A PROJECT REPORT

ON
A COMPRATIVE STUDY OF WIPRO AND INFOSY
Submitted in partial fulfillment of requirement for the degree of

MBA-III SEM.
IN

UNDER THE SUPERVISION OF

MISS PRIYANKA CHOURASIA

SUBMITTED BY
ANURITA PARIHAR

TO
DEPARTMENT OF MANAGEMENT STUDIES
SWAMI VIVEKANAND UNIVERSITY, SAGAR (M.P.)
DECEMBER 2014

CERTIFICATE
This is to certify that Report entitled STUDY ON PERFORMANCE OF

EQUITY SHARE OF BANKING SECTOR IN NATIONAL STOCK

EXCHANGE (NSE) which is submitted by ANURITA PARIHAT in partial
fulfillment of the requirement for the award of degree MBA. from SVN University
Sagar is a record of the candidate own work carried out my Supervision. The
matter embodied in this report is original has not been submitted for the award of
any other degree

Date

Mentor Name
(MISS PRIYANKA CHOURASIA)

DECLARATION
This is to certify that Report entitled STUDY ON PERFORMANCE OF

EQUITY SHARE OF BANKING SECTOR IN NATIONAL STOCK

EXCHANGE (NSE) which is submitted by me in partial fulfillment of
the requirement for the award of degree MBA from SVN University Sagar
Comprises only my original work and due acknowledgement has been made
in the text to all other material used.
NAME OF THE STUDENT
APPROVIED BY

( ANURITA PARIHAT)

............................................
(H.O.D & DEAN )
SWAMI VIVEKANAND UNIVERSITY SAGAR

PREFACE
Preparing a project of this nature is an arduous task and I was
fortunate enough to get support from a large number o persons. I wish to
express my deep sense of gratitude to all those who generously helped in
successful completion of this report by sharing their invaluable time and
knowledge.
It is my proud and privilege to express my deep regards to Respected
HOD Dr. Pramesh Gautam, Head of Department of Business Management,
SWAMI VIVEKANAND UNIVERSITY SAGAR for allowing me to
undertake this project.
I feel extremely exhilarated to have completed this project under the
able and inspiring guidance of Miss Priyanka chourasia he rendered me all
possible help me guidance while reviewing the manuscript in finalizing the
report.
I also extend my deep regards to my teachers, family members,
friends and all those whose encouragement has infused courage in me to
complete to work successfully.
ANURITA PARIHAR
MBA III SEM.

ACKNOWLEDGEMENT
Preparing a project of this nature is an arduous task and I was
fortunate enough to get support from a large number o persons. I wish to
express my deep sense of gratitude to all those who generously helped in
successful completion of this report by sharing their invaluable time and
knowledge.
It is my proud and privilege to express my deep regards to Respected,
Head of Department Dr.Pramesh Gautam, Department of Business
Management , SWAMI VIVEKANAND UNIVERSITY SAGAR for
allowing me to undertake this project.
I feel extremely exhilarated to have completed this project under the
able and inspiring guidance of He rendered me all possible help me guidance
while reviewing the manuscript in finalizing the report.
I also extend my deep regards to my teachers, family members ,
friends and all those whose encouragement has infused courage in me to
complete to work successfully.

ANURITA PARIHAT
MBA III SEM.

CONTENTS
S.NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

PAGE
COVER PAGE
PREFACE
DECLARATION
CERTIFICATE
INTRODUCTION
RATIONALE OF THE STUDY
OBJECTIVE OF THE STUDY
LITERATUVE REVIEW
SCOPE OF THE STUDY

RESEARCH METHODOLOGY
DATA INTERPRETATIONS
RESULTS AND FINDINGS
LIMITATION
SUGGESTIONS
CONCLUSIONS
BIBLIOGRAPHY

INTRODUCTION
Wipro Ltd:
Wipro Ltd. is the flagship company of the Azim H Premji group. Wipro was incorporated
in the year 1945. The company started off originally as a manufacturer of vegetable
ghee/vanaspati (hydrogenated vegetable oils), refined edible oils etc. Gradually, It
diversified into various other businesses. The group forayed into information technology
business in 1982.
Wipro is a global IT services company. The company provides comprehensive IT
solutions and services, including systems integration, information systems outsourcing,

package implementation, software application development and maintenance, and

research and development services to corporations. The company mainly operates in the
US. It is headquartered in Karnataka, India and employs more than 108,071 people
worldwide as of March 2010. It has interests varying from information technology,
consumer care, lighting, engineering and healthcare businesses.
SWOT Analysis examines the companys key business structure and operations, history
and products, and provides summary analysis of its key revenue lines and strategy.
Strengths:

Global R&D facility.

Retention of the man-power is the best in the industry.
Impressive list of clientele.
Relatively lower receivable compared to the industry average.
Diversified skill base across service lines
Delivery capabilities & client satisfaction
Commitment to go the extra mile
Technological partnership with other software companies
Low cost advantage
MEGA Partnership Cisco, EMC, Microsoft, Oracle and SAP

Weaknesses:

Low operating margin of the other group companies.

Free floating stock is very less.
Domestic market was huge but was underdeveloped
Small player in global market
Limited domain
Clients not trusting the capabilities of Indian Software Cos.

Opportunities:

In the branded product category.

In the consultancy area.
In the emerging technology areas like Blue Tooth, WAP etc.
Huge global market
The Company has entered into the global market so now its the biggest
opportunity available to the company.
Huge potential in domestic market

Threats:

Increasing cost of human capital.

Slowdown in the US economy.
Will face fierce competition in the areas of e-business and ASP services.

Competition by Indian companies in domestic market

Presence of big companies in global market
Exchange rate : This can be a threat to the company as the company is making
profits due to the high exchange rate and if this rate comes down in future it can
lead to a major problem for the company.
High exposure to the telecom/tech sectors (36%)
Slowdown in the banking, financial services and insurance (BFSI) sector

Recommendations:

Adopt the Dynamic High Technology Strategy

Increase Global Presence
More collaborations with other players; reduce dependence on only few players
Leveraging the huge investments in R&D to gain competitive advantage with
respect to other players
Diversify into various Sectors
Go for quality certification

Conclusion :
Till today Wipro has been known for being very process oriented with a focus on quality
and cost savings.Wipro long term strategy should be to create a brand image and be
known for innovation.Wipro should invest in R&D and Market research, so that It is able
to innovate new solutions for clients to cut costs or reduce time to market or improve
reliability.

Infosys Ltd:
Infosys was started in 1981 by seven people with US$ 250. Many of the worlds most
successful organizations rely on Infosys to deliver measurable business value. Infosys
provides business consulting, technology, engineering and outsourcing services to help
clients in over 30 countries build tomorrows enterprise. Infosys Labs and its
breakthrough intellectual property can be leveraged as a co-creation engine to accelerate
innovation across the enterprise.

Infosys pioneered the Global Delivery Model (GDM), based on the principle of taking
work to the location where the best talent is available, where it makes the best economic
sense, with the least amount of acceptable risk. Continued leadership around GDM
enables Infosys to drive extraordinary efficiencies and free up clients resources for
strategic transformation or innovation initiatives.
Infosys has a global footprint with 68 offices and 70 development centers in US, India,
China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands,
Poland, Canada and many other countries. Infosys and its subsidiaries have 151,151
employees as on June 30, 2012.
Infosys takes pride in building strategic long-term client relationships. 99.1% of our
revenues come from existing customers (Q1 FY 13).
Infosys gives back to the community through the Infosys Foundation that funds learning
and education.
SWOT Analysis Infosys
Infosys is one of the largest businesses in India with a turnover in excess of $4 billion in
2008. The company specializes in Information Technology (IT) and consulting. N.R.
Narayana Murthy and six others started the company in 1981, and it is now the largest IT
company in India with its headquarters in Bangalore (although it was started in Pune). It
employs more than 90,000 IT professionals and was famously rated 'Best Employer in
India. It operates in a number of business sectors from banking to retail, and its services
tend to encompass end-to-end IT solutions which includes a whole bundle of added-value
solutions from infrastructure to software engineering.
Strengths

Since the company is based in India its competitive advantage is enhanced. The
Indian economy, despite weak economic indicators such as relatively high rates of
inflation, has low labor costs. The workforce has relatively high skills levels in
Information Technology. Couple these two elementstogether and you have an
operational basis that offers low-cost based, highly skilled competitive advantage.
Trained Indian personnel often speak very good English and are sensitive to
Western culture, underpinned by India's colonial past.
Infosys is in a strong financial position. The business turned over more than $4
billion in 2008. This means that it has the capital to expand, and also the basis to
leverage potential investors.
The company has bases in 44 global development centres, most of which are
located in India, although the company has offices in many developed and
developing nations. This means not only that Infosys is becoming a global brand
but also that it has the capability to support the global operations of multinational
clients.

Weaknesses

Infosys on occasion struggles in the US markets, and has particular problems in

securing United States Federal Government contracts in North America. Since
these contracts are highly profitable and tend to run for long periods of time,
Infosys is missing out on lucrative business. Added to this is the fact that its
competitors do well in terms of securing the same Federal business (and one
should also take into account that many of its competitors are domiciled in the US
and there could be political pressure on the US Government to award contracts to
domestic organizations).
Despite being a huge IT company in relation to its Indian competitors, Infosys is
much smaller than its global competitors. As discussed above, Infosys generated
$4 billion in 2008, which is relatively low in comparison with large global
competitors such as Hewlett-Packard ($91 billion), IBM ($91 billion), EDS ($21
billion) and Accenture ($18 billion).
It is sometimes argued that Infosys is weaker when it comes to high-end
management consultancy, since it tends to work at the level of operational value
creation. Competitors such as IBM and Accenture tend to dominate this space.

Opportunities

At a time of recession in the global economy, it may appear that some companies
will reduce take up of services that Infosys offers. However, in tough times clients
tend to focus upon cost reduction and outsourcing - with are strategies that
Infosys offers. So hard times could be profitable for Infosys.
There is a new and emerging market in China as the country undergoes a huge
industrial revolution.
The strategic alliance between Infosys and Schlumberger gives the IT company
access to lucrative business in the gas and oil industries.
There has been a trend over recent years for European and North American
companies to base some or all of their operation in India. This is called an
offshore service. Essentially there is a seamless link between domestic operations
and services hosted in India. Examples include telecommunications companies
such as British Telecom and banks such as HSBC that have customer service and
support centres based in India. Think about the times that you have made calls to
a support line to find that the adviser is in Mumbai or Bangalore and not in your
home market.

Threats

India is not the only country that is undergoing rapid industrial expansion.
Competitors may come from countries such as China or Korea where there are
large pools of low-cost labor, and developing educational infrastructures such as
universities and technology colleges.

Customers may switch to other offshore service companies in other countries such
as China or Korea.
Other global players have realised that India has the benefit of low-cost, highlyskilled labor that often speaks English and is culturally sensitive to Western
practices. As with all global IT players, Infosys has to compete for skilled labor
and this may have the effect of driving up wage levels, and making it more
difficult to recruit and retain staff.

1. Accounting Analysis
1.1 Quality of Earnings

Wipro Ltd.

Wipro uses straight line method of depreciation and the method has not been changed
for the past two years. Hence there is no effect on the profit on the basis of change in
depreciation method

Inventories are valued at lower of cost and net realizable value, including necessary
provision for obsolescence. Cost is determined using the weighted average method.
Cost of work-in-progress and finished goods include material cost and appropriate
share of manufacturing overheads. Hence there is no effect on the profit on the basis
of change of inventory valuation method

The sales increased from Rs 263,005 millions in 2010-11 to Rs 316,829 millions in

2011-12 while other income increased from Rs 6,807 millions to Rs 12,274 millions.

Wipro had a cash balance of Rs. 52,033 millions on 31 st Mar 2012 as against Rs.
62,328 millions on 31st Mar 2011. Hence cash is not a problem for Wipro.

The change of useful life of some assets was due to the assets undergoing changes
due to renovation and modernization. Intangible assets are amortized over their
estimated useful
life on a straight line basis.

The provision for bad debts has changed by Rs. 225 million in 2011-12.

Taking the above factors into consideration it can be safely concluded that the quality of
earnings for Wipro Ltd. is quite high.

Infosys

Infosys uses straight line method of depreciation and the method has not been
changed for the past two years. Hence there is no effect on the profit on the basis of
change in depreciation method

The companies does not hold any physical inventories.

The sales increased from Rs 26,532 crores in 2010-11 to Rs 33,083 crores in 2011-12
while other income increased from Rs 1,147 crores to Rs 1,829 crores.

Wipro had a cash balance of Rs. 19,557 millions on 31 st Mar 2012 as against Rs.
15,167 millions on 31st Mar 2011. Hence cash is not a problem for Infosys.

The provision for bad debts has reduced by Rs. 9 crores in 2011-12.

Taking the above factors into consideration it can be safely concluded that the quality of
earnings for Infosys is quite high.

2.2

Horizontal Analysis

2.2.1

Sources of Funds

Wipro Ltd
There was marginal change of 0.18 in the share capital between 2010-11 and 2011-12.
However the total liabilities increased by 13.71% indicating that the firm has been
leveraging. The ROI however is almost comparable to the borrowing cost so the
leveraging should not pose any problems.

Infosys
There was no change in the share capital between 2010-11 and 2011-12. However the
total liabilities increased by 24.12% indicating that the firm has increased its dependence

on debts. Thus, the debt ratio of the firm has increased and the firm has become more
risky.

2.2.2

Assets

Wipro Ltd
The assets of the firm have increased by 13% in 2011-12 as compared to 2010-11. This
indicates that Wipro had good cash flows in the previous year. Also, the fixed assets
disposed off during the year were not substantial and therefore do not affect the going
concern assumption.

Infosys
The assets of the firm have increased by 24% in 2011-12 as compared to 2010-11. This
indicates that Infosys had good cash flows in the previous year and thus invested highly
in assets to increase the overall equity of the firm.
As compared to Wipro, Infosys had huge investment in assets in 2011 as compared to
previous year.

2.2.3

Profit and Loss

Wipro Ltd
The companys Operating Profits have declined from 21.65% in 2010-11 to 19.80 in
2011-12 by 1.85 percent. It should be noted that although the sales in the last year have
increased by 22.0 percent. The reason that the operating profits have gone down is that
the operating expenses have gone up.
This can be accounted by the following:
Employee benefits expense increased from 109,374 mn to 133,115 mn
Changes in inventories of finished goods, work in progress and stock-in-trade increased
from (316) mn to 449 mn
This has ensured that the profit after tax has gone up by 10.78 percent. However there is a
caveat that the Operating expenses are increasing at an alarming rate when compared to
the increase in Operating profits. Thus, they do not earn sufficient operating profits in the
yr. 2011-12 as a result, the company end up making operating losses since they didnt
have sufficient non operating incomes every year.

Infosys
The companys Operating Profits have increased by 20.70 percent in 2011-12. Thus, the
company has enjoyed good cash flows throughout the previous year and good margins.
As compared to Wipro, the profits of Infosys were huge and thus Infosys showed a
significantly good performance than Wipro.

2.2.4

Long Term Loan and Advances

Wipro Ltd
The long term loans and advances of Wipro have declined from 9,627 mn in 2010-11 to
9,404 mn in 2011-12 by -2.32 percent. This shows that Wipro has recovered the dues
from its debtors and there are few debtors as compared to previous year. This is also be
interpreted as the fact that Wipro has earned its income from majority of its debtors in the
year 2011-12.

Infosys
The long term loans and advances of Infosys have increased from 1,244 cr in 2010-11 to
1,431 cr in 2011-12 by 15 percent. This shows that Infosys has not recovered enough
dues from its debtors and there are exists a large number of debtors as compared to
previous year.
Thus, Infosys has yet to earn the income from its debtors and the delay in earnings from
debtors has lead to significant opportunity cost on the income.
2.2.5

Current Investments

Wipro Ltd
The current investments of Wipro have significantly declined from 47,950 mn in 2010-11
to 40,409 mn in 2011-12 by -15.73 percent. This can be attributed to the fact that
company had a fall in operating profits during the year 2011-12. Thus, it seems that
company has retained its earnings(although small) thereby avoiding the risk involved in
capital investments.

Infosys
The current investments of Infosys have significantly increased from 119 cr in 2010-11 to
341 cr in 2011-12 by 186.55 percent. This can be attributed to the fact that company had
a huge rise in operating profits during the year 2011-12.
Thus, Infosys as compared to Wipro, has made huge return on investments(evident from
increase in operating profits) as a result of large amount of investment expenditure .

2.3 Vertical Analysis

2.2.6

Sources of Funds

Wipro Ltd
There was small change of 4.19 percent in the share capital between 2010-11 and 201112 as per the vertical analysis. The share capital increase can be attributed to the fact that
company has issued new shares to public.

Infosys
There was no change in the share capital between 2010-11 and 2011-12. The company
has not raised any equity by selling shares to public during the fiscal year 2011-12.

2.2.1

Assets

Wipro Ltd
The current assets of the firm have increased by 65.96% in 2011-12 as compared to 201011. This indicates that Wipro had good cash flows in the previous year. The company is
having good amount of liquidity to pay off its debts.

Infosys
The current assets of the firm have increased by 79.48% in 2011-12 as compared to 201011. This indicates that Infosys had good cash flows in the previous year and thus invested
highly in assets to increase the overall equity of the firm. The company is having high
liquidity and it will greatly help the firm in paying off its liabilities.
As compared to Wipro, Infosys has higher liquidity in 2011 as per vertical analysis.

2.2.2

Profit and Loss

Wipro Ltd
The companys Operating Profits have increased by 14.5 percent. It should be noted that
although the sales in the last year have increased by 1.53 percent. The operating profits
have increased by good amount indicating that company is experiencing smooth and
good operations.

Infosys
The companys Operating Profits have increased by 22.3 percent in 2011-12. Thus, the
company has enjoyed good cash flows throughout the previous year and good margins.

As compared to Wipro, the profits of Infosys were huge and thus Infosys showed a
significantly good performance than Wipro.
2.2.3

Long Term Loan and Advances

Wipro Ltd
The long term loans and advances of Wipro have increased by 2.44 percent. This shows
that Wipro has recovered the dues from its debtors and there are few debtors as compared
to previous year. This is also be interpreted as the fact that Wipro has earned its income
from majority of its debtors in the year 2011-12.

Infosys
The long term loans and advances of Infosys have increased by 4 percent. This shows
that Infosys has not recovered enough dues from its debtors and there are exists a large
number of debtors as compared to previous year. Thus, Infosys has large number of
debtors and the delay in earnings from debtors has lead to significant opportunity cost on
the income.

2.2.4

Current Investments

Wipro Ltd
The current investments of Wipro have significantly by 10.47 percent. This can be
attributed to the fact that as per vertical analysis, the company is having high liquidity.
Thus, the company is investing high in order to have more return on investments.

Infosys
The current investments of Infosys have significantly increased from 0.95 percent.
Although, the liquidity of Infosys is quite high as per vertical analysis, but it seems that
the company is playing safe by keeping the high liquidity and not investing much,
thereby reducing risk.
Thus, Wipro as compared to Infosys has made huge significant investments while both
the companies had high liquidity.

2.3 Trend Analysis

2.3.1 Sales Turnover
As per the Trend analysis, it can be seen that sales turnover of Wipro has increased
considerably as compared to Infosys even though both companies are following
increasing trend in sales from 2009-12.

2.3.2 Current Investments

As per the Trend analysis, it can be seen that current investments of Wipro have increased
in 2009-11, but decreases in 2011-12. Moreover, the current investments of Infosys
are on increasing trend from 2009-12.

2.3.3 Current Liabilities

As per the Trend analysis, it can be seen that current liabilities of Wipro have increased
throughout 2009-12. Moreover, the current liabilities of Infosys have also increased
during 2009-12.

2.3.4 Long Term Loan and Advances

As per the Trend analysis, it can be seen that current liabilities of Wipro have increased
throughout 2009-12. Moreover, the current liabilities of Infosys have also increased
during 2009-12.

2.3.5 Share Capital

As per the Trend analysis, it can be seen that share capital of Wipro has declined a bit
during 2011-12 and share capital of Infosys has remained almost constant over
2009-12

3 Financial Analysis
3.1 Ratio Analysis
3.1.1 Liquidity Ratios
3.1.1.1 Current Ratio
It is also known as Working Capital Ratio, Solvency Ratio. This Ratio indicates the
relationship between Current Assets and Current Liabilities. Ideally, the Current Assets
should be more than Current Liabilities. If Current Ratio > 1 then the current assets are

said to be enough to pay current obligations. Analysts consider current ratio of 2:1 to be
ideal.
Year/Company
Wipro
Infosys
2011-12
2.70
4.68
2010-11
1.45
5.11
The current ratio of both Wipro and Infosys is well above the excepted ratio of 2:1.
But, the credit strength of Infosys is stronger than Wipro and Infosys enjoys quite
huge working capital and thus can meet its current liabilities easily. This also
indicates that assets have not been put into appropriate use by Infosys.

3.1.1.2 Quick Ratio

It measures the ability of a company to use its near cash or quick assets to extinguish or
retire its current liabilities immediately. It should be 1:1 or higher, however this varies
widely by industry. In general, the higher the ratio, the greater the company's liquidity.
Year/Company
Wipro
Infosys
2011-12
2.58
4.6
2010-11
2.2
5.02
The quick ratio of both the companies is higher than 1. Moreover, the higher quick
ratio of Infosys as compared to Wipro in 2011-12 suggests that Infosys can meet its
financial obligations easily, has higher liquidity and better short term financial
position as compared to Wipro.

3.1.2 Profitability Ratios

3.1.2.2 Net Profit Margin
When doing a simple profitability ratio analysis, net profit margin is the most often
margin ratio used. The net profit margin shows how much of each sales dollar shows up
as net income after all expenses are paid. For example, if the net profit margin is 5% that
means that 5 cents of every dollar is profit.
The net profit margin measures profitability after consideration of all expenses including
taxes, interest, and depreciation. The calculation is: Net Income/Net Sales. Both terms of
the equation come from the income statement.
Year/Company
2011-12
2010-11

Wipro
0.126
0.180

Infosys
0.256
0.243

The Net Profit Margin of both the companies is below 1. Moreover, Infosys has high
Net Profit Margin and is more profitable and efficient than Wipro. This also imply
that Infosys has received higher returns than Wipro.

3.1.2.2 Gross Profit Margin

The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio
looks at how well a company controls the cost of its inventory and manufacturing of its
products and subsequently pass on the costs to its customers. The larger the gross profit
margin, the better for the company. The calculation is: Gross Profit/Net Sales. Both terms
of the equation come from the company's income statement.
Year/Company
Wipro
Infosys
2011-12
0.293
0.2965
2010-11
0.1962
0.3023
The Gross Profit Margin of both the companies is below 1 and almost same.
Moreover, the Gross Profit margin of Wipro has increased significantly from 201011 to 2011-12 and for Infosys, the Gross Profit Margin has declined from 2010-11 to
2011-12, thus indicating that Wipro has higher operating efficiency as compared to
Infosys.

3.1.2.3 Operating Profit Margin

Operating profit is also known as EBIT and is found on the company's income statement.
EBIT is earnings before interest and taxes. The operating profit margin looks at EBIT as a
percentage of sales. The operating profit margin ratio is a measure of overall operating
efficiency, incorporating all of the expenses of ordinary, daily business activity. The
calculation is: EBIT/Net Sales. Both terms of the equation come from the company's
income statement.
Year/Company
2011-12
2010-11

Wipro
0.196
0.219

Infosys
0.1957
0.1432

The Operating Profit Margin of both the companies is below 1 and almost same in
2011-12. Moreover, the Operating Profit margin of Wipro has decreased from 201011 to 2011-12 and for Infosys, the Operating Profit Margin has declined from 201011 to 2011-12, thus indicating that overall profitability of Wipro has declined and
that of Infosys has increased.

3.1.3 Leverage Ratios

3.1.3.1 Debt Equity Ratio
One of the most important things on a firms balance sheet is the amount of debt they
have on their balance sheet. Debt includes the firm's current liabilities which are the

obligations the firm intends to pay off in one year or less. The debt to equity ratio is
calculated by dividing the firms total debt by the firms equity. Debt includes short-term
debt (current liabilities on the balance sheet) and long-term debt. Equity includes the
combination of shareholders equity (the cash paid in by the investors when the company
sold its stock) and the companys retained earnings. Debt/Equity = Total
Debt/Shareholders Equity.
Year/Company
Wipro
Infosys
2011-12
0.206
2010-11
0.220
The Debt Equity Ratio of Wipro has reduced over past two years, thus indicating
that there relatively higher margin of safety for creditors and is favourable from
long term creditors view. Moreover, Infosys has no debt and thus has all equity
capital in investments.

3.1.3.2 Interest Coverage Ratio

It tells how easily a company can pay interest expenses on outstanding debt. The lower
the ratio, the more the company is burdened by debt. When the companys interest
coverage ratio is only 1.5 or lower, its ability to meet interest expenses may be
questionable.
Year/Company
Wipro
Infosys
2011-12
79.32
2010-11
99.37
The Interest Coverage Ratio of Wipro has reduced over past two years, thus
indicating a decrease in the capacity of the firm to pay interest expenses on
outstanding debt. Moreover, Infosys has no debt and thus the interest coverage ratio
is zero.

3.1.4 Activity Ratios

3.1.4.1 Inventory Turnover Ratio
In accounting, the Inventory turnover is a measure of the number of times inventory is
sold or used in a time period such as a year. The equation for inventory turnover equals
the cost of goods sold divided by the average inventory.
Year/Company
Wipro
Infosys
2011-12
48.33
2010-11
43.12
The Inventory Turnover Ratio of Wipro has increased over past two years, thus
indicating a effective stock management and stocks are sold more frequently and

hence less money is required for inventory maintenance. Moreover, Infosys being a
pure software company doesnt hold any inventories.

3.1.4.1 Debtors Turnover Ratio

In accounting, the Inventory turnover is a relationship between sales and amount
receivables. The shows the speed with which receivables are converted to cash. It
indicates the average no. of times debtors are turned during the year.
Year/Company
Wipro
Infosys
2011-12
4.61
6.5
2010-11
4.87
6.81
The Debtor Turnover Ratio of Wipro and Infosys has decreased over past two years,
thus indicating an ineffective debtor management. Moreover, Infosys has converted
large no. of debtors as compared to Wipro during 2010-12 but the overall debt
collection has reduced over the past two years for both the companies.

4 Ratios important to various Institutes

Ratios important to creditors:
Short-term creditors are primarily concerned with a company's ability to meet short-term
debt from current assets, so they concentrate on the Liquidity Ratios emphasizing cash
flow. Long-term creditors want to be paid back in the long term, so they look to solvency
ratios such as total debt to total stockholders' equity.
Wipro Ltd
The liquidity ratios of Wipro are above the standard benchmark and have increased
during 2011-12. Thus, I would suggest the creditors to invest in Wipro as there are
good future prospects.
Infosys
The liquidity ratios of Infosys are above the standard benchmark but it should be
noted that the liquidity ratios namely-current ratio and quick ratio have declined
during 2011-12. Also, Infosys doesnt have any debts since all of its investment is
equity capital, so considering the goodwill of company and decent liquidity ratios, I
think creditors can invest in Infosys.
Ratios important to Investors:
Investors often look at the debt/equity ratio, the quick ratio, the current ratio to get an
idea of the financial position of the company. Just like with your own personal finances,
you want to know that the company has enough money to pay its bills timely and that it
does not owe too much money.
Wipro Ltd

The debt equity ratio has reduced during 2011-12 and liquidity ratios have
increased during 2011-12. Thus, I would suggest the investors to invest in Wipro as
there are good future prospects.
Infosys
The liquidity ratios namely-current ratio and quick ratio have declined during 201112. Also, Infosys doesnt have any debts since all of its investment is equity capital
and is under utilizing its assets(current ratio 5.11), so I think the prospects are grim
and investors should take a call before investing in the firm.
Ratios important to Management:
Managers are interested in measuring the operating performance in terms of profitability
and return on invested capital. They are interested in measures of operating efficiency,
asset turnover, and liquidity or solvency. These will help them manage day-to-day
activities and evaluate potential credit customers and key suppliers. Manager ratios serve
as cash management tools by focusing on the management of inventory, receivables and
payables. Accordingly, these ratios tend to focus on operating data reflected on the profit
and loss statement and on the current sections of the balance sheet. Three separate items
are involved in the calculation of these ratios: sales, net income, and assets.
Wipro Ltd
The debt equity ratio has reduced during 2011-12 and liquidity ratios have
increased during 2011-12. Also, the turnover ratios and profitability ratios have
increased during 2011-12, but the operational efficiency is less as compared to
Infosys. So, I would suggest the management to focus on operational efficiency and
should utilize their assets properly as current ratio is about 2.7 for Wipro during
2011-12.
Infosys
The profitability ratios of Infosys are fine, but the current ratio is very high. I think
there is management failure in Infosys as a result of which the assets are poorly
utilized. So, I ould suggest the management to look into the situation on immediate
basis and devise a way for proper utilization of assets.
Ratios important to Banking and other financial institutes:
Ratios important to banks are business entity's liquidity, solvency, return on investment,
operating performance, asset utilization, and market measures.
Wipro Ltd
The debt equity ratio has reduced during 2011-12 and liquidity ratios have
increased during 2011-12. Thus, the liquidity and returns of company during 201112 are satisfactory. So, I think the prospects are good and banks and other financial
institutions can invest in Wipro.
Infosys
The liquidity ratios namely-current ratio and quick ratio have declined during 201112. Also, Infosys doesnt have any debts since all of its investment is equity capital
and is under utilizing its assets(current ratio 5.11), market sentiments are also not
positive for Infosys and the companys forecast for yr. 2012-13 is way too low as
compared its competitiors. So, I think the prospects are grim and thus banks and
other financial institutions should take a call before investing in the firm.

HIGHLIGHTS OF ACCOUNTING POLICIES

Basis of Preparation:
These financial statements have been prepared in accordance with the generally accepted
accounting principles in India under the historical cost convention on accrual basis. These
financial statements have been prepared to comply in all material aspects with the
accounting standards notified under Section 211(3C) [Companies (Accounting Standards)
Rules, 2006, as amended] and the other relevant provisions of the Companies Act, 1956.
All assets and liabilities have been classified as current or non-current as per the
Company''s normal operating cycle and other criteria set out in the Schedule VI to the
Companies Act,1956. Based on the nature of products and the time between the
acquisition of assets for processing and their realisation in cash and cash equivalents, the
Company has ascertained its operating cycle as 12 months for the purpose of current non current classification of assets and liabilities.
Revenue Recognition:
Revenue is primarly derived from software development and related services and from
licensing of software products. Arrangements with customers for software development
are either on fixed price or fixed time-frame or fixed time and material basis.
Valuation of Fixed Assets:
WIPRO:
Fixed assets are stated at historical cost less accumulated depreciation. Costs include
expenditure directly attributable to the acquisition of the asset. Borrowing costs directly
attributable to the construction or production of qualifying assets are capitalized as part of
the cost.
INFOSYS:
Fixed assets are stated at cost, less depreciation and impairment, if any. Direct costs are
capitalized until assets are ready for use. Capital work in progress compromises the cost
of fixed assets that are not yet ready for their intended use. Intangible assets are recorded
at the consideration paid for such project and are carried at cost less accumulated
amortization and impairment. Goodwill compromises excess of purchase consideration
over the fair value of the net assets of the acquired enterprise.
Depreciation and Amortization:
WIPRO:
The Company has provided for depreciation using straightline method, at the rates
specified in Schedule XIV to the Companies Act, 1956, except in cases of the
followingassets, which are depreciated based on estimated useful life, which is higher
than the rates specified in Schedule XIV. Fixed assets individually costing Rupees five
thousand orless are depreciated at 100% over a period of one year. Assets under finance
lease are amortised over theirestimated useful life or the lease term, whichever is lower.
INFOSYS:

Depreciation on fixed assets is provided on the straight line method which is estimated by
the management. Individual low costs project (less than Rs. 5000) are depreciated over a
period of one year. Intangible assets are amortized on straight line basis. Leasehold
improvements are written off over the lower of remaining lease period or life of the asset.
Investments:
WIPRO:
Long term investments are stated at cost less other than temporary decline in the value of
such investments, if any. Current investments are valued at lower of cost and fair value
determined by category of investment. The fair value is determined using quoted market
price/market observable information adjusted for cost of disposal. On disposal of the
investment, the difference between its carrying amount and net disposal proceeds is
charged or credited to the statement of profit and loss.
INFOSYS:
Trade investments are the investments made to enhance groups business interests.
Investments are classified into long term or short term based on management
classification at the time of their purchase. Cost for overseas investment comprises the
Indian rupee value of the consideration translated at the exchange rate of the day when
payments are made. Long term investments are carried at cost less provisions recorded to
recognize any decline.
Inventories:
WIPRO:
Inventories are valued at lower of cost and net realizable value, including necessary
provision for obsolescence. Cost is determined using the weighted average method. Cost
of work-in-progress and finished goods include material cost and appropriate share of
manufacturing overheads.
INFOSYS:
Infosys doesnt have any inventories.

RATIONALE OF THE STUDY

The study is global in scope, since many of the risks involved are global or regional in
nature.
For this study, stress is defined as a situation where private sector proponents have exited,
or are contemplating exit from a project. Information on stress was derived from the
World Bank's Private Participation in Infrastructure (PPI) dataset, which was used as the
source for much of the data used in the estimation. This global dataset contains projectspecific information on a large number of projects classifiable as PPP, including the total
value of investment, sector, sub-sector, type of transaction, and multilateral participation.
It covers projects which achieved financial closure from 1984 up to the present. The data
is cross-sectional, with projects classified according to their current status (i.e., whether
they are operational, distressed, canceled, or concluded). Although the data is crosssectional, it contains temporal information that can also be used in analysis. Because the
sample period spans the emergence of PPP in the late 1980s, through the Asian and
Argentine crisis, and beyond, the sample includes many projects that have undergone the
most tumultuous experiences in PPP, as well as the periods of consolidation that
followed. The PPI dataset is augmented by country-specific macroeconomic data and,
where available, additional project-specific data such as country growth and exchange
rate information.
Analyzing and addressing stress also helps stakeholders enhance PPP's attractiveness as
an investment, by minimizing the fiscal and social impacts of poorly designed and
managed projects.

OBJECTIVES OF THE STUDY

The objective of this project is to deeply analyze our Indian IT Industry for investment
purpose by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:

Detailed analysis of IT industry which is gearing towards international standards

Analyze the impact of qualitative factors on industrys and companys prospects

Comparative analysis of three tough competitors Wipro and Infosy through

fundamental analysis.

Suggesting as to which companys shares would be best for an investor to invest.

LITERATURE REVIEW
SECURITY ANALYSIS
Investment success is pretty much a matter of careful selection and timing of stock
purchases coupled with perfect matching to an individuals risk tolerance. In order to carry
out selection, timing and matching actions an investor must conduct deep security
analysis.

Investors purchase equity shares with two basic objectives;

1.

To make capital profits by selling shares at higher prices.

2.

To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefully
understand and analyze all these factors. There are basically two approaches to study
security prices and valuation i.e. fundamental analysis and technical analysis

The value of common stock is determined in large measure by the performance of the
firm that issued the stock. If the company is healthy and can demonstrate strength and
growth, the value of the stock will increase. When values increase then prices follow and
returns on an investment will increase. However, just to keep the savvy investor on their
toes, the mix is complicated by the risk factors involved. Fundamental analysis examines
all the dimensions of risk exposure and the probabilities of return, and merges them with
broader economic analysis and greater industry analysis to formulate the valuation of a
stock.

FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of a financial
instrument based on economic, political, environmental and other relevant factors and
statistics that will affect the basic supply and demand of whatever underlies the financial
instrument. It is the study of economic, industry and company conditions in an effort to
determine the value of a companys stock. Fundamental analysis typically focuses on key
statistics in companys financial statements to determine if the stock price is correctly valued.
The term simply refers to the analysis of the economic well-being of a financial entity as
opposed to only its price movements.

Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the
fundamental analysis is that if an investor invests re.1 in buying a share of a company, how
much expected returns from this investment he has.

The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one
should purchase or sell a share on the basis of tips and rumors. The fundamental approach
calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of
the information about the company, about the industry, and the economy. It is also known as
top-down approach. This approach attempts to study the economic scenario, industry
position and the company expectations and is also known as economic-industry-company
approach (EIC approach).

SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The project is
based on tools like fundamental analysis and ratio analysis. Further, the study is based on
information of last five years.

The analysis is made by taking into consideration five companies i.e. Wipro and
Ifosy.

The scope of the study is limited for a period of five years.

The scope is limited to only the fundamental analysis of the chosen stocks.

RESEARCH METHODOLOGY

According to Green and Tall A research design is the specification of the

methods and procedures for acquiring the information needed. It is the overall
operational pattern or framework of the project that stipulates which
information is to be collected, from where it is to be collected and by what
procedures
This research process based on primary data analysis and secondary data
analysis will be clearly defined to meet the objectives of the study.
I chose the primary sources to get the data. A questionnaire was designed
in accordance with our mentor in Shirts. I chose a sample of about 30
corporate customers
I collected some data from the secondary sources like published
Company documents, internet etc.
Research Design
A research design is the arrangement of conditions for collections and analysis
of data in a manner that aims to combine relevance to the research purpose with
economy in procedures. It is a descriptive cross sectional design .It is the
conceptual structure with in which research is conducted; it constitutes the
blueprint for the collection, measurement and analysis of data.
It is needed because it facilitates the smooth sailing of the various research
operations, thereby making research as efficient as possible yielding maximal
information with minimal expenditure of effort, time and money.
In the preliminary stage, my research stage constituted of exploratory study by
which it is clear that the existence of the problem is obvious .So, I can directly
head for the conclusive research.

Sampling Plan
Sampling plan is a distinct phase of research process. In this stage I have to
determine who is to be sampled, how large should be the needed sample and
how sampling unit is to be selected.
Population
In my research, I have defined my population as a complete set of customers of
Sagar City.
Sample Survey
As compared to census study, a sample study has been conducted by us because
of:
Wide range of population, it was impossible to cover the whole
population
Time and money constraints.
Sample Unit
In this survey I took the list of customers from the dealers of Shirts
Sampling Technique
Sampling technique implies the method of choosing the sample items, the two
methods of selecting sample are:
Probability method.
Non-probability method.
Probability method is those in which every item of the universe has an equal
chance of the inclusion in the sample. Non-probability methods are those that
do not provide every item in the universe with known cause of being included in
the sampl

DATA SOURCES

 Research is totally based on primary data. Secondary data can be used only
for the reference. Research has been done by primary data collection, and
primary data has been collected by interacting with various people. The
secondary data has been collected through various journals and websites and
some special publications of BIRLA.
SAMPLING
i.

Sampling Procedure
The sample is selected in a random way, irrespective of them being investor
or not or availing the services or not. It was collected through mails and
personal visits to the known persons, by formal and informal talks and
through filling up the questionnaire prepared. The data has been analyzed by
using the measures of central tendencies like mean, median, mode. The
group has been selected and the analysis has been done on the basis
statistical tools available.

ii.

Sample Size
The sample size of my project is limited to 25 only. Out of which only 135
people attempted all the questions. Other 65 not investing in MFs attempted
only 2 questions.

iii.

Sample Design
Data has been presented with the help of bar graph, pie charts, line graphs
etc.

SHARE PRICE ANALYSIS OF WIPRO AND INFOSYS FOR 2011-12

WIPRO

Source:
www.nseindia.com
Technically, the above chart has followed following trends:
From January 2011 to June 2011, the share price has remain in a consolidated (range
bound) trend with 450 being an important support and resistance level.

In the period from mid-July to August 2011 the share price has seen a major fall in its
price from 414.80 to 320.35.

From end of August there has been a bullish trend with higher tops and higher
bottoms till mid Feb 2012 (when it again reached is resistance at 450) and since then
the share price is in consolidated trend till end of March 2012.

INFOSYS

Source:
www.nseindia.com
Technically, the above chart has followed following trends:
From July 2011 mid-August 2011 mid, the share price of Infosys has seen a major
fall.

From August end till October the share price has seen recovery (was in bullish trend).

Since November 2011 till March 2012 the share price is in a range bound trend
between 2550 and 3000.

COMPARATIVE CHART OF WIPRO AND INFOSYS FOR 2011-12

Source:
www.nseindia.com
Technically, the above chart has followed following trends:
From July 2011 mid-August 2011 mid, the share prices of both Wipro and Infosys has
seen a major fall.

From August end till October the share prices were recovering (was in bullish trend).

Since November 2011 till March 2012 the growth in share price of Wipro was more
than Infosys.

Lastly, post January 2012, the share price of Wipro has shown more growth as
compared to Infosys in the same quarter (Q4).

FINDINGS

The three companies were performing well till 2008 with a positive trend in the
earnings per share. But there was a downward trend in 2009. Especially, Wipro has
witnessed a steep fall in the year 2009.

The sales trend has been upward and positive in case of all the three companies. The
sales growth looks positive but in the year 2009, Wipro sales have declined whereas
Infosy have maintained the same upward positive trend.

In case of dividend per share, there were fluctuations during the period 2005-2009.
Due to recession, the dividends per share have declined in all the three companies.
Wipro dividend has fallen drastically while Maruti stick to below 5 per share. Infosy
has made a slight reduction from rs.11.5 per share in 2008 to rs.10 per share this year.

The return on investment has been fluctuating since 2005 and the year 2009 witnessed
low returns in case of all the companies amongst which Wipro has the least rate of
return. Compared to the three companies, Infosy has the highest ROI in 2009.

Maruti had a stable dividend payout ratio since 2005. WIPRO and Infosy have
increased their payout ratio in which Infosy shows a higher payout ratio.

The three companies have witnessed a low price earnings ratio in 2008 compared to
the previous years. But the ratio increased in 2009 in three companies. WIPRO has
the highest P/E ratio in 2009 which indicates that it is overvalued and Infosy s P/E
ratio is the lowest in 2009 which indicates that it is undervalued and there is a scope
for growth in the future.

Conclusion
Key Improvement Areas:
WIPRO:
The company should focus on reducing the operating expenses as there is a decline in
net profit although there was in net sales. The drop in net profit was due to high
operating costs.

The long term debts should also be controlled as long debt equity ratio has increased
for Wipro during 2011-12.

The company should resort to efficient working capital management techniques as

return on working capital has decreased during 2011-12.

Debtors turnover ratio has decreased which shows that debtors are now making
payments more frequently.

Inventory turnover ratio has increased, thus the company is exhibiting good sales.

INFOSYS:
The company has unnecessarily kept its capital in assets as current ratio is 5.11. So,
Infosys should make proper utilization of its assets.

Market sentiments are negative, thus the companys management should take
appropriate steps to revive the company before it starts making losses.

The company doesnt have any debt as all investment is through equity capital.

Being a software firm, Infosys doesnt have any inventories.

The company should take steps to earn its receivables from debtors as debtors
turnover ratio has increased during 2011-12.
I think that Wipro should be given higher rating as although the profits of Wipro
are not as high as Infosys, but as per overall financial analysis Wipro stands out
over Infosys. The reason can be that Infosys has unnecessarily blocked its capital
in assets, the amount to be recovered from debtors have increased considerably
during 2011-12 and lastly, the market sentiments are negative for Infosys(as per
share price analysis) due to inability of Infosyss management to take decisions
on time.

REFERENCES
[1] www.nseindia.com

[2] www.wipro.com
[3] www.infosys.com
[4] www.wikipedia.org

BIBLIOGRAPHY
Text Books
Security Analysis and Portfolio Management by Punithavathy Pandian, Vikas
Publications.
Security analysis and portfolio management by V.A. Avadhani
Financial Markets and Services by Gordon and Natarajan, Himalaya Publications.
Financial Management by Shashi K Gupta and R. K Sharma, Kalyani Publications.
Newspapers
Economic times
Business line
Websites

www.nseindia.com

www.bseindia.com

www.investopedia.com

www.moneycontrol.com

www.indiainfoline.com

www.sebi.gov.in

www.Wipromotors.com

www.marutisuzuki.com

www.Infosy .com

www.yahoofinance.com

CNBC TV18 The Informed Investor supported by SEBI and presented by