efficiency of an enterprise can be ascertained apart from its core business. Profit
margin is one of the commonly used profitability ratios to gauge the degree to which a company or a
business activity makes money. It represents what percentage of sales has turned into profits. Simply put,
the percentage figure indicates how many cents of profit the business has generated for each dollar of sale.
here, it is 6.43 which is, again very low against the industry average.
EARNINGS PER SHARE(EPS)

EARNINGS PER SHARE= (Net income- preferred dividends)/ (End- of period common shares
outstanding)

BASIC (FACE VALUE- 2)= 10.87

Industry average= 85.23

INTERPRITATION:

EPS is more important to shareholders since it helps in determining the return on investment. Higher the
EPS, higher is the stock price of the company. The earnings per share value are calculated as the net
income (also known as profits or earnings) divided by the available shares. A more refined calculation
adjusts the numerator and denominator for shares that could be created through options, convertible debt,
or warrants. The numerator of the equation is also more relevant if it is adjusted for continuing operations.
Against the face value of 2, the earning per share for the year was 10.87. The industry average for the
same was 85.23 during the year

OTHER PROFITABILITY RATIOS THAT MEASURE MANAGEMENT EFFCTIVEMESS

 C. LEVERAGE RATIO
A leverage ratio is any one of several financial measurements that look at how much capital comes in the
form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage
ratio category is important because companies rely on a mixture of equity and debt to finance their
operations, and knowing the amount of debt held by a company is useful in evaluating whether it can pay
its debts off as they come due. Several common leverage ratios will be discussed below.

DEBT TO EQUITY RATIO

DEBT TO EQUITY RATIO= (Total Debt)/(Total Equity)

4795.81/11842.33= 0.40 times

INTERPRITATION:

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. These
numbers are available on the balance sheet of a company’s financial statements. Business with high debt Equity
ratio indicates that it is more dependent on debts for operation. This is also known as Gearing ratio which
is used by Investors and Creditors to analyze the company’s financial leverage. Birlasoft’s debt to equity
ratio is 0.40 times.

DEBT TO ASSET RATIO

DEBT TO ASSET RATIO= (Total Debt)/(Total Asset)

4795.81 / 16638.34 = 0.28 times

INTERPRITATION:

Debt to Asset ratio can be used to determine if the business will be able to pay all of its debts if the business
is closed immediately. The higher the ratio, the higher the degree of leverage (DoL) and, consequently,
financial risk. The total debt to total assets is a broad ratio that analyzes a company's balance sheet by
including long-term and short-term debt (borrowings maturing within one year), as well as all assets—
both tangible and intangible, such as goodwill. A company having a debt to asset ratio of less than 1 is
considered as good for investment. If the ratio is greater than 1, the company is considered as highly
leveraged. Birlasoft’s debt to asset ratio is 0.28 times.
DEBT RATIO

DEBT RATIO= (Total Liabilities)/(Total Asset)

4795.81/16638.34= 0.28 times

INTERPRITATION:

The debt ratio is a financial ratio that measures the extent of a company’s leverage. The debt ratio is defined as
the ratio of total debt to total assets, expressed as a decimal or percentage. It can be interpreted as the proportion
of a company’s assets that are financed by debt. The liabilities to assets ratio is also known as solvency ratio
indicates how much of a company’s assets are made of liabilities. A high liability to assets ratio indicates
the business might face potential solvency issues. This in the case of birlasoft is 0.28 times.

INTEREST COVERAGE RATIO

INTEREST COVERAGE RATIO = (Earnings before interest and taxes (EBIT))/ (Interest Expense)

1450.58/122.20 = 11.87 times

INTERPRITATION:

The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay
interest on its outstanding debt. The interest coverage ratio may be calculated by dividing a company's earnings
before interest and taxes (EBIT) during a given period by the company's interest payments due within the same
period. The Interest coverage ratio is also called “times interest earned.” Lenders, investors, and creditors
often use this formula to determine a company's riskiness relative to its current debt or for future
borrowing. This, in the case of Birlasoft is 11.87 times.
 D. ACTIVITY RATIO

Activity ratios are a category of financial ratios that measure a firm's ability to convert different accounts
within its balance sheets into cash or sales. Activity ratios measure the relative efficiency of a firm based
on its use of its assets, leverage, or other similar balance sheet items and are important in determining
whether a company's management is doing a good enough job of generating revenues and cash from its
resources. Activity ratios are also commonly known as efficiency ratios.

RECEIVABLE RATIO

RECEIVABLE RATIO= (Annual Sales Credit)/(Accounts Receivable)

2018-19= 2.97

Industry average= 5.18

INTERPRITATION:

The accounts receivable turnover ratio is an accounting measure used to quantify a company's
effectiveness in collecting its receivables or money owed by clients. A high receivables turnover ratio can
indicate that a company’s collection of accounts receivable is efficient and that the company has a high
proportion of quality customers that pay their debts quickly. A low receivables turnover ratio might be
due to a company having a poor collection process, bad credit policies, or customers that are not financially
viable or creditworthy. Birlasoft’s receivable ratio for the year was 2.97 where as the industry average
stood at 5.18.
INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO= (Cost of Goods Sold)/(Average Inventory)

2018-19=

Industry average= 401.35

INTERPRITATION:

The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is managed by comparing
cost of goods sold with average inventory for a period. This measures how many times average inventory is
“turned” or sold during a period. In other words, it measures how many times a company sold its total average
inventory dollar amount during the year. Inventory turnover ratio in the case of Birlasoft cannot be measured
since they provide it solutions and services.

ASSET TURNOVER RATIO

ASSET TURNOVER RATIO= (Net Revenue)/(Assets)

2018-19= 1.06

Industry average= 1.1

INTERPRITATION:

The asset turnover ratio measures the value of a company's sales or revenues relative to the value of its
assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using
its assets to generate revenue. The higher the asset turnover ratio, the more efficient a company.
Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to
generate sales. This is 6.8 in the case of Birlasoft. The 5-year average for birlasoft has been 9.82 and the
industry average is 22.99
 FINDINGS
1. The current ratio of Birlasoft limited indicates short term financial stability. The ratio for the
company stood at 2.66:1. This ratio is very important for any company because it assures investors
that it has the ability to pay all its short term liabilities, same with cash ratio and quick ratio as well
which were also just along the lines of being ideal for any company.
2. The profitability ratio is very crucial to investors and the company itself since it shows the
performance of the perm in the present year. Birlasoft, though an establishes and old IT player,
still seem to have been lagging behind industry’s pace of groth. Gross margin standing at 19.42%,
the industry average being 64.9%
3. The operating profit for Birlasoft was 8.63% which again, reflects the poor performance of the
company in the year 2018-19. The 5-year average of the ratio stood at 24.05. The industry average
of the same was 64.55% as well. The case is very similar in the case of profit margin ratio which
is 6.43 against the industry average at 20.37% showing how the profitability has definitely
deceased and is edging to losses if the ratio falls in a similar year in the next year as well.
4. The industry average of earnings per share was for the year 2018-19 was 85.23 which for Birlasoft
was 10.87.
5. The debt to equity ratio of the present year was 0.40 times which is an indicator of how the
company's gearing ratio is at an acceptable mark in the present year. The case is similar with debt
ratio as well as debt to asset ratio. The debt to asset ratio is 0.28 which is good because the firm is
not heavily leveraged which is a sign of good financial planning in the part of the company
showing how less than half of the equity is supported by debt in the company.
6. Interest coverage ratio of birlasoft came out to be 11.87 times. This shows how the company is
capable to paying its interest payment obligations easily.
7. The asset turnover ratio of the company was 1.06 against the industry average of 1.1 which shows
that the company has good asset management and utilization of the company.
 LIMITATIONS
1. This report of the company was made while the company was going through the huge transition
of it’s merger with KPIT Cummins. Company managed to remain financially sound which is
definitely commendable even though the profits of the year might be lower than the average of the
industry.
2. The final reports available online did not have a few sets of information necessary for the
computation of ratios and their effective study.
3. The level of secrecy maintained by the company for perhaps a completive edge or otherwise made
it hard to do in dept research and to really get an insight about the financial standing of the
company.
4. This project provides a very bird’s eye view of the state of the company since all the data collected
was from secondary in nature and hence can’t be as accurate.
5. Due to time restrain it was not possible to study in depth to get sufficient information for
conducting a detailed analysis.
 CONCLUSION
1. We should remember that Birlasoft was going through its transition of its merger with KPIT. The
company has not been doing very well as per the 5-year averages of the ratios computed especially
when compared with the averages of the industry. The company had to take steps or it was well
on its way to obsolesce.
2. The company’s financial planning, as per the ratios is ideal. Be it of its short-term requirements or
to pay back its long-term debts.
3. The profitability ratio was a different scenario though since the company were disappointingly,
very low and have been down for a few years as per the 5 year average, if this trend were to persists
and was left unassisted, can lead to losses as well. Though company’s current direction with the
merger and new projects sure seems promising.
4. The earning per share too decreased a few folds from the previous year. This obviously shows the
declining quality or demand for the services or solutions provided by the company which must be
looked at and fixed in the present year if they aim towards a better financial year which is the case
with the company’s ventures.
5. The leverage ratios showed how the company is adequately leveraged. This is assured the investors
and the owners of the company that their funds are secured with Birlasoft which is a nod to the
capital planning of the company.
6. Asset turnover ratio of the company was good as well. All this is an indicator of how the company
obviously had a bad year when compared to its last, the long-term planning or the asset, equity an
debt management of the company remains good and up to mark.
 RECOMMEMDATION
1. The company, though impeccable when it comes to the financial planning seems to have been
struggling to keep up with the pace of the industry, apparent with the computed ratios. Even though
the IT industry has been on a rise for years now, seems like Birlasoft was not able to take full
advantage of the opportunities bought in by the technological advancements seen by the industry.
Birlasoft needs to steer its efforts in the right direction with the merger and then the demerger
splitting the merged entity into two, both having a part of Birlasoft and KPIT and maybe perform
to its full potential along so the company has something going for it other than its financial stability.
2. The IT industry is predicted to experience a major slump in the upcoming years but a rise in some
sections of the industry. The planning for the coming years for the company would decide if the
company can stay relevant in the industry, if the company can stay credible and ultimately grow.
3. Birlasoft delves and provides many types of services within the IT industry and is undoubtably an
old and still important player in the market, working on new and profitable projects and also doing
its bit for the society, giving back as every big company must. The company is excelling, surely
but it remains as a background player which makes it seem almost closed off. With the recent
changes in the company, Birlasoft should also try and reach out and be a more visible player in the
market.
 REFERENCE AND BIBLOGRAPHY
https://www.techopedia.com

https://www.comptia.org

https://www.ibef.org

https://www.birlasoft.com/solutions/truview-clm

https://www.birlasoft.com/services

https://www.investopedia.com/accounting-ratios

https://www.investing.com/equities/kpit-cummins-infosystems-ratios

https://www.investopedia.com/terms/p/profitmargin.asp

http://www.ckbirlagroup.com/birlasoft.php

https://www.owler.com/company/birlasoft