Financial Analysis of Wipro LTD
Financial Analysis of Wipro LTD
Financial Analysis of Wipro LTD
Project Report
On
Financial Analysis
Of
Presented to
Faculty Member
S.V. Institute of Management.Kadi
North Gujarat University Patan
On
December 23rd , 2008
By:
Ashwin Chaudhary (Roll No.12)
Priyanka Maheta (Roll No.17)
MBA-1 (A)
Preface
Our gratitude to our honorable guide Prof. Nikunj Patel for giving us the
opportunity for developing the project and his able guidance, inestimable motivation and
constant encouragement throughout our project. Without his help this project would
never have been realized in its entirety.
We are especially thankful to our Head Of Department Prof. Bhavin Pandya for
his valuable support in providing us the facilities and his valuable guidance for the
development of this project.
Date: 20th December ,2008 Ashwin Chaudhary (Roll No.5)
Place: Kadi Priyanka Mehata (Roll No.)
Executive Summary
It is Summarize tin of all report in one or two pages so as to provide an overview of the
company. it is also called synopsis or Abstract. As a partials fulfillment of the
requirement for the Managerial Accounting Cource.We have completed a project report
on financial Analysis of Wipro Ltd.
Sales Figure is increasing at a handsome rate. it is at Rs. 58400.23 Million. in
2003-04 and it is increased to Rs. 141395.8 Million. So Sales is increased 75.05%
because of aggressive Selling Policy.
Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514
Million at Rs 3408, 8747, 4388.6, 5970.4, respectivaly last four year. This is
because company has increased it sales and doing good cost management
Net worth of the company is increased in this year because of increase in Reserve
& Surplus
Current Ratio of Wipro limited is showing good position. It is 1.26 Times in
2003-04 then it is increased to 2.13 Times in 2007-08 this shows Company has
achieved standard Ratio.
The returns on the investment is some what decline in current year.
The EPS of Share is increased Rs. 7.43 to Rs 20.62 in 2007-08 So Share holder
are benefited.
Company’s Total Assets are increased and it trying to expand its business on the
other hand debt are also increased it shows that company trying to Trading on
Equity.
After analyzing all aspect Company’s performance is good.
CONTENT
Preface
Acknowledgement
Executive Summary
1. INTRODUCTION
1.1 Introduction to company
1.2 Group of companies
1.3 History
1.4 Company Profile
1.5 Registered office address
1.6 Board of director
1.7 Auditor
5. RATIO ANALYSIS
5.1 Introduction of the ratio analysis
5.2 Liquidity ratio
5.2.1 Current ratio
5.2.2 Quick ratio
5.2.3 Net working capital
5.3 Profitability ratio
5.3.1 Gross profit
5.3.2 Operating ratio
5.3.3 Net profit ratio
5.3.4 Return on investment
5.3.5 Return on equity
5.4 Assets turnover ratio
5.4.1 total asset turn over ratio
5.4.2 net fixed asset turn over
5.4.3 inventory turn over ratio
5.4.4 average age of inventories
5.4.5 debtor turn over ratio
5.5 Finance structure ratio
5.5.1 debt ratio
5.5.2 debt equity
5.5.3 interest coverage ratio
5.6 Valuation ratio
5.6.1 earning per share
5.6.2 divident pay out ratio
5.6.3 P/E ratio
5.6.4 Profit margin ratio
5.7 Du-Pont chart
6. SCENARIO ANALYSIS
6.1 business unit performance
6.2 company analysis
6.2.1 Share holding pattern
6.2.2 Market capitalization
7 ANNEXURES
8 BIBLIOGRAPHY
Chapter 1.
Introduction
♦ Introduction to company
♦ Group Companies
♦ History
♦ Company Profile
♦ Registered Office Address
♦ Board of Directors
♦ Auditors
1. INTRODUCTION
1.3. History
Wipro started in 1945 with the setting up of an oil factory in Amalner a small town in
Maharashtra in Jalgaon District. The product Sunflower Vanaspati and 787 laundry
soap (largely made from a bi-product of Vanaspati operations) was sold primarily in
Maharashtra and MP. The company was aptly named Western India Products
Limited.
The Birth of the name Wipro - As the organization grew and diversified into
operations of Hydraulic Cylinders and Infotech, the name of the organization did not
adequately reflect its operations. Azim Premji himself in 1979 selected the name
"Wipro" largely an acronym of Western India Products. Thus was born the Brand
Wipro. The name Wipro was unique and gave the feel of an 'International" company.
So much so that some dealers even sent their cheques favouring Wipro (India)
Limited. Fortunately, the banks accepted them!!By the early 90s, Wipro had grown
into various products and services. The Wipro product basket had soaps called Wipro
Shikakai, Baby products under Wipro Baby Soft, Hydraulic Cylinders branded
Wipro, PCs under the brand name Wipro, a joint venture company with GE named
Wipro GE and software services branded Wipro. The Wipro logo was a 'W", but it
was not consistently used in the products.It was clearly felt that the organization was
not leveraging its brand name across the various businesses. The main issue remained
whether a diverse organization such as Wipro could be branded under a uniform look
and feel and could there be consistent communication about Wipro as an
organization.
1.4.Company Profile
Business-Description
Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT
Services Company globally. Wipro 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 globally.
The Group's principal activity is to offer information technology services. The
services include integrated business, technology and process solutions including
systems integration, package implementation, software application development and
maintenance and transaction processing. These services also comprise of information
technology consulting, personal computing and enterprise products, information
technology infrastructure management and systems integration services. The Group
also offers products related to personal care, baby care and wellness products. The
operations of the Group are conducted in India, the United States of America and
Other countries. During fiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd,
Retailbox Bv, Enabler Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler
Brazil Ltd, Enabler and Retail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd,
Saraware Oy, Quantech Global Services and Hydroauto Group AB
The Global IT Services and Products segment accounted for 74% of the Company's
revenues and 89% of its operating income for the year ended March 31, 2007 (fiscal
2007). Of these percentages, the IT Services and Products segment accounted for
68% of its revenue, and the BPO Services segment accounted for 6% of its revenue
during fiscal 2007.
Customized IT solutions
Wipro provides its clients customized IT solutions in the areas of enterprise IT
services, technology infrastructure support services, and research and development
services. The Company provides a range of enterprise solutions primarily to Fortune
1000 and Global 500 companies. Its services extend from enterprise application
services to e-Business solutions. Its enterprise solutions have served clients from a
range of industries, including energy and utilities, finance, telecom, and media and
entertainment. The enterprise solutions division accounted for 63% of its IT Services
and Products revenues for the fiscal 2007.
Technology Infrastructure Service
Wipro offers technology infrastructure support services, such as help desk
management, systems management and migration, network management and
messaging services. The Company provides its IT Services and Products clients with
around-the-clock support services. The technology infrastructure support services
division accounted for 11% of Wipro's IT Services and Products revenues in fiscal
2007.
Research and Development Services
Wipro's research and development services are organized into three areas of focus:
telecommunications and inter-networking, embedded systems and Internet access
devices, and telecommunications and service providers.The Company provides
software and hardware design, development and implementation services in areas,
such as fiber optics communication networks, wireless networks, data networks,
voice switching networks and networking protocols. Wipro's software solution for
embedded systems and Internet access devices is programmed into the hardware
integrated circuit (IC) or application-specific integrated circuit (ASIC) to eliminate
the need for running the software through an external source. The technology is
particularly important to portable computers, hand-held devices, consumer
electronics, computer peripherals, automotive electronics and mobile phones, as well
as other machines, such as process-controlled equipment. The Company provides
software application integration, network integration and maintenance services to
telecommunications service providers, Internet service providers, application service
providers and Internet data centers.
Business Process Outsourcing Service
Wipro BPO's service offerings include customer interaction services, such as IT-
enabled customer services, marketing services, technical support services and IT
helpdesks; finance and accounting services, such as accounts payable and accounts
receivable processing, and process improvement services for repetitive processes,
such as claims processing, mortgage processing and document management. For BPO
projects, the Company has a defined framework to manage the complete BPO process
migration and transition. The Company competes with Accenture, EDS, IBM Global
Services, Cognizant, Infosys, Satyam and Tata Consultancy Services.India and
AsiaPac IT Services and Products
The Company's India and AsiaPac IT Services and Products business segment, which
is referred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-
East markets, and provides enterprise clients with IT solutions. The India and AsiaPac
IT Services and Products segment accounted for 16% of Wipro's revenue in fiscal
2007. The Company's suite of services and products consists of technology products;
technology integration, IT management and infrastructure outsourcing services;
custom application development, application integration, package implementation
and maintenance, and consulting
Azim Premji
Chairmen & Managing Director
1.7. Auditors
• KPMG
• BSR & Co.
Audit committee
N Vaghul - Chairman
P M Sinha - Member
B C Prabhakar - Member
Board Governance and Compensation Committee
Ashok S Ganguly - Chairman
N Vaghul - Member
P M Sinha - Member
Shareholders’ Grievance and Administrative Committee
B C Prabhakar - Chairman
Azim H Premji - Member
Chapter 2.
Analysis of Balance
Sheet
Interpretation
The current assets is shows the cash liquidity of the company.
Hear it is increase it year by year it means the company has sufficient liquidity for
generating the business.
Interpretation
Share holder equity is increase high in 2006-07 because the company has allocated
new share.
Share holder equity is showing high fluctuation.
Interpretation
There is increase in share capital more than two times in 2005-06 and 2006-07 and
it increase three time in 2004-05 compare to base year 2003-04.In 2007-08 there is
not big increase in share capital compare to 2005-06.
There is highest share capital in 2004-05.
The company has issued new shares in the 2005-06.
As a result no. of shares is increased and these funds are implemented for future
plans of the company.
Reserves & surplus shows a remarkable increase in 2004-05, 2005-06 and 2006-07
and it slowly decrease in 2008. respectively with respect to the base year, this
shows the company has future vision and it would like to expand its business.
Increase in Reserve & surplus shows because of increase in profit every year.
Has a hole we can say that the company is target oriented and its sticking to its
policies as a result share holder’s funds is increasing year by year.
2.1.6 Source of Funds
Source Of Funds
Year 2003-04 2004-05 2005-06 2006-07 2007-08
140.684
Share holder's Equity 100 5 125.181 181.718 121.833
161.944
Minority Interest 100 6 - 10.929 400
58.9471
Total Loan Funds 100 7 122.076 616.343 1171.94
138.553
Total Sources of Funds 100 4 124.52769 149.283 162.162
Interpretation
The loan fund is increases six and twelve time in year 2007, 2008 respectively
compare to 2003-04.
The company has observed an increase in loan funds as compared to the base year
which indicates its growing reputation in the financial market.
Hence the overall sources of funds have shown big increase with respect to the
base year
2.1.7 Investment
Investment
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Investments 100 123.3283 131.087 107.909 48.1879
Interpretation
Investment figure shows healthy progress of the company.
Investment has increased in 2005, 2006 and after that it has strated decrease in
2007, 2008 which shows not good growth compared to base year.
As they have invested most of their funds in Indian money market mutual
funds.
Shows that the company has not take risk but the company has invested
money for developed it’s own business.
Application of funds
Year 2003-04 2004-05 2005-06 2006-07 2007-08
130.826
Total Fixed Assets 100 7 112.844 175.077 220.726
123.328
Investments 100 3 131.087 107.909 48.1879
Deferred Tax Assets(Net) 100 101.789 120 99.3266 89.661
231.519
Net Current Assets 100 7 131.437 203.29 219.526
Interpretation
Graph shows that in 2007-08 Company invested more fund in fixed Assets.
Company has enough cash in hand so that in any condition company can take
Any Financial decision easily.
Interpretation
Company has raised Share Capital during 2003-04 to 2006-07 and after that it
was reduced at 24% this step has been taken in order to promote expansion of their
business.
Company strive enhancement of share holder’s value through sound business
decision, prudent financial management and high standard of ethics through the
organizations. Reserves and surplus has been retained for future expansion of the
business.
In the base year 2003-04 total loan funds is normally up to 2006 and after that
it was increase up to 25%, so it means that company has expand the business.
2.2.4 Application of funds
Application of Funds
2003- 2004- 2005- 2006- 2007-
Year 04 05 06 07 08
Total Fixed Assets 38% 36% 32% 38% 52%
Investments 49% 44% 46% 33% 10%
Deferred Tax Assets(Net) 1% 1% 1% 1% 0%
Net Current Assets 12% 20% 21% 28% 38%
Total Application of Funds 100% 100% 100% 100% 100%
Interpretation
The total fixed assets are 38% in 2004 and after that it was decrease up to 4%
in 2006 and after that it was increase 10% so it means the company has bought the
assets for expansion of business.
The investment is decline slowly and gradually.
The net current assets are increase at increasing rate so that company has a
good liquidity.
The company’s future plans for expansion seem clear due to increased
investment in Fixed Assets .Efficient use of these Assets has enabled the
company to observe an increased profit.
Chapter 3.
Analysis of Profit &
Loss Account
Interpretation
Though the sales has been continuously increased from past 3 years but the
proportionate expenditure is also rising so overall not making any huge effect on net
profit of this company.
In 2006-07 Income from mutual fund dividend increased by 93.57 % and Interest
on debt instrument 567 % increased in 2005-06 compare to previous year.
Percentage Expenditures increasing year by year little more than Income
increased, so that Profit margin Decrease year by year.
Interpretation
The graph is showing that in year 2004-05 the company has transferred big
portion of net profit to genral reserve.
Hear the in 2005 company has reinvest profit for business expansion it is good
shine for the company.
Interpretation
Net sales and services are incresing from 2004 to 2005.
From 2005 onward the net sales incresing at a stret line so hear company
should tray to increse net sales.
Interpretation
The total expenditure is near by 80% of total income in every year.
Every year PBT is near by 20% of total income.
Chapter 4.
Analysis of Cash Flow
Statement
♦ Introduction
♦ Cash Flow statement
♦ Interpretation of Cash Flow Statement
5. RATIO ANALYSIS
5.1. Introduction Of The Ratio Analysis
Ratio analysis involves establishing a comparative relationship between the
components of financial statements. It presents the financial statements into various
functional areas, which highlight various aspects of the business like liquidity,
profitability and assets turnover, financial structure. It is a powerful tool of financial
analysis, which recognizes a company’s strengths as well as its potential trouble
spots.
It can be further classified as in different categories of Ratio.
• Liquidity Ratios
• Profitability Ratios
• Asset Turnover Ratios
• Finance Structure Ratios
• Valuation Ratios
Current Ratio
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Ratios 1.26 1.58 1.44 1.67 2.13
Interpretation
Current ratio is always 2:1 it means the current assets two time of current liability.
After observing the figure the current ratio is fluctuating.
In the year 2008 ratio is showing good shine.
Hear ratio is increase as a increasing rate from 2004 to 2008.
Company is no where near the ideal ratio in every year but every company can not
achieve this ratio.
Current ratio is increased in 2007-08 as compared to 2003-04 because of increase in
Inventories 100.96% and 123.77 % increased in Cash and Bank balance.
Current ratio is decreased in 2005-06 as compared to the last year because of
increase in liabilities by 45.39% and 93.19% in increasing in Provision.
5.2.2 Quick Ratio
This ratio is designed to show the amount of cash available to meet immediate
payments. It is obtained by dividing the quick assets by quick liabilities. Quick Assets
are obtained by deducting stocks from current assets. Quick liabilities are obtained by
deducting bank over draft from current liabilities.
Quick Ratio = Quick Assets
Current Liabilities
Quick Ratio
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Ratios 1.2 1.5 1.4 1.6 2.0
Interpretation
Standard Ratio is 1:1
Company’s Quick Assets is more than Quick Liabilities for all these 5 years.
In 2007-08 the ratio is increasing because of increase in bank and cash balance.
So all the years has quick ratio exceeding 1, the firm is in position to meet its
immediate obligation in all the years.
In 2005-06 quick ratio is decreased because the increase in quick assets is less
proportionate to the increased quick liabilities.
The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.
5.2.3 Networking Captial
Interpretation
GP Ratio shows how much efficient company is in Production.
GP is decreasing 2007-08 due to higher production cost.
Gross sales and services are increasing year by year so in effect Gross profit ratio is
icreasing year by year up to 2007.
5.3.2 Operating Profit Ratio
This ratio shows the relation between Cost of Goods Sold + Operating Expenses and
Net Sales. It shows the efficiency of the company in managing the operating costs
base with respect to Sales. The higher the ratio, the less will be the margin available
to proprietors.
Operating Profit Ratio = COGS+Operating expences X 100
Sales
Operating ratio
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Trend 83.5 80.0 79.0 77.9 81.7
Interpretation
Operating ratio is lowest during current 2007.
This shows that the expenses incurred to earn profit were less compared to the
previous two years.
Operating ratio is decreses feom 2004 to anward decreasing rate.
From the graph conclusion is made that company is not on the right track by
efficiently cutting down manufacturing, administrative and selling distribution
expenses.
5.3.3 Net Profit Ratio
= Net profit x 100
Net sales
Net profit ratio
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Trend 16.3 19.4 19.2 19.8 17.7
Return On Investment
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Trend 32.7 39.7 35.7 30.6 18.6
Interpretation
From the above observation it can be seen that ratio is fluctuating.
In the year 2005-06 Rate of Return on Investment is slightly increase as compared
to previous year
Ratio is decreasing after 2005 at adecreasing rate because of asseets increase
compare to sales.
The company’s Total Assets is increased to 86.51%, so ROI is decreased so
conclusion made that company is not utilizing its assets and investment efficiently.
5.3.5 Rate of Return on Equity
Rate of Return on Equity shows what percentage of profit is earned on the capital
invested by ordinary share holders.
Rate of Return on Equity = Profit for the Equity
Net worth
Rate of return on
equoty
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Trend % 22.2 11.5 7.1 10.0 5.5
Interpretation
ROE is remaining almost same Between 2005 to 2007, but it is decrease in2008
because the the company has increase share capital but profit not getting that much
increase.
Company is getting same return on equity.
As a result the share holders are getting higher return every year and investment
portfolio scheme selection was a judicious decision taken by the company.
This happens because Profit and Share Capital both increasing same way.
5.4 Asset Turnover Ratios
Asset Turnover Ratio are basically productivity ratios which measure the output
produced from the given input deployed. This relationship is shown as under
Productivity = Output
Input
Assets are inputs which are deployed to generate production (or sales). The same set
of assets when used intensively produces more output or sales. If the asset turnover is
high, it shows efficient or productive use of input.
The following Assets Turnover Ratios are calculated for the company.
• Total Assets Turnover
• Net Fixed Assets Turnover
• Net Working Capital Turnover
• Inventory Turnover Ratio
• Debtor Turnover (in times)
5.4.1 Total Asset Turnover Ratio
The amounts invested in business are invested in all assets jointly and sales are
affected through them to earn profits. Thus it is the ratio of Sales to Total Assets. .It is
the ratio which measures the efficiency with which assets were turned over a period.
Total Asset Turnover Ratio = Sales
Total Assets
Total assets turnover ratio
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Trend 1.5 1.5 1.6 1.5 1.2
Interpretation
The total assets turnover ratio is almost same in all years.
The Assets turnover Ratio is near by 1.5 in all 5 years which shows effective
utilization of assets from the company’s view point.
In the year 2005-06 ratio is increased because of company’s total assets is
increased by 24.52%, but sales is increased by 29.92%.So the ratio is increased but
in current year it is decreased because sale increasing by 41.45% and Assets
increasing by 49.28%.
Interpretation
Here the ratio of Net Fixed Asset Turnover is continuously increasing up to 2006
and after that it has strated decline.Because sales as wellas assets boths are equally
increase.
Net Fixed Assets Turnover Ratio is increasing year by year because of Sale is
increasing continuously.
It indicates that the company maximizes the use of its fixed assets to earn profit in
the business so that whatever amount is invested by company in fixed asset, gives
maximum productivity which helps to increase sales as well as profit.
5.4.3 Inventory Turnover Ratio
Inventory Turnover Ratio: The no. of times the average stock is turned over during the
year is known as stock turnover ratio.
Inventory Turnover Ratio = COGS
Average stock
Total Inventory turnover ratio
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Time 30.3 22.6 24.3 19.8 16.0
Interpretation
From the above calculation we can say that the ratio is decreasing. It mens
inventory is not spdly convert in to sales. So that it is bad for the company.
In 2003-04 ratio is increased as compared to after that all year so management
should take care about good efficiency of stock management.
But in 2006 onward ratio is decreasing because of increase in COGS. So company
should devise a systematic operational plan for inventory control.
Interpretation
This graph shows that inventory convert into cash in short time period.
Inventory turnover ratio is low in 2003-04 So In this year inventory is converted in
cash 11.9 days.
The inventory conversation in to cash time duration is increases from 2004 to every
year so the management should tray to efficient inventory conversation,so it will It
shows that company effectiveness utilizing its Inventories in quickly.
Interpretation
Debtor turnover indicates how quickly the company can collect its credit sales
revenue.
Here the ratio is continuously decreasing, so that the company’s collection of credit
sales is efficient management is improved its collection period every year so it
shows that the management have an ability to collect its money from his debtors. So
they can invest that money on Assets, HRD and other investments.
Debt Ratio
2003-04 2004-05 2005-06 2006-07 2007-08
0.028 0.384
Trend 4 0.0165 0.0114 0.0383
Debt Ratio
0.4
0.3
0.2
Trend
0.1
0
2003-04 2004-05 2005-06 2006-07 2007-08
Interpretation
From the above calculation it seems that the ratio is fluctuating.
In 2007-08 the ratio is increased as compared to the previous year because the total
loan funds are increased by 661.56%.
In 2005-06 Company has issued equity Share and also loan is decreased.
Its means that now company trying to increasing Trading on equity.
5.5.2 Debt-Equity Ratio
This ratio is only another form proprietary ratio and establishes relation between the
outside long term liabilities and owner funds. It shows the proportion of long term
external equity & internal Equities.
Debt Equity Ratio = Total Long Term debt
Share holder equity
Table 5.15 Debt - Equity Ratio Analysis
Debt- Equity Ratio
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Trend 0.027 0.012 0.011 0.030 0.376
Debt equityratio
0.4 0.376
0.3
0.2
Trend
0.1
0.027 0.012 0.03
0.011
0
2003-04 2004-05 2005-06 2006-07 2007-08
Interpretation
It shows companies accumulated more equity than required company has to refocus
to its strategic policies and plans and try to accumulate more debt funds in future so
as to make the balance between debt and equity.
There is only current year ratio is some what sufficient.
5.5.3 Interest Coverage Ratio
Interest Coverage Ratio: The ratio indicates as to how many times the profit covers
the payment of interest on debentures and other long term loans hence it is also
known as times interest earned ratio. It measures the debt service capacity of the firm
in respect of fixed interest on long term debts.
Interest Coverage Ratio = EBIT
Interest
Intrest coverage ratio
Year 2003-04 2004-05 2005--06 2006-07 2007-08
Trend 3.4 5.0 4.5 4.2 21.9
Interpretation
After observing the figure it shows that the ratio has mix trend up to 2006.
In the year 2007-08 company has not much debt compare to EBIT so interest
coverage ratio is high but in 2007-08 company increasing its external debt so
company have pay more interest among its earnings so interest coverage ratio
falling down compare to previous year.
5.6 Valuation Ratios
Valuation ratios are the result of the management of above four categories of the
functional ratios. Valuation ratios are generally presented on a per share basis and
thus are more useful to the equity investors.
The following Valuation Ratios are calculated for the company.
• Earnings Per Share
• Dividend pay-out Ratio
• P/E Ratio
• Profit Margin
5.6.1 Earnings Per Share
This ratio measures profit available to equity share holders on per share basis. It is not
the actual amount paid to the share holders as dividend but is the maximum that can
be paid to them.
Earnings per Share = Net Profits for Equity Shares
No. of Equity Shares
Table 5.17 Earnings per Share
Earningper share
25 22.62
20.62
20
14.7
15 11.7
Trend(Rs.)
10 7.43
5
0
2003-04 2004-05 2005-06 2006-07 2007-08
Interpretation
Earninig per share is increasing as a increasing rate it is good for invester and share
holder.
In 2007-08 Profit is increasing by 42.30% and No Equity share Holder increased by
2.03%, Due to that EPS Ratio is increasing in Current year.
5.6.2 Dividend Pay-out Ratio
This ratio indicate split of EPS between Cash Dividends and reinvestment of Profit. If
the Company has Profitable projects than it will prefer to keep dividend pay out ratio
lower.
Dividend pay-out Ratio = Dividend per Share in Rs.
Earnings per share in Rupees
Table 5. 18 Dividend Pay-out Ratio Analysis
Dividend pay-out Ratio
Year 2003-04 2004-05 2005-06 2006-07 2007-08
Trend(Rs.) 1.54 4.68 2.94 3.77 3.43
Dividendpayout ratio
5 4.68
4 3.77
3.43
3 2.94
2 Trend(Rs.)
1.54
1
0
2003-04 2004-05 2005-06 2006-07 2007-08
Interpretation
In all years there is fluctuation in ratio.
If the company wants to prosper in future with flying colors then ideally more
amounts should be reinvested in the business rather than distributing as dividend.
In 2005-06 company has reinvested in business for expansion.
5.6.3 P/E Ratio
P/E Ratio is computed by dividing the current market price of a share by earning per
share. This is Popular measure extensively used in Investment analysis.
P/E Ratio = Current Market Price of Share
Earnings per Share
Table 5. 19 P/E Ratio Analysis
P/E Ratio
Year 20003-04 2004-05 2005-06 2006-07 200708
Trend 31.36 19.91 15.85 11.30 10.30
PEratio
40
31.36
30
19.91
20
15.85 Trend
11.3 10.3
10
0
20003-04 2004-05 2005-06 2006-07 200708
Interpretation
In 2004-05 P/E Ratios is high means Share price of company is Stable and Share
holder are interested to invest in the company’s share.
But in 2006-07 P/E Ratio is Falling down word So company share price is not as
stable as compare to previous year.
5.6.4 Profit margin ratio
Profit margin ratio= PAT/Sales*100
Interpretation
The ratio is shows equal for middle three year it means the company has maintain
the equal ratio for year 2005 to 2007.
The ratio shows decline in current year it is bad sign for the company.
5.7 The Du-Pont Chart
ROA (IN %)
2007-08 30.88
2006-07 53
2005-06 63.08
2004-05 67.8
2003-04 75.6
♦ Company Analysis
♦ Share Holding Pattern
Chapter 6.
Scenario Analysis
♦ Company Analysis
♦ Share Holding Pattern
6. SCENARIO ANALYSIS
Books:
Annual Report of Wipro Limited for Financial Year 2004-05, 2006-07,2007-08.
Narayanaswamy R., (1998): “Financial Accounting”: A Managerial Perspective,
Prentice-Hall of India Private Ltd, New Delhi., Third Edition, Reprint 2003
Khan M.Y. and Jain P.K., (1992):”Financial Management”, Tata McGraw-Hill
Publishing Co Ltd., New Delhi., Third Edition.
.
Websites
http://www.wipro.com
http://www.bseindia.com//shareholding/shareholding_new.asp
http://www.cmie.com//indutries//gdp.asp
http://www.wipro.com/investors/annual_reports.htm
http://www.wipro.com/investors/pdf_files/AR07_08_first_book_final.pdf
http://www.wipro.com/investors/pdf_files/AR07_08_second_book_final.pdf
http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_1.pdf
http://www.wipro.com/investors/pdf_files/Wipro_AR_2006_07_Part_2.pdf
http://www.wipro.com/investors/pdf_files/Wipro_annual%20report_2005-06.pdf
http://www.wipro.com/investors/pdf_files/Wipro_Annual_Report_2004_2005.pdf