Evaluate the companys financial performance and policy.

FINANCIAL ANALYSIS OF BOTH THE COMPANIES

COMPANY 1 : Infosys COMPANY 2 : Wipro

Financial analysis is the process of identifying the financial strengths & weaknesses of a firm by properly establishing relationships between the items of the Balance Sheet and Profit & Loss A/c. This is done by (1) The Firms Management (2) Owners (3) Creditors (4) Investors (5) Bankers & Others Financial analysis of both the companies is done on the basis of annual reports of 2011-12. About Industry: The Information technology industry in India has gained a brand identity as a knowledge economy due to its IT and ITES sector. The ITITES industry has two major components: IT Servicesand business process outsourcing (BPO). The growth in the service sector in India has been led by the ITITES sector, contributing substantially to increase in GDP, employment, and exports. The sector has increased its contribution to India's GDP from 1.2% in FY1998 to 7.5% in FY2012.[1] According to NASSCOM, the ITBPO sector in India aggregated revenues of US$100 billion in FY2012, where export and domestic revenue stood at US$69.1 billion and US$31.7 billion respectively, growing by over 9%.[1] The major cities that account for about nearly 90% of this sectors exports

are Bangalore, Delhi, Mumbai, Chennai, Hyderabad, Pune, Kolkata and Coimbatore. Export dominate the ITITES industry, and constitute about 77% of the total industry revenue. Though the ITITES sector is export driven, the domestic market is also significant with a robust revenue growth.[1] The industrys share of total Indian exports (merchandise plus services) increased from less than 4% in FY1998 to about 25% in FY2012. According to Gartner, the "Top Five Indian IT Services Providers" are Tata Consultancy Services, Infosys, Cognizant, Wipro and HCL Technologies.

This sector has also led to massive employment generation. The industry continues to be a net employment generator - expected to add 230,000 jobs in FY2012, thus providing direct employment to about 2.8 million, and indirectly employing 8.9 million people.[1] Generally dominant player in the global outsourcing sector. However, the sector continues to face challenges of competitiveness in the globalized world, particularly from countries like China and Philippines.

Infosys Infosys Limited, formerly Infosys Technologies Limited (BSE: 500209, NSE: INFY, NASDAQ: INFY) is an Indian multinational provider of business consulting, technology, engineering and outsourcing services company. It is headquartered in Bangalore, Karnataka. Infosys was co-founded in 1981 by N. R. Narayana Murthy, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K.Dinesh and Ashok Arora after they resigned from Patni Computer Systems. InStep is Infosys' flagship global internship program. The program students from management, technical and liberal arts backgrounds. InStep fosters a multi-cultural environment within the organization and provides strategy and research projects. The InStep program is also part of AcE activities .

Liquidity Ratio i)Current Ratio: Current assets divided by current liabilities. It shows a firms ability to cover its current liabilities with its current assets. In below there is the graph of the two textile companys current ratio: Company Current asset current liabilities Current Ratio

infosys wipro

30261 25458

6902 11740

4.038 2.1683

For wipro the current ratio value i.e 2.1683 which is an acceptable current ratio. But for Infosys it is more than 4 which is alarming as management has so much cash on hand, they may be doing a poor job of investing it.

ii)Quick Ratio: Current assets less inventories and prepaid expenses divided by current liabilities. It shows a firms ability to meet current liabilities with its most liquid assets.

Company Current asset (inventories + prepaid expenses) infosys wipro 30261-(0 + 66) =30195 254582-(10662 +5507)=23841

current liabilities

Current Ratio

6902 11740

4.374 2.030

Quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore in 2012 infosys will have a better liquid position than wipro.

Leverage ratios i)Debt Equity Ratio Ratios that show the extent to which the firm is financed by debt. It is Long term debts divided by shareholders fund. Company Long Term Debt infosys wipro 123 2202 31332 24352 .004 0.09 Shareholders fund Debt Equity Ratio

Infosys is in better position than wipro as far as debt equity ratio is concerned. ii)Debt to total Asset ratio The debt to total asset ratio is derived by dividing a firms total debt by its total assets.

Company Long Term Debt infosys wipro 123 2202

Total Asset

Debt Equity Ratio

38627 38595

.003 0.057

From the able we can realize that Wipros ratio is more than infosys. We know that the higher the debt to assets ratio, the greater the financial risk; the lower the ratio, the lower the risk. So wipro has more risk than the Infosys.

iii) Proprietary ratio This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to total assets ratio. This ratio relates the shareholder's funds to total assets. Proprietary /Equity ratio indicates the long-term or future solvency position of the business Company Shareholders fund infosys wipro 31332 24352 38627 38595 .811 0.63 Total Asset Debt Equity Ratio

Proprietary ratio highlights the financial position of the company and therefore Proprietary ratio can be interpreted as good if it is high because a higher proprietary ratio would imply that company has enough capital to repay its creditors whenever any such demand is made by the creditors. A lower proprietary ratio would imply that company is not in a position to pay all of its creditors and therefore here Infosys is in better position than wipro to pay their creditors.

Activity Ratio i) Capital turnover ratio A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales. Working capital = current assets - current liabilities

Company

Net Sales

Capital Employed

Capital turnover ratio 9.07 18

infosys wipro

211910 254632

23359 13717

A company uses working capital (current assets - current liabilities) to fund operations and purchase inventory. These operations and inventory are then converted into sales revenue for the company. The working capital turnover ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. So wipro is in better condition then infosys in case of capital turnover ratio.

ii) Fixed asset Turnover Ratio A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

Company infosys wipro

Net Sales 211910 254632

Net Fixed asset 4061 4196

Fixed asset Turnover Ratio 52 60

This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was. Here it is nearly same for both the companies.

iii) Stock Turnover Ratio The ratio is calculated by dividing the cost of goods sold by the amount of average stock at cost. Company infosys wipro Stock Turnover Ratio 36.29

The activities of infosys dont involve any purchase of inventory. Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. A low inventory turnover implies over-investment in inventories, dull business, poor quality of goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits as compared to total investment. In case of wipro it is doing well as far as stock turnover ratio is concerned. vi) Debtor Turnover Ratio An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Company infosys wipro

Debtor Turnover Ratio 6.75 5.50

Infosys debtor turnover ratio implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. Whereas the wipros ratio is less so it should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.

Profitability Ratio
i)

Gross Profit Ratio

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales

Company infosys wipro 29.51 18.22

Gross Profit

Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products. So Infosys is delivering products with higher efficiency as its GP ratio is more than 10% higher than that of wipro.

ii)

Operating Profit

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Company infosys wipro 32.61 20.76 Operating Profit

Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. Operating profit for both the companies is not satisfactory.

iii)

Net Profit

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. Company infosys 23.84 Net Profit

wipro

16.66

NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. Infosys is again better than wipro in measure of overall profitability. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in minds that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.
iv)

Return On Capital Employed

Return on capital employed establishes the relationship between the profit and the capital employed. Company infosys wipro Return On Capital Employed 35.74 22.93

Return on capital employed ratio is considered to be the best measure of profitability in order to assess the overall performance of the business. It indicates how well the management has used the investment made by owners and creditors into the business. It is commonly used as a basis for various managerial decisions. As Infosys is having ROCE of 35.74 as compared to that of Wipros 22.93, Infosys is more efficient in using its funds.
v)

Return on Assets

Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". Company infosys wipro Return on Assets 452.42 91.62

Infosys is better at converting its investment into profit.

Horizontal Analysis

a) Infosys

Particulars Share Capital Reserve and Surplus Capital work in progress

2011 286 25690 264

2012 286 31046 590

Short Term loan and advances

2544

3420

Analysis Share capital for both the year 2011 and 2012 remains unchanged. It is better in 2012 in terms of reserve and surplus as it increased by 5356 cr. Working capital is almost double in 2012 to that of 2011.It was better in 2011 as there was less amount of capital tied up in the production or manufacturing process. And low risk of obsolescence The value of this account is very important when determining a company's financial health. If the account is larger than the company's cash and cash equivalents, this suggests that the company may be in poor financial health and does not have enough cash to pay off its shortterm debts. In case of infosys Cash and Cash equivalent (20501crore in 2012 and 16666 in 2011) are much higher than then short term loan and advances, so it can be concluded that company is in a good financial health.

Current Investment

140

368

Current investment has increased two fold from 2011 to 2012.that is a good sign for business expansion.

b) Wipro

Particulars

Fiscal Year 2011-2012 (in lakhs)

Fiscal Year 2010-2011 (in lakhs)

Difference

Long term borrowings Fixed Assets Goodwill Short term borrowings Current assets

22,510 54,627 67,961 35,480 269,027

19,759 48,849 54,266 31,166 226,918

2,751 5,778 13,695 4,314 42,109

300,000 250,000 200,000 150,000 100,000 50,000 0 Long term borrowings Fixed Assets Goodwill Short term Current borrowings assets Series1 Series2

Question 3: SUGGESTIONS TO VARIOUS STAKEHOLDERS Stakeholders are the groups , individuals or the other interested parties that are affected by the decisions of the organization.There are various stakeholders of the company and they are listed below-:

Creditors Banks and financial institutions Investors

Government Management 1.) Creditors An entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real". The creditors of the company are basically concerned with he capability of the company to repay their debts within time and there are no defaults in the payment of the interest and amount of debt. The creditors of the company are concerned with ratios like Debt equity ratio Current ratio Quick ratio Net profit ratio Infosys: current ratio is 4.0 so company is doing good performance Wipro: current ratio is 2.1 so company is doing average performance

2.) Banks and financial institutions Banks and financial institutions are very important stakeholders of the company. These institutions provide funds to the company which are used for the functioning and the growth of the company. The Banks and financial institutions of the company are concerned with ratios like Debt equity ratio .004 .09 Current ratio Quick ratio Net profit ratio Infosys: have a debt equity ratio of .004 which is very low so Bank can lend them money. Spice jet: have a debt equity ratio of .09 which is very low so Bank can lend them money. 3.) Investors An investor is someone who allocates capital with the expectation of a financial return. The types of investments include, --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc. This definition makes no distinction between those in the

primary and secondary markets. That is, someone who provides a business with capital and someone who buys a stock are both investors. The ratios that investors will use are as follows-: Net profit ratio Gross profit ratio Operating profit per share Dividend payout ratio net profit

Jet airways: shareholder holders equity in company is around 31332 crores. Spice jet: shareholder holders equity in company is around 24352 crores.

4.) Management The management of the company uses the several ratios for taking various important decisions regarding the company. the following ratios are used by the company-: Inventory turnover ratio Debtor turnover ratio Fixed asset turnover ratio Number of days in working capital Infosys: N. R. Narayana Murthy is owner of jet airways now and he has major stack of the company Wipro: Ajeez Prem ji is owner of jet airways now and he has major stack of the company

Question 4: ACCOUNTING POLICIES OF BOTH THE COMPANIES

Infosys VALUATION OF INVENTORIES

Inventories are valued at the lower of cost, computed on a weighted average basis, and estimated net realizable value, after providing for cost of obsolescence and other anticipated losses, wherever considered necessary. Finished goods and work-in-progress include costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Weighted average basis of valuation of inventories- Under the weighted average approach, both inventory and the cost of goods sold are based upon the average cost of all units currently in stock at the time of reporting. When inventory turns over rapidly this approach will more closely resemble FIFO than LIFO.

VALUATION OF FIXED ASSETS AND DEPRICIATION Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided (except in the case of leasehold land which is being amortised over the period of the lease) on the straight line method and at the rates and in the manner specified in Schedule XIV of the Companies Act, 1956. However certain employee perquisite - related assets are depreciated over four to six years, the period of the perquisite scheme computers and related assets are depreciated over four years certain assets of the cold chain are depreciated over four / seven years; and motor vehicles are depreciated over six years

GOODWILL AND INTANGIBLE ASSETS Intangible assets are stated at cost of acquisition less accumulated amortisation. Goodwill and other Intangible assets (except computer software) are amortised over the assets useful life not exceeding 10 years. Computer software is amortised over a period of 5 years on the straight line method. VALUATION OF INVESTMENTS Investments are classified into current and long - term investments. Current investments are stated at the lower of cost and fair value. Long - term investments are stated at cost. A provision for diminution is made to recognise a decline, other than temporary, in the value of long - term investments.

Wipro VALUATION OF INVENTRIES Inventories consist of raw and packing materials, stores and spares, work in progress and finished goods. Inventories are valued at lower of cost and net realisable value. Cost of Inventories is determined on weighted average basis. Cost of manufactured finished goods and work-in-progress includes material cost determined on weighted average basis and also includes an appropriate portion of allocable overheads.

FIXED ASSETS AND THEIR VALUATION Fixed assets are stated at cost of acquisition less accumulated depreciation and impairment, if any. Cost is inclusive of freight, duties, taxes and other directly attributable costs incurred to bring the assets to their working condition for intended use.

Question 5: Analyse the key highlights of the various compenents of the annual reports for the companies: a. Auditors report b. Management discussions c. Corporate governance report a)Auditors report

Auditor's Report (Infosys)

Year End : Mar '12

We have audited the accompanying financial statements of Infosys Limited (''the Company'') which comprise the Balance Sheet as at 31st March, 2012, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended and a summary of significant Accounting policies and other explanatory information. Management's Responsibility for the Financial Statements The Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (''the Act''). This responsibility

includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material Misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India : (i) in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March, 2012; (ii) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and (iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Wipros Auditor Report: To the Members of WIPRO LIMITED We have audited the attached balance sheet of Wipro Limited (the Company) as of March 31, 2012, the statement of profit and loss and the cash flow statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 1. As required by the Companies (Auditors Report) Order, 2003, as amended (the Order), issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956 (the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 2. Further to our comments in paragraph 1 above, we report that: a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books; c) the balance sheet, statement of profit and loss and cash flow statement dealt with by this report are in agreement with the books of account; d) in our opinion, the balance sheet, statement of profit and loss and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act ; e) on the basis of written representations received from the directors as on March 31, 2012 and taken on record by the Board of Directors, we report that none of the directors is disqualified as of March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act; and (f ) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give

the information required by the Act, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: in the case of the balance sheet, of the state of affairs of the Company as of March 31, 2012; in the case of the statement of profit and loss, of the profit of the Company for the year ended on that date; and in the case of the cash flow statement, of the cash flows of the Company for the year ended on that date. b)Management Discussions Infosys Revenue Mix Service Line Distribution We continued to expand and grow our Services portfolio. Growth in the current year was driven by 28% increase in revenues from Analytics & Information Management, 17% increase in revenues from Technology Infrastructure Services, 16% increase in revenues from Business Application Services, 2% increase in revenues from Business Process Outsourcing, 11% increase in revenues from Product Engineering and 10% increase in revenues from Application Development and Maintenance. Overview The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, guidelines issued by the Securities and Exchange Board of India (SEBI) and the Generally Accepted Accounting Principles (GAAP) in India. Our Management accepts responsibility for the integrity and objectivity of these financial statements, as well as for the various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis, so that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present our state of affairs, profits and cash flows for the year. I Industry structure and developments Changing economic and business conditions, evolving consumer preferences, rapid technological innovation and adoption, and globalization are driving corporations to transform the manner in which they operate. Companies are now more focused on their core business objectives, such as revenue growth, profitability and asset efficiency.

II Financial condition Sources of funds 1. Share capital

At present, we have only one class of shares - equity shares of par value Rs. 5/- each.Our authorized share capital is Rs. 300 crore, divided into 60 crore equity shares of Rs.5/- each. The issued, subscribed and paid up capital stood at Rs. 287 crore as at March31, 2012 (same as the previous year).

2. Reserves and Surplus Capital reserve The balance as at March 31, 2012 amounted to Rs. 54 crore, same as the previous year. Securities premium The addition to the securities premium account of Rs. 7 crore during the year isprimarily on account of premium received on issue of 78,442 equity shares, on exercise ofoptions under the 1998 and 1999 Stock Option Plans of Rs. 6 crore.

3. Fixed assets Capital expenditure We incurred a capital expenditure of Rs. 1,296 crore ( Rs. 1,152 crore in the previousyear) comprising additions to gross block of Rs. 797 crore excluding Rs. 10 crore of grossblock transferred from Infosys Consulting Inc. on its termination, for the year endedMarch 31, 2012. The entire capital expenditure was funded out of internal accruals.

4. Investments We made several strategic investments during the past years aimed at procuring businessbenefits and operational efficiency for us.

Wipro Economic Overview Global economy is under stress due to high levels of sovereign debt in the Western markets coupled with increasing levels of unemployment and rising income and wealth inequalities. We see subdued growth in the developed markets and growth slowing down in the developing markets. In this economic Environment, businesses are focused on investing in newer areas for growth and driving productivity and enhancing sustainability. We believe the shift towards driving sustainable growth, has brought ecological

Technologies We will continue to invest in the 3 disruptive technologies viz. Cloud Computing Services, Mobility Services & Analytics with the objective of providing differentiated business oriented solutions to our customers. Delivery Efficiencies We seek to achieve agility and increased efficiencies in our organization by continuously improving the manner in which we develop and deliver our ITservices. We develop preconfigured solutions, standardized delivery tools and technology-enabled delivery processes to increase the speed and efficiency of our IT services and provide our clients with faster, more accessible and more cost effective IT solutions Revenue Mix Vertical Distribution Our revenue increase of 13.4% was primarily due to a 57% increase in revenue from energy and utilities (organic growth of 28%), a 13% increase in revenue from financial solution, a 11% increase in revenue from retail and transportation, a 6% increase in revenue from manufacturing and Hi-tech, a 6% increase in revenue from healthcare life sciences and a 4% increase in revenue from global media and telecom. Revenue Mix Service Line Distribution We continued to expand and grow our Services portfolio. Growth in the current year was driven by 28% increase in revenues from Analytics & Information Management, 17% increase in revenues from Technology Infrastructure Services, 16% increase in revenues from Business Application Services, 2% increase in revenues from Business Process Outsourcing, 11% increase in revenues from Product Engineering and 10% increase in revenues from Application Development and Maintenance. c) Corporate governance report Infosys Corporate Governance is about commitment to values and ethical business conduct.At infosys,good governance is intrinsic to the management of company affairs. Corporate Governace Ratings: CRISIL - CRISIL Ratings is India's leading rating agency. We pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we have a leadership position. We have rated over 50,000 entities, by far the largest number in India. We are a full-service rating agency. We rate the entire range of debt instruments: bank loans, certificates of deposit, commercial paper, nonconvertible debentures, bank hybrid

capital instruments, asset-backed securities, mortgagebacked securities, perpetual bonds, and partial guarantees.

ICRA ICRA assigned CGR 1 rating to our corporate governance practices. Wipro Our Corporate Governance principles and practices have been articulated through the Companys Code of Business Conduct and Ethics, Corporate Governance guidelines, charters of various sub-committees of the Board and Companys Disclosure policies. These policies seek to focus on enhancement of long-term shareholder value without compromising on Ethical Standards and Corporate Social Responsibilities. These practices form an integral part of the Companys operating plans. The Spirit of Wipro represents the core values of Wipro framed around these Corporate Governance principles and practices. The three values encapsulated in the Spirit of Wipro are: Intensity to Win Make customers successful Team, innovate and excel Act with Sensitivity Respect for the individual Thoughtful and responsible Unyielding Integrity Delivering on commitments Honesty and fairness in action Corporate Governance philosophy is put into practice at Wipro Through the following four layers, namely, Governance by Shareholders, Governance by Board of Directors, Governance by Sub-committee of Board of Question 6:

Infosys
3500 3000 2500 Axis Title 2000 1500 1000 500 0

Share price movement of last 1 year

Sep/ Oct/ Nov/ Dec/ Jan/1 Feb/ Mar/ Apr/ May/ Jun/ Jul/1 Aug/ 11 11 11 11 2 12 12 12 12 12 2 12 Series1 2373 2227 2503 2440 2463 2865 2875 2743 2765 2608 2875 2534

share price movement of last 1 year

500 450 400 350 300 250 200 150 100 50 0

Wipro

Axis Title

Sep/ Oct/1 Nov/ Dec/ Jan/1 Feb/ Mar/ Apr/ May/ Jun/1 Jul/1 Aug/ 11 1 11 11 2 12 12 12 12 2 2 12 Series1 367.6 339.9 399.3 409.6 405.1 439 431.8 413.3 398.8 378.2 366.5 340.7

Conclusion : 1.) Infosys share price is very sensitive during Feb 2012 & Jan 2012 and also same for wipro. 2.) We can see that both are varying in same cycle 3.) So that we can say that IT industrys market price is may be varying the same pattern because macro economics factors for both the company are same. 4.) Risk factors (beta) for the both company of market price available in secondary market are very near.

Question 7:

a) Improvement areas Infosys high exposure to discretionary spending and negative operating leverage are likely to hurt revenue growth and margins in the near term, though a weaker rupee more than offsets the impact of these headwinds. It is advised against investing in it for short-term outperformance rather they should invest in long term outperformance.

They should focus on Cost saving that can be achieved through a strategic product reduction exercise, by reorganising assets and people and optimizing processes. Changing economic and business conditions, evolving consumer preference, rapid technological innovation and adoption and globalization are driving corporation to transform the manner in which they operate. Company should be more focussed on their core business objectives, such as revenue growth, profitability and asset efficiency. There is an increasing need for highly skilled professionals in the market in the market to help corporation transform their business. They should invest surplus with highly rated companies, banks and financial institutions for maturities up to 365 days. They could try to reduce the general and administration expenses. They could realign existing and form new alliances, leverage alliance partnerships for joint GTM with Wipro. Partner with emerging technology providers to improve market address and develop new streams of revenue Wipro Global economy is under stress due to high levels of sovereign debt in the Western markets coupled with increasing levels of unemployment and rising income and wealth inequalities. In this economic Environment, businesses should focus on investing in newer areas for growth and driving productivity and enhancing sustainability. Focus should be to target growth hot spots across industry segments and geographies. They should continue to invest significant resources in understanding and prioritizing verticals such as Energy, natural resources and utilities, banking, financial services and insurance, healthcare, life sciences & services and retail and consumer product goods. It helps in acquiring deep industry knowledge, Understanding their information and technology and leveraging available technologies to deliver effective Solutions and products to our clients and potential clients.

b)Infosys is better than Wipro Focus on India

Infosys has always focused on the high margin business. For this, it has concentrated on the

business from the developed markets such as the North America and the Europe. And, it has definitely worked well for the company till now. But in the process Infosys has ended up ignoring the emerging market opportunities particularly those from India. On the other hand, Wipro has been catering to domestic market as well. And during the time of slowdown in the developed economies, this focus on India has worked in the favour of Wipro and has helped it in growing its business. Of late, though Infosys has started focusing on Indian market. But till now its name has not really featured in the big ticket contracts awarded by the Indian government or domestic companies. Its portion of revenues from India still remains quite low. Geographical focus Both the companies generate a large part of their revenues from the developed economies such as America and Europe. However, Infosys earns a larger chuck from the North American market. As compared to Infosys, Wipro has a higher share of revenues from the European markets. This makes Wipro more vulnerable to the prevailing uncertainty in the European markets. But the saving grace for the company is that it generates a large part of the ROW (Rest of the World) business from Indian and Middle East Markets, which have been growing in recent times.

Data source: Company's results documents

Industry wise client distribution Banking, Financial Services & Insurance (BFSI) industry has been the biggest growth driver

for the IT sector. And the same is true for Infosys as well. In fact, Infosys derives a large part of its revenues from this sector. Recently, Infosys has started focusing on the healthcare vertical which presents a good growth opportunity in the future. As for Wipro, all the industry verticals contribute almost evenly to total IT revenues.

Data source: Company's results documents

Service focus Here, Infosys seems to have some upper hand over Wipro as the former generates a larger share from the high end services such as consulting. A note to the readers is that these are also the higher margin businesses. Several IT services such as Application Development & Maintenance (ADM) are already commoditized. Hence, they do not offer better profitability. Considering this, Infosys had started focusing on high end services. And this helped company maintain its margins.

Data source: Company's results documents, *Consulting, System Integration and R&D Business #ADM, Infrastructure Management, Testing etc, PES- Product Engineering Services

Generally Indian IT companies are services oriented. Hence, they do not generate much from the product offering. However, since the advent of cloud computing companies have started focusing on Product, Platform & Solutions services. Infosys aims to grow this business to as high as 1/3rd of its total revenue. On similar lines, Wipro is also focusing on mobility, analytics and cloud computing. So far, we have just talked about what these companies are and from where they earn their revenues. In the subsequent articles, we would compare their business strategies, financial performance and valuations of the companies. References: 1) http://www.investopedia.com/ 2)