A

PROJECT

ON

STUDY ON WORKING CAPITAL AND RATIO ANALYSIS OF WIPRO

TECHNOLOGIES LTD

UNDER THE

GUIDANCE OF
Chapter Contents Page
No. No.

1. Research Design

1.1 Introduction

1.2 Objectives

1.3 Limitations of Study

1.4 Chapter Scheme

2. 2.1Review of Literature

2.2 Company Profile

3. Research Methodology

3.1 Introduction

3.2 Data Collection

3.3 Sample Size

3.4 Chart

4. Data Analysis and Interpretation

5. Findings and Conclusion

INTRODUCTION

Working Capital is the amount of fund necessary for the cost of operating the enterprise.
Working Capital in a going concern is a revolving fund, it consists of cash received from sales
which are used to cover the cost of current operations. This capital is needed for holding current
assets like stock of raw material, semi – finished goods, accounts receivable. Bills receivable and
cash for carrying out expenses like wages and salaries. Sources of Working capital are
commercial and development bank, public deposit, ploughing back up profit and other finance
companies. These are the sources of variable working capital but for permanent working capital
are secured ordinary shares, preference shares, debentures, ploughing back of profits. Amount of
working capital depend upon the size and scale of business unit but it is mostly dependent upon
scale of production and seasonal fluctuations. Working capital management in general refers to
the administration of all aspect of current assets ie. cash, marketable securities, debtors and stock
and current liabilities. Working capital management policies have a great effect on firms
profitability, liquidity and its structural health. Only those enterprises which have adequate
working capital can survive in times of depression. Excessive working capital is equally
unprofitable. The extra working capital is not utilized in business operations and earns no profit
for the firm. The abundance of working capital would lead to waste and inefficiency. Shortage of
working capital funds renders the firm unable to avail attractive credit opportunities etc. The firm
loses its reputation when it becomes unable to honor short term obligations. As a result the firm
faces tight credit terms and the growth stagnates.

OBJECTIVES

Since working capital management is one of the most important aspects of finance, it enables to
study in-depth the methods involved in it; so that as a student of finance it gives me a chance to
study the financial perspectives of the industry. It offers scope to understand various aspects of
finance and all these aspects are reflected in this report. The estimation of required working
capital differs from organization to organization. So doing this project in an industry will help in
knowing more about the working capital, its preparation and execution. The study has the
following objectives:-

1. To see whether the working capital in “WIPRO LIMITED” and “ITC LIMITED” is an
effective one.

2. To find out the extent of the need and adequacy of the working capital of the firm.

3. To see the liquidity position of the company.

4. To see the changes in the working capital.

5. To see the ratio analysis of the two companies.

6. To determine the net working capital.

LIMITATIONS OF THE STUDY

Working capital management is an effective tool for management control. The following is the
limitation which I observed in “WIPRO LIMITED” and “ITC LIMITED”:-
1. Since the report is exclusively made from secondary source of data, the direct observation is
literally impossible.

2. There was no scope for gathering sufficient financial information as it is confidential.

3. There was time constraint for the project, due to the limited time

4. They themselves have not maintained the data so accurately but seem to be sufficient for the
project.

5. The company’s head office is inaccessible for me. All the data with which the company’s
detail has been mentioned in the project was available to me through various magazines, annual
reports.

CHAPTER SCHEME

The following project has been presented in form of the following chapters:-
Chapter 1: Introduction The purpose of Introduction is to provide a basic description of the topic
of the project Working Capital and its importance. The background of the subjects builds a
platform for the next coming topics to be discussed. The Literature review indicates some related
theories to the topic already highlighted which gives importance to the project. Objectives of the
study is also defined in here. The methodology shows the steps which has been taken for the
completion and development of the project.

Chapter 2: Conceptual Framework Conceptual frameworks are abstract representations,

connected to the research project's goal that direct the collection and analysis of data (on the
plane of observation – the ground). Here, the national and international scenario of corporate
social responsibility is shown and through this, analysis can be done about how aware the global
world is regarding the subject. The impact and effect of the topic is also shown.

Chapter 3: Presentation of data, analysis and findings The process of evaluating data using
analytical and logical reasoning to examine each component of the data provided. This form of
analysis is just one of the many steps that must be completed when conducting a research
experiment. Data of Nestle India from various sources has been gathered, reviewed, and then
analyzed to form some sort of finding or conclusion. There are a variety of specific data analysis
method, some of which include data mining, text analytics, business, and data visualizations.

Chapter 4: Conclusions and Recommendations The interpretations are given of the significance
of the findings of a research project along with recommendations for action. These
recommendations will be based on the research and on any other relevant information available,
including own past experience in a market or in business. Conclusions and recommendations
usually form an important part of a project brief and of any report or documentation, and are a
key part of the value offered to clients by professional market research.

REVIEW OF LITERATURE

• A study undertaken by Garcia-Teruel and Martinez Solano entitled “working capital

management of SMEs” year 1996, collected a panel of 8,872 small to medium sized
enterprises(SMEs) from Spain covering the period 1996-2002.They tested the effects of working
capital management on SMEs profitability using the panel data methodology. The result
demonstrated that managers could create value by reducing their inventories and the number of
days for which their accounts are outstanding. Moreover, shortening the cash conversion cycle
also improves the firm’s profitability.

• A study undertaken by Appuhami, Ranjith entitled “The impact of Firms’ Capital Expenditure
on working capital Management:An Empirical Study across Industries in Thailand” year
(2008),studied impact of firms’ capital expenditure on their working capital management. The
author used the data collected in the Thailand Stock Exchange. The study used Schulman and
cox’s(1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working
capital measurement and developed multiple regression models. The empirical research found
that the firms’ capital expenditure has a significant impact on working capital management. The
study also found that the firms’ operating cash flow, which was recognised as a control variable
has a significant relationship with working capital management.

• A study undertaken by Arunkumar O.N & Radha Ramanan entitled “Working Capital
Management and Profitability:A Sensitivity Analysis” year 2013,reveals that the data analysis
was carried for 1198 manufacturing firms listed in centre for Monitoring Indian Economy for a
period of 5 years. The relationship of debtor’s days, inventory days, creditor days, current ratio,
ratio of current liability to total assets, assets turnover ratio, financial assets to total assets and
size with return on assets employed is analysed in this study. The authors have applied
correlation and group wise weighted least squares regression analysis to identify the effects of
these variables on profitability. The correlation analysis shows that the firms profitability is
highly influenced by the variables relating to assets.It was also found out that there is a positive
relationship between profitability and debtors days and inventory day.

COMPANY PROFILE

WIPRO Wipro Enterprises Limited (Formerly Azim Premji Custodial Services Private Limited),
was incorporated under the Provisions of Companies Act, 1956, is headquartered in Bangalore,
India. The Company primarily carries on the businesses of Consumer care products, Domestic &
Commercial lighting and Infrastructure engineering which Ire transferred pursuant to the Scheme
of Arrangement of Wipro Limited (“Wipro”) with effect from March 31, 2013, with the
appointed date as on April 1, 2012.

Wipro Ltd. (NYSE:WIT), a leading global Information Technology, Consulting and

Outsourcing company today announced that it has been ranked as a leader in the 'Global R&D
Service Provider' survey by Zinnov Management Consulting for the fourth successive year.
Zinnov is a leading Globalization and Market Expansion Advisory firm that helps companies
globalize their R&D/Product Engineering activities.

"Wipro has consistently kept up pace with changing customer needs in the Product Engineering
space. Be it adopting flexible business models, taking a solution led approach or co-investing in
developing a product and taking it to market Wipro has demonstrated strong capability. Wipro’s
vertical specific solutions and PDLC (Product Development Life Cycle) accelerators give it a
definite edge as an engineering partner." said Sundararaman Viswanathan, Engagement
Manager, Zinnov Management Consulting Pvt. Ltd.

Wipro Enterprises Limited comprises of two main divisions

1. Wipro Consumer Care and Lighting (WCCLG)

2. Wipro Infrastructure Engineering (WIN)

Wipro Consumer Care and Lighting (WCCLG) is among the top fastest growing FMCG
companies in India. It has a strong brand presence in personal care and skin care products in
South-East Asia and Middle-East apart from significant market share in identified segments.
Today WCCLG has global workforce of 8300 serving over 40 countries.

WCCLG business includes multiple product ranges from Personal care (Soaps, Toiletries), Baby
care, Illness Electrical wire devices, Lighting and Modular Office furniture.

Wipro Infrastructure Engineering (WIN) is the largest independent hydraulic cylinder

manufacturer in the world, delivering around 2 million cylinders to OEMs in different
geographies. WIN has global workforce of over 1,700 committed and skilled people, and 14
state-of-the-art manufacturing facilities across India, Northern Europe, Eastern Europe, US,
Brazil and China.
WIN specializes in designing and manufacturing custom Hydraulic Cylinders (double acting,
single acting and telescopic cylinders), Actuators and Precision engineered components for
infrastructure and related industries such as Construction & Earthmoving, Material/Cargo
Handling & Forestry, Truck Hydraulic, Farm & Agriculture, Mining, and Aerospace & Defense.

Wipro Enterprises Limited also has two associates:

1. Wipro GE Healthcare Private Limited

2. Wipro Kawasaki Precision Machinery Private Limited

Business Products

Wipro Technologies • IT Services

• Product Engineering Solution

• Technology Infrastructure Services

• Business Process Outsourcing

• Consulting Services

Wipro Infotech LTD • Notebooks

• Desktops

• Servers

• Data Warehousing

• IBM Servers

Wipro Consumer Care & Lightning Fast Moving Consumer Goods

Wipro Infrastructure Engineering Construction, Mining, Agriculture, Ports

 Wipro GE Medical Systems Medical Systems

Wipro Biomed • Life Sciences

• Speciality Products

• Medical Systems

• Managed Services

RESEARCH METHODOLOGY

The collection is the process of enumeration together with the proper recording of results. The
success of an enquiry is based up on the proper collection of data.

Secondary Data: Secondary data are those that are already collected by someone for some
purpose and are available for the present study. The covers various sources of secondary data
including published and unpublished sources like news papers, published books, magazines
etc…,

DATA TYPE USED: The data required for this project is being collected from various sources
which are deemed to be fully accurate and full reliability is there on the data collected. The
sources from where the data is collected is from magazines, annual reports, newspaper, published
books.

STATISTICAL TOOLS USED: Graphs, pie charts and tables.

SAMPLE SIZE OF THE STUDY: Two:

• WIPRO Limited

• ITC Limited

DATA ANALYSIS AND INTERPRETATION

BALANCE SHEET – WIPRO LTD

Particulars 2013-14 2012-13 2011-12 2010-11 2009-10

Liabilities 12 Months 12 Months 12 Months 12 Months 12 Months

Share Capital 492.60 491.70 490.80 295.40 294.50

Reserves & Surplus 23736.90 23860.80 20829.40 17396.80 12220.50

Net Worth 24229.50 24352.50 21320.20 17692.20 12515.00

Secured Loan 50.40 1.00 9.60 .00 .00

Unsecured Loan 3995.60 5242.20 4701.20 5530.20 5013.90

TOTAL LIABILITIES 28275.50 29595.70 26031.00 23222.40 17528.90

Assets

Gross Block 8312.50 8761.60 7740.60 6761.30 5743.30

(-) Acc. Depreciation 4403.10 4111.80 3503.60 3105.00 2563.70

Net Block 3909.40 4649.80 4237.00 3656.30 3179.60

Capital work in progress 378.90 301.20 396.40 991.10 1311.80

Investments 10904.20 10335.20 10813.40 8966.50 6895.30

Inventories 320.50 785.10 724.90 606.90 459.60

Sundry debtors 8499.40 7967.00 5781.30 5016.40 4446.40

Cash and bank 7800.40 6232.80 5203.30 5664.30 4409.20

Loans and advances 8893.80 8324.80 6963.50 5425.90 4202.00

Total current assets 25514.10 23309.70 18673.00 16713.50 13517.20

Current liabilities 8792.80 5984.20 5121.20 4874.20 5564.30

Provisions 3638.30 3016.00 2967.60 2230.80 1810.70

Total current liabilities 12431.10 9000.20 8088.80 7105.00 7375.00

Net current assets 13083.00 14309.50 10584.20 9608.50 6142.20

Total assets(A+B+C+D+E) 28275.50 29595.70 26031.00 23222.40 17528.90

CHANGES IN WORKING CAPITAL STATEMENT FOR THE PERIOD 2009
TO 2014

PARTICULARS 2009- 10 2010-11 2011-12 2012-13 2013-14

CURRENT
ASSETS

- 459.6 606.9 724.9 785.1 320.5

INVENTORIES

SUNDRY 4446.4 5016.4 5781.3 7967.0 8499.4

DEBTORS

-CASH&BANK 4409.2 5664.3 5203.3 6232.8 7800.4

A.TOTAL 9315.2 11287.6 11709.5 14984.9 16620.3

CURRENT 7375.0 7105.0 8088.8 9000.2 12431.1

LIABILITIES

B.TOTAL 7375.0 7105.0 8088.8 9000.2 12431.1

A-B. 1940.2 4182.6 3620.7 5984.7 4189.2

WORKING
CAPITAL

INTERPRETATON

• The above chart clearly shows the increase in the working capital for the year 2009- 2010.All
the Current Assets except other current assets have increased in the year 2010 as compared to
year 2009. The end result of the statement of changes in working capital after comparing all the
increases and decreases is the net decrease in the amount of working capital. The above table
prepared focuses on the fact that the increase in working capital is Rs. 2242.4(crores)
• The above chart clearly shows the decrease in the working capital for the year 2010- 2011.All
the Current Assets except receivables have decreased in the year 2011 as compared to year 2010.
The end result of the statement of changes in working capital after comparing all the increases
and decreases is the net decrease in the amount of working capital. The above table prepared
focuses on the fact that the decrease in working capital is Rs. 561.9(crores).

• The above chart clearly shows the increase in the working capital for the year 2011-2012. All
the Current Assets except other current assets have increased in the year 2012 as compared to
year 2011. The end result of the statement of changes in working capital after comparing all the
increases and decreases is the net decrease in the amount of working capital. The above table
prepared focuses on the fact that the increase in working capital is Rs. 236.4(crores).

• The above chart clearly shows the decrease in the working capital for the year 2012- 2013.All
the Current Assets except receivables have decreased in the year 2013 as compared to year 2012.
The end result of the statement of changes in working capital after comparing all the increases
and decreases is the net decrease in the amount of working capital. The above table prepared
focuses on the fact that the decrease in working capital is Rs. 1795.5(crores)

FINDINGS AND CONCLUSIONS

FINDINGS

➢ In financial year March 2009 Current Ratio and Quick Ratio is low compared to March 2010
which is not good for working capital as it implements more liabilities than current asset as cash
cycle and collection is weak. Working Capital Turnover ratio is high in March 2009 as compared
to March 2010 which implements that the management is being efficient in using a firm’s short
term assets and liabilities to support sales in march 2009.

➢ In financial year Mar’10 Current Ratio and Quick Ratio is high compared to Mar’11 which is
good for working capital as it involves cash cycle. Working Capital Turnover ratio is low in
March 2010 as compared to March 2011 which implements business is investing in too many
accounts receivables which would lead to an excessive amount of bad debts and obsolete
inventory,which is not good for business.

➢ In financial year Mar’11 Current Ratio and Quick Ratio is low compared to Mar 12 which is
not good for working capital as it implements more liabilities than current assets as cash cycle
and collection is weak. Working Capital Turnover ratio is high in March 2011 as compared to
March 2012 which implements that the management is being efficient in using a firm’s short
term assets and liabilities to support sales in March 2011.

In financial year Mar’12 Current Ratio and Quick Ratio is high compared to Mar’13 which is
good for working capital as it involves cash cycle. Working Capital Turnover ratio is low in
March 2012 as compared to March 2013 which implements business is investing in too many
accounts receivables which would lead to an excessive amount of bad debts and obsolete
inventory, which is not good for business.

CONCLUSIONS

The management of working capital plays a vital role in running of a successful business. So,
things should go with proper understanding for managing cash receivables and inventory.
WIPRO LIMITED is managing its working capital in a good manner but still there is scope for
improvement in its management. This can help the company in raising its profit level by making
less investment in accounts receivables and stock etc. This will ultimately improve the efficiency
of its operations. Following are few recommendations given to the company in achieving its
desired objectives.

➢ The business runs successfully with adequate amount of the working capital but the company
should see to it that cash should not be tied up in excessive amount of working capital.
➢ Though the present system is mostly perfect, the company as due to the increasing sales
should adopt more effective measures so as to counter the treat.

➢ The investment of cash in marketable securities should be increased as it is very profitable for
the company.

Holding of excessive and insufficient stock must be avoided as it creates a burden on the cash
resources of a business and results in lost sales, delays for customers etc respectively.