PROJECT REPORT ON FINANCIAL ANALYSIS OF WIPRO LTD.

AND INFOSYS

Submitted To: Dr. N.K. Gupta

Submitted By: Rishi Shankar Pathak Roll No. 254/2012 Section-D

PGDM(Finance)
TABLE OF CONTENTS

TITLE

PAGE NO.

1.

Strategy Analysis

2.

Accounting Analysis 2.1 Quality Earnings 2.2 Horizontal Analysis 2.3 Vertical Analysis 2.4 Trend Analysis

8 8 10 13 16

3.

Financial Analysis 3.1 Ratio Analysis

19 19

4. 5.

Highlights of Accounting Policies Key Highlights of Annual Report

26 29

6.

Share Price Analysis

35

7.

CONCLUSION

38

REFERENCES

39

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1. Strategy Analysis
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

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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
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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

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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
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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, highly-skilled 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.

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2. Accounting Analysis
2.1 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-inprogress 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 31st 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
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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 31st 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.

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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

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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.

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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.

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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 2011-12 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

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The current assets of the firm have increased by 65.96% in 2011-12 as compared to 2010-11. 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 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. 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
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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.

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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.

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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.

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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

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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 2011-12 2010-11 Wipro 2.70 1.45 Infosys 4.68 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 2011-12 2010-11 Wipro 2.58 2.2 Infosys 4.6 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.
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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 2011-12 2010-11 Wipro 0.293 0.1962 Infosys 0.2965 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 2010-11 to 2011-12 and for
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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 2010-11 to 2011-12 and for Infosys, the Operating Profit Margin has declined from 2010-11 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
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2011-12 2010-11

0.206 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 2011-12 2010-11 Wipro 79.32 99.37 Infosys -

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 2011-12 2010-11 Wipro 48.33 43.12 Infosys -

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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 2011-12 2010-11 Wipro 4.61 4.87 Infosys 6.5 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. Longterm 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

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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 2011-12. 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
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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 2011-12 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 2011-12. 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
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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
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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:

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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.

KEY HIGHLIGHTS OF VARIOUS COMPONENTS OF ANNUAL REPORT Auditors Report:

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WIPRO: (a)The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. (b)The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are verified in a phased manner over a period of three years. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. As informed to us, no material discrepancies were noticed on such verification. (c)Fixed assets disposed off during the year were not substantial, and therefore, do not affect the going concern assumption. (d)The inventory, except goods-in-transit, has been physically verified by the management during the year. In our opinion, the frequency of such verification is reasonable. (e)The procedures for the physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (f)The Company is maintaining proper records of inventory. As informed to us, the discrepancies noticed on verification between the physical stocks and the book records were not material. (g)The Company has granted loans to four parties covered in the register maintained under Section 301 of the Companies Act, 1956 (Act). The maximum amount outstanding during the year was Rs 4,060 millions and the year-end balance of such loans was Rs 3,969 millions (of which loans amounting to Rs 3,536 millions are interest free). (h)In our opinion, the rate of interest, where applicable and other terms and conditions on which loans have been granted to companies, firms or other parties covered in the register maintained under Section 301 of the Act are not, prima facie, prejudicial to the interest of the Company.

INFOSYS: (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation, of fixed assets. (b) The fixed assets are physically verified by the Management according to a phased programme designed to cover all the items over a period of 2 years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the Management during the year and no material discrepancies between the book records and the physical inventory have been noticed.
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(c) According to the information and explanation given to us, the Company procures inventories specifically for the purpose of executing certain contracts and no inventory is held at any point of time during the year. Accordingly clauses (ii)(a) and (ii)(b) of Paragraph 4 of the order are not applicable to the Company. (d) The Company has granted a loan to body corporate covered in the register maintained under Section 301 of the Act. The maximum outstanding amount is26,95,65,993 and the body has never defaulted in payments. (e) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. (f) The company has no material dues but have income tax dues due to some disputes.The exact figure can be found out in companys annual report. (g) The Company has no accumulated losses. (h) According to the records of the Company examined by us and the information and explanation given, the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

Management Discussions WIPRO:

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Industry /Vertical focus:

We 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. Within these verticals, we invest 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. We seek to meet all the IT services needs of our clients in these verticals with our broad range of specialized service offerings that are designed to address their industry specific needs. Geographies:

Our prioritized investments in addition to our major markets will be focused on markets such as France and Germany in Europe, Canada, India, the Middle East, Asia Pacific and Africa. 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. Employee Centricity:

We believe that our employees are the heart of our organization; hence a large part of our management focus is towards strengthening and caring for our employees. Our aim is to create and nourish the best in class global leadership and provide them unlimited opportunities for career enhancement and growth. It is our aim to be a truly global company that not only services global customers but also employs people worldwide. We consciously enhance gender diversity with 28% of our employees being women. We have 23,000 employees onsite in customer locations of whom 38% are resident citizens. We have employees of 73 nationalities on our rolls. Our employee base is young with 65% of our employees aged less than 30 years and the average age of 29 years.

INFOSYS: The financial statements have been prepared in compliance with the companies act 1956, guidelines by the SEBI and Generally Accepted Accounting Principles(GAAP )in India.
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Industry Structure and Developments: Changing economic and business conditions, evolving consumer preferences and rapid technological transformations are driving corporations to transform the manner in which they operate. Companies are now more focussed on their core business objectives such as revenue growth and profitability. There is increasing need for highly skilled IT professionals to optimize the business process but the organizations are quite reluctant to grow their in-house IT development. This has led to their increased dependence on other specialized corporations. According to Global Tech Market Outlook IT consulting and outsourcing are to grow by 6.3% in 2012-13. Financial Condition: The sources of funds were identified as: Share capital Reserves and surplus

Applications of funds were on fixed assets and investment like increasing stake in Infosys BPO and other investments on various subsidies.

Corporate Governance Report WIPRO: Awards and Rating

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The Company has been awarded the highest rating of Stakeholder Value and Corporate Rating 1 (called SVG 1) by ICRA Limited, a rating agency in India being an associate of Moodys. This rating implies that the Company belongs to the Highest Category on the composite parameters of stakeholder value creation and management as also Corporate Governance practices. The company has been awarded the National award for excellence in Corporate Governance from Institute of Company Secretaries of India during the year 2004. The company has been given the award for excellence in Financial Reporting from Institute of Chartered Accountants of India during the year 2012. Mr. Azim H. Premji Chairman and managing Director of the Company has been awarded Long time Achievement Award for Excellence in Corporate Governance from Institute of Company Secretaries of India during the year 2011. The Company has also been assigned LAAA rating to Wipros long term credit. This is the highest credit quality rating assigned by ICRA Limited to long term instruments. The Companys Long Term Corporate Credit Rating by Standard and Poor (S & P), a Credit Rating Agency is BBB+ (Outlook Negative). The Company was ranked among the Top 5 in Greenpeace International Ranking Guide and regained its top position. The Company has been Awarded as one of the worlds Most Ethical Companys by Ethisphere Institute Shareholders Satisfaction Survey

The Company conducted a Shareholders Satisfaction survey in July 2011 seeking views on various matters relating to investor services. 1,944 shareholders participated and responded to the survey. The analysis of the responses reflects an average rating of about 4.08 on a scale of 1 to 5. Around 85% of the shareholders indicated that the services rendered by the Company were good /excellent and were satisfied. We are constantly in the process of enhancing our service levels to further improve the satisfaction levels based on the feedback received from our shareholders. We would welcome any suggestions from your end to improve our services. Means of Communication with Shareholders / Analysis

We have established procedures to disseminate, in a planned manner, relevant information to our shareholders, analysts, employees and the society at large. Our Audit Committee reviews the earnings press releases, SEC filings and annual and quarterly reports of the Company, before they are presented to the Board of Directors for their approval for release. News Releases, Presentations, etc.: All our news releases and presentations made at investor conferences and to analysts are posted on the Companys website.
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Quarterly results: Our quarterly results are published in widely circulated national newspapers such as The Business Standard, the local daily Kannada Prabha. We have also commenced intimating quarterly results to shareholders by email from January 2011 onwards. Website: The Companys website contains a separate dedicated section Investors where information sought by shareholders is available. The Annual report of the Company, earnings press releases, SEC filings and quarterly reports of the Company apart from the details about the Company, Board of directors and Management, are also available on the website.

INFOSYS: Corporate governance is about commitment to values and good ethical business conduct which is intrinsic of the management affairs at Infosys. These values and principles set the context to manage Infosys in a fair and transparent manner. Rating agency Crisil has been rating Infosys CRISIL GVC LEVEL 1 rating for several year now while ICRA assigner CRA1 to Infosys.

SHARE PRICE ANALYSIS OF WIPRO AND INFOSYS FOR 2011-12

WIPRO
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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

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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

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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).

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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.

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REFERENCES
[1] www.nseindia.com

[2] www.wipro.com

[3] www.infosys.com

[4] www.wikipedia.org

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