Financial Analysis of Wipro LTD

A

Project Report

On

Financial Analysis

Of

Presented to

Prof. Nikunj Patel

Faculty MemberS.V. Institute of Management.Kadi

North Gujarat University PatanOn

December 23rd , 2008

In the partial fulfillment of the requirements for Managerial Accounting-I Course in the Master of Business Administration

Programme

By:Ashwin Chaudhary (Roll No.12)Priyanka Maheta (Roll No.17)

MBA-1 (A)

Preface

As a part of our syllabus of MBA programme in Semester-I, we are assigned some

practical and theoretical project work. In partial fulfillment of the Managerial

Accounting-I, course we have prepared a comprehensive project report in Financial

Analysis of the company.

Study of management will be immaterial if it is not coupled with study of financial aspect

of the business. It gives the student an opportunity to learn the connection between

comparison & execution to test & verify application of theories & help in the comparison

of management theories and practice. The study gives a chance to know about the

profitability and financial position of the firm.

We have chosen Wipro Limited which is a $3.5 Billion Global company in Information

Technology Services ,R&D Services, Business Process Outsourcing.

This report contains the analysis of the 5 years data of the company. The Financial

statements of the report are analyzed in three different ways such as

Trend Analysis

Horizontal Analysis

Ratio Analysis

Cashflow Analysis

The ratio analysis of the company has been derived for 23 ratios which help to determine

the company’s performance. In the Scenario Analysis of the company we have included

the company’s industrial GDP, its Market Share, Market Capitalization, Market Growth

etc.

Date: 20th December ,2008 Ashwin Chaudhary (Roll No.5)Place: Kadi Priyanka Mehata (Roll No.)

Acknowledgement

With a sense of gratitude and respect, we would like to extend our heartiest thanks

to all of those who provided help and guidance to make this project a big success. No

Project is ever the outcome of single individual’s talent or effort. This work is no

exception. This project would not have been possible without the whole hearted

encouragement, support and co-operation of our guide, friends and well-wishers.

Although it is not possible for us to name and thank them all individually, we must make

special mention of some of the personalities and acknowledge our sincere indebtness to

them.

The successful completion of this project rests on the shoulder of many persons who have

helped us directly or indirectly. We wish to take this opportunity to express to all those,

without whose help, completion of this project would have been difficult. We are

indebted and thankful to all the individuals who have guided, advised, inspired and

supported us in making this project a success.

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

PrefaceAcknowledgementExecutive Summary

1. INTRODUCTION1.1 Introduction to company1.2 Group of companies1.3 History1.4 Company Profile1.5 Registered office address1.6 Board of director1.7 Auditor

2. ANALYSIS OF BALANCE SHEET

2.1 Trend analysis of Balance sheet2.1.1 Trend analysis of fixed assets2.1.2 Trend analysis of total current assets2.1.3 Trend analysis of share holders equity2.1.4 Trend analysis of total current assets2.1.5 Share holder’s fund2.1.6 Sources of fund2.1.7 Investment 2.1.8 Application of funds

2.2 Horizontal analysis of Balance sheet 2.2.1 Sources of fund 2008 2.2.2 Application of fund 2008 2.2.3 Sources of fund for five years 2.2.4 Application of fund for five years

3. ANALYSIS OF P & L ACCOUNT3.1 Trend analysis of P & L

3.1.1 Trend analysis of total income 3.1.2 Profit after tax

3.1.3 Transfer to general reserve 3.1.4 Net sales and services 3.2 Horizontal analysis of P & L 3.2.1 Comparison of PBT and Income with expenditure

4. CASH FLOW ANALYSIS4.1 Introduction4.2 Cash flow statement4.3 Interpretation of Cash flow statement

5. RATIO ANALYSIS5.1 Introduction of the ratio analysis 5.2 Liquidity ratio

5.2.1 Current ratio5.2.2 Quick ratio5.2.3 Net working capital

5.3 Profitability ratio 5.3.1 Gross profit5.3.2 Operating ratio

5.3.3 Net profit ratio5.3.4 Return on investment5.3.5 Return on equity

5.4 Assets turnover ratio 5.4.1 total asset turn over ratio5.4.2 net fixed asset turn over5.4.3 inventory turn over ratio5.4.4 average age of inventories5.4.5 debtor turn over ratio

5.5 Finance structure ratio 5.5.1 debt ratio5.5.2 debt equity5.5.3 interest coverage ratio

5.6 Valuation ratio5.6.1 earning per share5.6.2 divident pay out ratio5.6.3 P/E ratio5.6.4 Profit margin ratio

5.7 Du-Pont chart

6. SCENARIO ANALYSIS6.1 business unit performance6.2 company analysis

6.2.1 Share holding pattern6.2.2 Market capitalization

7 ANNEXURES8 BIBLIOGRAPHY

Chapter 1.Introduction

Introduction to company

Group Companies

History

Company Profile

Registered Office Address

Board of Directors

Auditors

1. INTRODUCTION

1.1.Introduction of company

Wipro Limited (Wipro), together with its subsidiaries and associates (collectively, the

company or the group) is a leading India based provider of IT Services and Products,

including Business Process Outsourcing (BPO) Services, globally. Further,Wipro has

other business such as India and AsiaPac IT Services and products and Consumer

Care and Lighting. Wipro is headquartered in Bangalore, India.Wipro Technologies is

a global services provider delivering technology-driven business solutions that meet

the strategic objectives clients. Wipro has 40+ ‘Centers of Excellence’ that create

solutions around specific needs of industries. Wipro delivers unmatched business

value to customers through a combination of process excellence, quality frameworks

and service delivery innovation. Wipro is the World's first CMMi Level 5 certified

software services company and the first outside USA to receive the IEEE Software

Process Award.

Wipro is a $3.5 billion Global company in Information Technology Services, R&D

Services, Business process outsourcing. Team wipro is 75,000 Strong from 40

nationalities and growing. Wipro is present across 29 counries,36 Development

canters, Investors across 24 countries.

Largest third party R&D Service provider in the world.

Largest Indian Technology Infrastructure management service provider.

A vendor of choice in the middle east

Among the top 3 Indian BPO Service provider by Revenue (* Nasscom)

Among the top 2 Domestic IT Services companies in India (*IDC India)

1.2. Group Companies

Wipro Infrastructure Engineering Ltd.

Wipro Inc.

cMango Pte Ltd.

Wipro Japan KK

Wipro Shanghai Ltd.

Wipro Trademarks Holding Ltd.

Wipro Travel Services Ltd.

Wipro Cyprus Private Ltd.

Wipro Consumer Care Ltd.

Wipro Health Care Ltd.

Wipro Chandrika Ltd.(a)

Wipro Holdings (Mauritius) Ltd.

Wipro Australia pty Ltd.

WMNETSERV Ltd.(a)

Quantech Global Service Ltd.

3D Network Pte Ltd.

Planet PSG Pte Ltd.

Spectramind Inc.

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

Global IT Services and Products

The Company's Global IT Services and Products segment provides IT services to

customers in the Americas, Europe and Japan. The range of its services includes IT

consulting, custom application design, development, re-engineering and maintenance,

systems integration, package implementation, technology infrastructure outsourcing,

BPO services and research and development services in the areas of hardware and

software design. Its service offerings in BPO services include customer interaction

services, finance and accounting services and process improvement services for

repetitive processes.

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

Wipro's system integration services

Include integration of computing platforms, networks, storage, data center and

enterprise management software. These services are typically bundled with sales of

the Company's technology products. Wipro's infrastructure management and total

outsourcing services include management and operations of customer's IT

infrastructure on a day-to-day basis. The Company's technology support services

include upgrades, system migrations, messaging, network audits and new system

implementation. Wipro designs, develops and implements enterprise applications for

corporate customers. The Company's solutions include custom application

development, package implementation, sustenance of enterprise applications,

including industry-specific applications, and enterprise application integration. Wipro

also provides consulting services in the areas of business continuity and risk

management, technology, process and strategy.

Consumer Care and Lighting

Wipro's Consumer Care and Lighting business segment accounted for 5% of its

revenue in fiscal 2007. The Company's product lines include hydrogenated cooking

oil, soaps and toiletries, wellness products, light bulbs and fluorescent tubes, and

lighting accessories. Its product lines include soaps and toiletries, as well as baby

products, using ethnic ingredients. Brands include Santoor, Chandrika and Wipro

Active. The Wipro Baby Soft line of infant and child care products includes soap,

talcum powder, oil, diapers and feeding bottles and Wipro Sanjeevani line of wellness

products.

The Company's product line includes incandescent light bulbs, compact fluorescent

lamps and luminaries. It operates both in commercial and retail markets. The

Company has also developed commercial lighting solutions for pharmaceutical

production centers, retail stores, software development centers and other industries.

Its product line consists of hydrogenated cooking oils, a cooking medium used in

homes, and bulk consumption points like bakeries and restaurants. It sells this product

under the brand name Wipro Sunflower.

1.5. Registered Office Address

WIPRO LIMITED

Doddakannelli, Sarjapur Road,

Bangalore – 560 035, India.

Tel : +91-80-28440011

Fax : +91-80-2844054

1.6. Board of Directors

Azim H . Premji Chairman

Dr Ashok S Ganguly Former Chief Ex.Officer Nortel

B .C. Prabhakar Practitioner of Law

Dr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.

N.Vagual Chairman-ICICI Bank Ltd

Bill Owens

Former Chief Ex.Officer,Nortel

P. M. Sinba

Former Chairman Pepsico India Holdings

Azim PremjiChairmen & 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

Trend Analysis of Balance Sheet

Horizontal Analysis of Balance Sheet

2. ANALYSIS OF BALANCE SHEET

2.1.Trend Analysis of Balance Sheet

Trend Analysis of Balance Sheet involves calculation of percentage changes in the

Balance Sheet items for a no. of successive years. This is carried out by taking the

items of the past financial year used as base year and items of other years are

expressed as percentage of the base year. Here 2003-04 is taken as base year

Perticular2003-04

2004-05

2005-06

2006-07

2007-08

SOURCES OF FUNDS          Share Holder's Funds          Share Capital 100 302.27 202.68 207.37 100.171Share application money pending allotment 100   622.41 290.456 114.286Reserves & Surplus 100 138.62 122.94 180.99 122.516Share holder's Equity 100 140.68 125.18 181.718 121.833Loan Funds 100        Secured 100 22.786 208.9 689.7 139.154Unsecured 100 382.54 75.796 577.241 1829.68Total Loan Funds 100 58.947 122.08 616.343 1171.94Minority Interest 100 161.94 - 10.929 400Total Sources of Funds 100 138.55 124.53 149.283 162.162APPLICATION OF FUNDS          Fixed assets          Goodwill 100 107.82 62.297 268.622 445.384Gross Block 100 133.91 118.74 142.195 159.492Less:          Accumulated Depreciation 100 130.95 129.74 147.107 147.775Net Block 100 136.72 108.75 153.667 154.22Capital work in progress and advances 100 182.43 240.03 163.056 131.194Total Fixed Assets 100 130.83 112.84 175.077 220.726Investments 100 123.33 131.09 107.909 48.1879Deferred Tax Assets(Net) 100 101.79 120 99.3266 89.661Current Assets, Loans & Advances          Inventories 100 135.23 118.19 200.969 160.578

Sundry Debtors 100 130.78 137.08 138.168 137.637Cash & Bank Balances 100 176.2 155.03 223.775 198.113Loan & Advances 100 97.872 230.42 127.844 180.692Total Current Assets 100 129.24 157.71 154.955 166.304Less:    Current Liabilities & Provisions          Current Liabilities 100 143.26 145.4 181.719 118.484Provisions 100 61.257 239.3 63.3118 180.879Total Liabilities 100 102.82 172.99 133.59 130.504Net Current Assets 100 231.52 131.44 203.29 219.526Total Application of Funds 100 138.55 124.53 149.283 162.162

Table 2.1.1 Trend Analysis of Balance Sheet

2.1.1 Trend Analysis of Fixed assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08Total Fixed Assets 100 130.827 112.844 175.077 220.726

Table 2.1.2 Trend Analysis of Fixed assets

Figure 2.1.1 Trend Analysis of total fixed assets

Interpretation

The fixed assets are increase in current year is good for the company.

Hear fixed assets are increasing as a increasing rate it means the company has

expand it’s business.

Fixed Assets are continuously increasing year by year.

It seems that the company has good future plans and they want to expand their

business so they have invested more and more funds in fixed assets.

Fixed assets are efficiently utilized by the company due to which the profit of

the company is increasing every year.

In 2006-07and 2007-08 Company has huge increase its land, patents, trade

marks and rights.

2.1.2 Trend Analysis of total current assets

Table 2.1.3 Trend Analysis of total current assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08Total Current Assets 100 129.242 157.708 154.955 166.304

Figure 2.1.2 Trend Analysis of total current assets

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.

2.1.2 Trend Analysis of total current assets

Table 2.1.4 Trend Analysis of total Liabilities

Year 2003-04 2004-05 2005-06 2006-07 2007-08Total Liabilities 100 102.817 172.991 133.59 130.504

Figure 2.1.3 Trend Analysis of total Liabilities

Interpretation

The total liabilities is highest in 2005-06.

Liabilities is incressing rate it mean company has to developed business. And

purchase raw material on credit basis.

2.1.3 Trend Analysis of share holder’s equity.

Table 2.1.5 Trend Analysis of share holder’s equity.

Year 2003-04 2004-05 2005-06 2006-07 2007-08Share holder's Equity 100 140.684 125.181 181.718 121.833

Figure 2. 4 Trend Analysis of share holder’s equity.

Interpretation

Share holder equity is increase high in 2006-07 because the company has allocated

new share.

Share holder equity is showing high fluctuation.

2.1.4 Trend Analysis of total loan fund.

Table 2.1.6 Trend Analysis of total loan fund.

Year 2003-04 2004-05 2005-06 2006-07 2007-08Total Loan Funds 100 58.9472 122.076 616.343 1171.94

Figure 2.1.5 Trend Analysis of total loan funds

Interpretation

The total trend line is slowly increase up to 2005-06. And after that it is increase at

a high rate.

From 2006-07 onward the loan fund is increase because the company has expanse

its business.

The company has been able to raise its secured loan without shortage of funds.

Increase in secured loan shows that company has very good prestige in

Financial market.

Company increasing loan funds because company want to increase its trading

on equity.

2.1.5 SHARE HOLDER’S FUNDS

    Share Holder's Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08share capital 100 302.273 202.68 207.37 100.171

Share application money pending allotment 100   622.406 290.456 114.286Reserves and Surplus 100 138.625 122.944 180.99 122.516Total 100 140.684 125.181 181.718 121.833

Table 2.1.7 Trend Analysis of Share Holder's Funds

Figure 2.1.6 Trend Analysis of Share Holder's Funds

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 2007-08Share holder's Equity 100 140.6845 125.181 181.718 121.833Minority Interest 100 161.9446 - 10.929 400Total Loan Funds 100 58.94717 122.076 616.343 1171.94

Total Sources of Funds 100 138.5534 124.52769 149.283 162.162

Table 2.1.8 Trend Analysis of Source Of Funds

Figure 2.1.7 Trend Analysis of Sources of Funds

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 2007-08Investments 100 123.3283 131.087 107.909 48.1879

Table 2.1.9 Trend Analysis of Investment

Figure 2.1.8 Trend Analysis of Investment

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.

2.1.8 Application Of Funds

  Application of funds    Year 2003-04 2004-05 2005-06 2006-07 2007-08Total Fixed Assets 100 130.8267 112.844 175.077 220.726Investments 100 123.3283 131.087 107.909 48.1879

Deferred Tax Assets(Net) 100 101.789 120 99.3266 89.661Net Current Assets 100 231.5197 131.437 203.29 219.526

Table 2. 10 Trend Analysis of Application Of Funds

Figure 2.1.9 Trend Analysis of Application Of Funds

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.

2.2 Horizontal Analysis of Balance Sheet

Financial Statement present information for the last five year. Horizontal analysis of

Balance Sheet deals with the amount changes and the percentage changes of the items

of the Balance Sheet.

Financial Statement present comparative information for the current year and the

previous year. Horizontal analysis of Balance Sheet deals with the amount changes

and the percentage changes of the items of the Balance Sheet.

YEAR 2007-08 2006-07 2005--06 2004-05 2003-04SOURCES OF FUNDS          

Share Capital 1.35 2.06 2.91 1.96 0.83Share application money pending allotment 0.02 0.02 0.08 0.02 0.00

Reserves & Surplus 52.69 65.73 64.42 71.64 65.85

Secured 0.96 1.05 0.46 0.30 1.68

Unsecured 19.77 1.65 0.31 0.56 0.19

Minority Interest 0.05 0.02   0.37 0.29

Current Liabilities 18.44 23.78 18.89 17.76 15.79

Provisions 6.72 5.67 12.93 7.39 15.37

TOTAL 100 100.00 100.00 100.00 100.00

APPLICATION OF FUNDS          

Total Fixed Assets 38.73 26.82 22.10 26.78 26.08

Investments 7.41 23.49 31.41 32.76 33.84

Deferred Tax Assets(Net) 0.24 0.42 0.61 0.69 0.86

Current Assets, Loans & Advances 0.00 0.00 0.00 0.00 0.00

Inventories 3.08 2.93 2.10 2.43 2.29

Sundry Debtors 18.70 20.76 21.68 21.63 21.07

Cash & Bank Balances 18.15 14.00 9.03 7.96 5.76

Loan & Advances 13.69 11.58 13.07 7.75 10.09

TOTAL 100 100 100 100 100

Table 2.2.1 Horizontal Analysis of Balance Sheet

2.2.1 analysis of sources of funds 2008

Share Capital 1.35Share application money pending allotment 0.02Reserves & Surplus 52.69Secured 0.96

Unsecured 19.77Minority Interest 0.05Current Liabilities 18.44Provisions 6.72

Table 2.2.2 Horizontal Analysis of sources of funds

Figure: 2.2.1 Horizontal analysis Sources of funds

Interpretation

Graph shows that in 2007-08 unseured loan is 19.77% it means that company has

more taken short term borrowings for expantion of business.

In this graph revenue is more then 50% compare to other source so it is good for

company.

2.2.2 analysis of application of funds 2008

Total Fixed Assets 38.73Investments 7.41Deferred Tax Assets(Net) 0.24

Current Assets, Loans & Advances 0.00Inventories 3.08Sundry Debtors 18.70Cash & Bank Balances 18.15Loan & Advances 13.69

Table 2.2.3 Analysis of application of funds in 2008

Figure: 2.2.2 analysis of application of funds

Interpretation

Graph shows that in 2007-08 the current assets loan is increase

Sondory debtors is 13.69 so company has to recover it.

2.2.3 Sources of Funds

  Sources of Funds    Year 2003-04 2004-05 2005--06 2006-07 2007-08Share holder's Equity 97% 98% 99% 96% 72%Total Loan Funds 3% 1% 1% 4% 28%Total Sources of Funds 100% 100% 100% 100% 100%

Table 2.2.4 Horizontal Analysis of Sources of Funds

Figure 2.2.3 Horizontal Analyses of Sources of Funds

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    

Year2003-04

2004-05

2005-06

2006-07

2007-08

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%

Table 2.2.5 Horizontal Analysis of Application of Funds

Figure 2.2.4 Horizontal Analysis of Application of Funds

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

Trend Analysis of Profit & Loss Account

Horizontal Analysis of Profit & Loss Account

3. ANALYSIS OF PROFIT & LOSS ACCOUNT

3.1.Trend Analysis of Profit & Loss Account

Trend Analysis of Profit & Loss Account involves calculation of percentage changes

in the P & L Account items for a no. of successive years. This is carried out by taking

the items of the past financial year used as base year and items of other years are

expressed as percentage of the base year. Here 2004-05 is taken as base year

 2003-

042004-

052005-

062006-

072007-

08

Income          Gross Sales and Services 100 139.16 129.73 142 133.12

Less: Excise Duty 100 95.25 106.94 174 122.77

Net Sales and Services 100 139.74 129.93 141 133.21

Other Income 100 71.79 162.58 193 140.87

Total Income 100 138.24 130.3 142 133.36

Expenditure          

Cost of Sales and Services 100 138.14 132.18 143 136.91

Selling and marketing expenses 100 104.38 124.21 136 148.91

General and administrative expenses 100 1.812 62.37 354 8669.4

Interest 100 109.12 137.58 149 21.48

Total Expenditure 100 133.38 131.74 143 139.13

PROFIT BEFORE TAXATION 100 157.48 125.5 139 112.37

Provision for taxation including FBT 100 163.61 123.33 114 117.63PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES 100 156.49 125.87 143 111.68

Minority interest 100 -148.9 -1.13 -600 -400

Share in earning of Associates 100 764.97 164.26 102 112.88

PROFIT FOR THE PERIOD 100 157.88 126.95 142 111.58

Appropriations          

Interim dividend 100       40.33

Proposed dividend 100 373.65 204.92 20 400.69

Tax on dividend 100 57.05 202.68 127 117.43TRANSFERTO GENERAL RESERVE 100 456.02 101.88 155 116.03

EARNINGS PER SHARE-EPS          

Equity shares of par value Rs.2/- each          

Basic (in Rs.) 100 78.68 125.64 140 109.70

Diluted (in Rs.) 100 78.11 124.83 141 110.29

Number of Shares for calculating EPS 100        

Basic (in Rs.) 100 200.55 101.07 101 101.69

Diluted (in Rs.) 100 202.19 101.68 101 101.69

Table 3.1.1 Trend Analysis of Profit & Loss Account

3.1.1 Trend Analysis of Total Income and Total Expenditure

Table 3.1.2 Trend Analysis of Total Income and Total Expenditure

  Trend analysis of total income & expenditure  2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100 138.238 130.304 142 133.36

Total Expenditure 100 133.382 131.735 143 139.13

Figure 3.1.1 Trend Analysis of Total Income and Total Expenditure

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.

3.1.2 Profit After Tax

  Profit after taxYear 2003-04 2004-05 2005-06 2006-07 2007-08

Profit after tax 100 157.481 125.497 139 112.37

Table 3.1.3Trend Analysis of Profit After Tax

Figure 3.1.2 Trend Analysis of Profit After Tax`

Interpretation

PAT has been rising over the years when we compare with the expenditure

which has been incurred to earn this profit is also rising

PAT has been increased all the years because of increasing in sales.

3.1.3 Trend Analysis of Profit trancfer to genral resrve

Year 2003-04 2004-05 2005-06 2006-07 2007-08TRANSFERTO GENERAL RESERVE 100 456.022 101.883 155 116.03

Table 3.1.4 Trend Analysis of Profit trancfer to genral resrve

Figure 3.1.3 Trend Analysis of Profit trancfer to genral resrve

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.

3.1.4 Trend Analysis of net sales and services

Year 2003-04 2004-05 2005-06 2006-07 2007-08Net Sales and Services 100 139.735 129.93 141 133.21

Table 3.1.5 Trend Analysis of net sales and services

Figure 3.1.4 Trend Analysis of net sales and services

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.

3.2.Horizontal Analysis of Profit & Loss Account

Financial Statement present comparison or every year what portion the rest of

particular is having compare to the total income. Hear we assume that the total

income is 100 then what is the of particular compare to total income. Horizontal

analysis of Profit & Loss Account deals with the amount changes and the percentage

changes of the items of the Profit & Loss Account in every year individually.

Year  2003-04 2004-05 2005-06 2006-07 2007-08

Income    

Gross Sales and Services 99.07% 99.73% 99.29% 98.94% 98.77%

Less: Excise Duty 1.27% 0.88% 0.72% 0.88% 0.81%

Net Sales and Services 97.80% 98.86% 98.57% 98.06% 97.95%

Other Income 2.20% 1.14% 1.43% 1.94% 2.05%

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Expenditure          

Cost of Sales and Services 65.56% 65.51% 85.32% 66.97% 68.75%Selling and marketing expenses 9.05% 6.83% 6.51% 6.24% 6.97%General and administrative expenses 5.19% 0.07% 0.03% 0.08% 5.27%

Interest 0.06% 4.64% 4.89% 5.14% 0.83%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%

PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%Provision for taxation including FBT 2.81% 3.33% 3.15% 2.53% 2.23%PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES 17.33% 19.62% 18.95% 19.04% 15.94%

Minority interest -0.10% 0.11% 0.00% 0.00% -0.01%

Share in earning of Associates 0.04% 0.21% 0.27% 0.19% 0.16%PROFIT FOR THE PERIOD 17.27% 19.73% 19.22% 19.24% 16.10%

Appropriations          

Interim dividend 9.74%     4.73% 1.43%

Proposed dividend 1.56% 4.21% 6.63% 0.95% 2.87%

Tax on dividend 1.45% 0.60% 0.93% 0.83% 0.73%TRANSFERTO GENERAL RESERVE 4.52% 14.92% 11.66% 12.72% 11.07%Table 3.2.1 Horizontal Analysis of Profit & Loss Account

3.2.1 Comparition of PBT and Expenduture with total income

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%

Table 3.2.2 Comparition of PBT and Expenduture with total income

Figure 3.1.1 Comparition of PBT and Expenduture with total income

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

4. ANALYSIS OF CASHFLOW STATEMENT

4.1.Introduction

Cash flow statement [CFS] provides information about the historical changes in

cash by classifying cash flows during the period from operating activities, financial

activities and investing activities of a concern. It shows the summary of cash flow

on account of these activities.

Operating activities as the principal revenue-production activities of the enterprise

These activities determines the net profit or loss of a concern. Operating Activities

refer to the operations of a business of purchasing, sales etc. Sales generate cash;

purchase and expense use up the cash. Net profit leads to net increase in cash.Net

increase in cash from operating activities is the main source of cash inflow.

Investing activities as the acquisition and disposal of long tern assets and

investments. Acquiring and selling of a subsidiary or other concerns should be

shown as Investing Activity. Investing Activities of acquisition of fixed assets, long

term investing reduces the cash and indicate cash outflow. Investing activities of

disposal of fixed assets etc increase the cash inflow.

Financial activities as the activities resulting in the changes in the size and

composition of the owner’s capital and borrowing of the enterprise. Owner’s capital

includes preference capital in case of a company. Financial Activities such as issue

of shares, taking a loan from Bank, sale of fixed assets etc. increase the amount of

cash available and form the source of cash inflow. Financial activities such as

repayment of preference capital or repayment of loan reduce the amount of cash and

indicates cash outflow.

4.2 Cash Flow Statement

Year ended March 31, (Ra. In Million)

Table 4. 1 Cash Flow Statement  2008 2007 2006 2005 2004A. Cash Flow from Operating Activities  Adjustments for :  Depreciation and amortizations 5359 3,978 3,096 2,456.24 1971.85Amortizations of stock compensation 1166 1,078 688 342.62  Unrealized foreign exchange Net -595 457 65 92.45 -132.77Interest on borrowings 1690 125 35 56.12  Dividend/interest – Net -2802 -2,118 -1,069 715.15 -762.41(Profit)/Loss on sale of investments -771 -588 -238 35.59  Gain on sale of fixed assets -174 -10 -8 109.8 -107Working Capital Changes :  Trade and other receivable -11885 -7,633 -6,991 4,433.69 -3670.41Loans and advances -5157 -299 -1,033 311.74 -359.89Inventories -1565 -1,120 -317 455.23 -281.5Trade and other payables 6182 5,445 6,150 4,180.42 2748.13Net cash generated from operations 28518 32,303 24,102 20,456.00 -594Direct taxes paid -5459 -4,252 -4,543 2,354.70 -1568.36Net cash generated by operating activities 23059 28,051 19,559 18,101.30 -2162.36B. Cash flows from investing activities:  Acquisition of property, fixed assets          Plant and equipment(Inc. advances) -14226 -13,005 -7927 6,465.43 -4100.97Proceeds from sale of fixed assets 479 149 113 168.98 121.86

Purchase of investments -

231684-

123,579-

59,047 70,145.11 -10706.5Proceeds on sale/from maturities on Investments 250013 122042 52,043 66,383.54 48.06Inter-corporate depo sit 150 -650 -   285.3Net payment for acquisition of Business -32790 -6608 -2,777 617.99 -465.27Dividend/interest income received 2490 2,118 923 254.15 777.85Net cash generated by/(used in) Investing -25568 -19533 -16672 144035.2 -14039.7C. Cash flows from financing activities:  Proceeds from exercise of Employee Stock Option 541 9,458 4,704 2,576.58 238.6Share application money pending allotment 40 35 63 12.05  Interest paid on borrowings -1690 -125 -35 56.12  Dividends paid (including distribution tax -12632 -8,875 -3,998 7,575.76 -262.36Proceeds/(repayment) of long term -74970 142 -268 - 463.02Proceeds/(repayment) of short term 110641 1825 -200 432.43  

Proceeds from issuance of shares by Subsidery 55 35   266.19 147.53Net cash generated by financing Activities 21985 2495 266 -5209 -12954.5Net increase in cash and cash equivalents During the period 19476 11013 3154 2469.95 -958.77Cash and cash equivalents at the Beginning of the period 19822 8858 5714 3242.7 4210.08Effect of translation of cash balance -28 -49 -10 0.92 -8.61Cash and cash equivalents at the end of Period * 39270 19822 8858 5713.57 3242.7

*includes Rs. 7,278 Million in a restricted designated bank account for payment of interim dividend

4.2.Interpretation of Cash Flow Statement

Overall Cash flow Statement shows that cash has been generated through Operating

activity is Rs 23059 , 28051 , 19559, 18101, -2162.36 and in the years 2007-08, 2006-

07, 2005-06, 2004-05 and 2003-04 respectively. So major part of cash inflowing is

Operating department. Investment Activity Shows Cash Outflow and borrowing activities

takes a little part in increasing cash.

Operating Activities : Profit before tax is increased by Rs. 25038.17 Million

and Net Cash generated by Operating activity is increased by Rs. 25221.36

Million because,

Depreciation and amortizations are increased by Rs. 3387.15 Million in

between four year.

Trade and other receivable are also increased by Rs. 8214.59 Million in

between four year.

Investing Activities : Net Cash outflow from investing activities is Rs. 11528

Million because,

Company has increased its plan and equipment worth Rs.10625 Million in

between four year.

Investment is also increase worth Rs. 220977 Million in between four year.

From this inference that these investments has been met out of the cash

from Operations or borrowings.

Investments in Fixed Assets could be part of Company’s plan of expansion

or modernization.

Financial Activities : From the section on cash flow from Financial Activities

company think to proceeds in both short term and long term borrowings with

proceeds from exercise of employee stock option.

Chapter 5.

Ratio Analysis

Introduction To The Ratio Analysis

Liquidity Ratios

Profitability Ratios

Finance Structure Ratios

Valuation Ratios

The Du-Pont Chart

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

5.2.Liquidity Ratio

Liquidity refers to the existence of the assets in the cash or near cash form. This ratio

indicates the ability of the company to discharge the liabilities as and when they

mature. The financial resources contributed by owners or supplemented by outside

debt primarily come in the cash form as under in the balance sheet form.

The following Liquidity Ratios are calculated for the company.

Current Ratio

Quick Ratio

Net Working Capital

5.2.1. Current Ratio

This ratio shows the proportion of Current Assets to Current Liabilities. It is also

known as “Working Capital Ratio” as it is a measure of working capital available at a

particular time. It’s a measure of short term financial strength of the business. The

ideal current ratio is 2:1 i.e. Current Assets should be equal to Current Liabilities.

Current Ratio = Current Assets

Current Liabilities

    Current Ratio    Year 2003-04 2004-05 2005--06 2006-07 2007-08Ratios 1.26 1.58 1.44 1.67 2.13

Table 5. 1 Current Ratio Analysis

Figure 5. 1 Current Ratio Analysis

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 2007-08Ratios 1.2 1.5 1.4 1.6 2.0

Table 5. 2 Quick Ratio Analysis

Figure 5. 2 Quick Ratio Analysis

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

Networking capital = Current Assets – Current Liabilities

    Net working capital  Year 2003-04 2004-05 2005-06 2006-07 2007-08Trend 4534.3 10497.8 13798.0 28050.0 61577.0

Table 5.3 Networking Capital

Figure 5.3 Networking capital

Interpretation

This ratio represents that part of the long term funds represented by the net

worth and long term debt, which are permanently blocked in the current

assets.

It is Increasing Double than year by year because of assets increasing fast than

liabilities.

5.3 Profitability Ratios

A company should earn profits to survive and grow over a long period of time. It

would be wrong to assume that every action initiated by management of company

should be aimed at maximizing profits, irrespective of social as well as economical

consequences. It is a fact that sufficient must be earned to sustain the operation of the

business to be able to obtain funds from investors for expansion and growth and to

contribute towards the responsibility for the welfare of the society in business

environment and globalization.

The profitability ratios are calculated to measure the operating efficiency of the

company.

The following Profitability Ratios are calculated for the company.

Gross Profit Ratio

Operating Profit Ratio

Net Profit Ratio

Rate Of Return On Investment

Rate Of Return On Equity

5.3.1 Gross Profit Ratio

This is the ratio expressing relationship between gross profit earned to net sales. It is a

useful indication of the profitability of business. This ratio is usually expressed as

percentage. The ratio shows whether the mark-up obtained on cost of production is

sufficient however it must cover its operating expenses.

Gross Profit Ratio = Gross Profit X 100

Sales

    Gross profit ratio analysisYear 2003-04 2004-05 2005--06 2006-07 2007-08Trend 29.8 31.7 32.6 33.7 33.0

Table 5.4 Gross Profit Ratio Analysis

Figure 5.4 Gross Profit Ratio Analysis

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 2007-08Trend 83.5 80.0 79.0 77.9 81.7

Table 5.5 Operating Profit Ratio Analysis

Figure 5.5 Operating Profit Ratio Analysis

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 2007-08Trend 16.3 19.4 19.2 19.8 17.7

Table 5.6 Net Profit Ratio Analysis

Figure 5.6 Net Profit Ratio Analysis

Interpretation

After observing the figure the ratio is fluctuating.

Company has rise in its net profit in 2006-07 as compared to the previous year

because the company has increased its sales 41.45% .

Though the company’s sale is continuously rising but the net profit is not so much

increased so management should take some steps to decrease its expenses.

Sales is decrease in 2008 compare to 2007

The overall ratio is showing good position of the company.

5.3.4 Return On Investment

Rate of Return on Investment indicates the profitability of business and is very much

in use among financial analysts.

ROI= EBIT X 100

Total Assets

    Return On Investment  Year 2003-04 2004-05 2005--06 2006-07 2007-08Trend 32.7 39.7 35.7 30.6 18.6

Table 5.7 Rate of Return on Investment Ratio Analysis

Figure 5.7 Rate of Return on Investment Ratio Analysis

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 2007-08Trend % 22.2 11.5 7.1 10.0 5.5

Table 5.8 Rate of Return on Equity Ratio Analysis

Figure 5.8 Rate of Return on Equity Analysis

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 ratioYear 2003-04 2004-05 2005-06 2006-07 2007-08Trend 1.5 1.5 1.6 1.5 1.2

Table 5.9 Total Asset Turnover Ratio Analysis

Figure 5.9 Total Asset Turnover Ratio Analysis

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%.

5.4.2 Net Fixed Assets Turnover

To ascertain the efficiency & profitability of business the total fixed assets are compared

to sales. The more the sales in relation to the amount invested in fixed assets, the more

efficient is the use of fixed assets. It indicates higher efficiency. If the sales are less as

compared to investment in fixed assets it means that fixed assets are not adequately

utilized in business. Of course excessive sale is an indication of over trading and is

dangerous.

Net Fixed Assets Turnover Ratio = Sales

Net Fixed Assets

  Total fixed assets turnover ratioYear 2003-04 2004-05 2005--06 2006-07 2007-08Time 4.0 4.2 4.9 4.0 2.4

Table 5.10 Net Fixed Asset Turnover Ratio Analysis

Figure 5.10 Net Fixed Assets Turnover Ratio Analysis

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 ratioYear 2003-04 2004-05 2005-06 2006-07 2007-08Time 30.3 22.6 24.3 19.8 16.0

Table 5. 11 Inventory Turnover Ratio Analysis

Figure 5. 11 Inventory Turnover Ratio Analysis

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.

5.4.4 Average age of Inventories

This ratio indicates the waiting period of the investments in inventories and is measured

in days, weeks or months. Inventory turnover and average age of inventories are

inversely related.

Average age of Inventories Ratio = 360 days

Inventory Turnover

    Average age of InventoriesYear 2003-04 2004-05 2005--06 2006-07 2007-08Days 11.9 15.9 14.8 18.2 22.4

Table 5. 12 Average age of Inventories Ratio Analysis

Figure 5. 12 Average age of Inventories Ratio Analysis

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.

5.4.5 Debtor Turnover Ratio

Debtor turnover ratio: The debtor turnovers suggest the no. of times the amount of

credit sale is collected during the year.

Debtor’s Turnover Ratio = Sales

Average Debtors

    Debtors turn over in (times)  Year 2003-04 2004-05 2005--06 2006-07 2007-08Time 4.9 3.8 3.7 3.7 1.5

Table 5. 13 Debtor Turnover Ratio Analysis

Figure 5.13 Debtor Turnover Ratio Analysis

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.

5.5 Finance Structure Ratios

Finance Structure Ratios indicate the relative mix or blending of owner’s funds and

outsiders’ debt funds in the total capital employed in the business. It should be noted that

equity funds are the prime fund which increase progressively through reinvestment of

profits, while outside debt funds are supplementary funds and are added at the discretion

of the management.

The following Finance Ratios are calculated for the company.

Debt Ratio

Debt-Equity Ratio

Interest Coverage Ratio

5.5.1 Debt Ratio

Debt ratio indicates the long term debt out of the total capital employed.

Debt Ratio = Long Term Debt

Total Capital Employed

Table 5. 14 Debt Ratio Analysis

Debt Ratio2003-04 2004-05 2005-06 2006-07 2007-08

Trend 0.0284 0.0165 0.0114 0.0383 0.384

Figure 5. 14 Debt Ratio Analysis

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 AnalysisDebt- Equity Ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08Trend 0.027 0.012 0.011 0.030 0.376

Figure 5. 15 Debt-Equity Ratio Analysis

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 2007-08Trend 3.4 5.0 4.5 4.2 21.9

Table 5. 16 Interest Coverage Ratio Analysis

Figure 5. 16 Interest Coverage Ratio Analysis

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

Earnings Per ShareYear 2003-04 2004-05 2005-06 2006-07 2007-08Trend(Rs.) 7.43 11.70 14.70 20.62 22.62

Figure 5.17 Earnings per Share Ratio Analysis

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 AnalysisDividend 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

Figure 5. 18 Dividend Pay-out Ratio Analysis

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

Figure 5. 19 P/E Ratio Analysis

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

 Year 2007-08 2006-07 2005-06 2004-05 2003-04Net Sales and Services 199796 149982 106030 81605.6 58400.23PAT 32829 29,421 20674 16285.4 10315Ratio 16% 20% 19% 20% 18%

Table 5. 20 Profit margin ratio

Figure 5. 20 Profit margin ratio

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

Table 5.20 Do-Pont chart

Sales

2007-08 199575 2006-07 1497512005-06 1061642004-05 815962003-04 58648

Assets turn over(in Rs.)

2007-08 1.93 2006-07 2.652005-06 3.322004-05 3.392003-04 4.20

Profit margin (in %)

2007-08 0.16 2006-07 0.202005-06 0.192004-05 0.202003-04 0.18

Profit after tax

2007-08 32829 2006-07 294212005-06 206742004-05 162852003-04 10315

Sales

2007-08 199575 2006-07 1497512005-06 1061642004-05 815962003-04 58648

Asset

2007-08 103160 2006-07 565352005-06 319512004-05 240492003-04 13969

Figure 5. 24 The Du-Point Chart

ROA (IN %)

2007-08 30.88 2006-07 532005-06 63.082004-05 67.82003-04 75.6

Interpretation

DuPont chart shows that how profitability is there in the business. When profit

margin is multiplied by total Assets turnover ratio that gives ROA. Profit Margin is

obtained by dividing PAT by Total sales. Total Asset Turnover is obtained by the

sales divided total assets.

It is like a Tree having various braches connected to each other.

It show company’s efficiency in making right decision of Investment

Total Assets turnover is decreasing in current year because of huge increase in net fix

assets and net current asset which is more than double compare to previous year.

The Chart shows the total assets turnover that indicate the company’s efficiency in

utilizing its assets.

So overall it can be interpreted that the company’s ROA is good .

Company should try its best to increase sales and profit.

The Du point chart Shows the complete picture of company’s performance.

Chapter 6.

Scenario Analysis

Company Analysis

Share Holding Pattern

Chapter 6.

Scenario Analysis

Company Analysis

Share Holding Pattern

6. SCENARIO ANALYSIS

6.1.Business Unit Performance

6.2.Company Analysis

6.2.1. Share Holding Pattern

FINDINGS

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.

Hear the in 2005 company has reinvest profit for business expansion it is good

shine for the company.

The total expenditure is near by 80% of total income in every year.

Every year PBT is near by 20% of total income.

Fixed assets are efficiently utilized by the company due to which the profit of the

company is increasing every year.

Liabilities is incressing rate it mean company has to developed business. And

purchase raw material on credit basis.

Company has enough cash in hand so that in any condition company can take

Any Financial decision easily.

All the years has quick ratio exceeding 1, the firm is in position to meet its

immediate obligation in all the years.

GP Ratio shows how much efficient company is in Production.

SUGGESTION

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.

Though the company’s sale is continuously rising but the net profit is not so

much increased so management should take some steps to decrease its

expenses.

Company should try its best to increase sales and profit.

The profit margin ratio shows decline in current year so that company should

tray to increase profit after tax

Current ratio is very good it is 2.13:1 so company has fully utilize cash

liquidity for business development.

Annexure

ANNEXURE-1

BALANCE SHEET Rs (In Million)

  2007-08 2006-07 2005--06 2004-05 2003-04SOURCES OF FUNDS          Share Holder's Funds  Share Capital 2923 2918 2852 1407.14 465.52Share application money pending a 40 35 75 12.05  Reserves & Surplus 113991 93042 63202 51407.1 37083.7Share holder's Equity 116954 95995 66129 52826.3 37549.5Loan Funds  Secured 2072 1489 451 215.89 947.47Unsecured 42778 2338 307 405.03 105.88Total Loan Funds 44850 3827 758 620.92 1053.35Minority Interest 116 29 - 265.33 163.84Total Sources of Funds 161920 99851 66887 53712.6 38766.7APPLICATION OF FUNDS  Fixed assets  Goodwill 42209 9477 3528 5663.16 5252.36Gross Block 56280 35287 24816 20899.6 15607.1Less:  Accumulated Depreciation 28067 18993 12911 9951.77 7599.48Net Block 28213 18294 11905 10947.9 8007.63Capital work in progress and advances 13370 10191 6250 2603.85 1427.28Total Fixed Assets 83792 37962 21683 19214.9 14687.3Investments 16022 33249 30812 23504.9 19058.8Deferred Tax Assets(Net) 529 590 594 495 486.3Current Assets, Loans & Advances  Inventories 6664 4150 2065 1747.25 1292.02Sundry Debtors 40453 29391 21272 15518.3 11865.6Cash & Bank Balances 39270 19822 8858 5713.57 3242.7Loan & Advances 29610 16387 12818 5562.85 5683.78Total Current Assets 115997 69750 45013 28542 22084.1Less:  Current Liabilities & Provisions  Current Liabilities 39890 33667 18527 12742.1 8894.2Provisions 14530 8033 12688 5302.14 8655.58

Total Liabilities 54420 41700 31215 18044.2 17549.8Net Current Assets 61577 28050 13798 10497.8 4534.28Total Application of Funds          

ANNEXURE-2

PROFIT & LOSS ACCOUNTRS. (In Million)

  2007-08 2006-07 2005-06 2004-05 2003-04Income  

Gross Sales and Services 201451 151,330 106805 82330.3 59161.07Less: Excise Duty 1655 1348 775 724.7 760.84Net Sales and Services 199796 149982 106030 81605.6 58400.23Other Income 4174 2963 1536 944.79 1315.99Total Income 203970 152945 107566 82550.3 59716.22Expenditure          Cost of Sales and Services 140224 102420 71484 54081.4 39150.23Selling and marketing expenses 14216 9547 7003 5638.13 5401.64General and administrative expenses 10750 124 35 56.12 3097.15Interest 1690 7866 5265 3826.91 35.07Total Expenditure 166900 119957 83787 63602.6 47684.39PROFIT BEFORE TAXATION 37070 32988 23779 18947.8 12031.83Provision for taxation including FBT 4550 3868 3391 2749.59 1680.56PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES 32520 29120 20388 16198.2 10351.27Minority interest -24 6 -1 88.12 -59.19Share in earning of Associates 333 295 288 175.33 22.92PROFIT FOR THE PERIOD (PAT) 32829 29,421 20674 16285.4 10315Appropriations          

Interim dividend 2919 7238     5818.98Proposed dividend 5846 1459 7129 3478.84 931.04Tax on dividend 1489 1268 1000 493.38 864.85TRANSFERTO GENERAL RESERVE 22575 19456 12545 12313.2 2700.13EARNINGS PER SHARE-EPS  Equity shares of par value Rs.2/- each  

Basic (in Rs.) 22.62 20.62 14.7 11.7 14.87Diluted (in Rs.) 22.51 20.41 14.48 11.6 14.85Number of Shares for calculating EPS  

Basic (in Rs.) 1,451,127,719 1,426,966,318 1,406,505,974 1,391,554,372 693,870,390

Diluted (in Rs.) 1,458,239,060 1441.469,952 1,427,915,724 1,404,334,256 694,545,321

ANNEXURE-3

CASH FLOW STATEMENT FOR THE YEAR ENDED ON MARCH 31

Rs(In Million)

  2008 2007 2006 2005 2004A. Cash Flow from Operating Activities  Adjustments for :  Depreciation and amortizations 5359 3,978 3,096 2,456.24 1971.85Amortizations of stock compensation 1166 1,078 688 342.62  Unrealized foreign exchange Net -595 457 65 92.45 -132.77Interest on borrowings 1690 125 35 56.12  Dividend/interest – Net -2802 -2,118 -1,069 715.15 -762.41(Profit)/Loss on sale of investments -771 -588 -238 35.59  Gain on sale of fixed assets -174 -10 -8 109.8 -107Working Capital Changes :  Trade and other receivable -11885 -7,633 -6,991 4,433.69 -3670.41Loans and advances -5157 -299 -1,033 311.74 -359.89Inventories -1565 -1,120 -317 455.23 -281.5Trade and other payables 6182 5,445 6,150 4,180.42 2748.13Net cash generated from operations 28518 32,303 24,102 20,456.00 -594Direct taxes paid -5459 -4,252 -4,543 2,354.70 -1568.36Net cash generated by operating activities 23059 28,051 19,559 18,101.30 -2162.36B. Cash flows from investing activities:  Acquisition of property, fixed assets          Plant and equipment(Inc. advances) -14226 -13,005 -7927 6,465.43 -4100.97Proceeds from sale of fixed assets 479 149 113 168.98 121.86

Purchase of investments -231684-

123,579-

59,047 70,145.11-

10706.51Proceeds on sale/from maturities on Investments 250013 122042 52,043 66,383.54 48.06Inter-corporate depo sit 150 -650 -   285.3Net payment for acquisition of Business -32790 -6608 -2,777 617.99 -465.27Dividend/interest income received 2490 2,118 923 254.15 777.85Net cash generated by/(used in) Investing -25568 -19533

-16672 144035.2

-14039.68

C. Cash flows from financing activities:  Proceeds from exercise of Employee Stock Option 541 9,458 4,704 2,576.58 238.6Share application money pending allotment 40 35 63 12.05  

Interest paid on borrowings -1690 -125 -35 56.12  Dividends paid (including distribution tax -12632 -8,875 -3,998 7,575.76 -262.36Proceeds/(repayment) of long term -74970 142 -268 - 463.02Proceeds/(repayment) of short term 110641 1825 -200 432.43  Proceeds from issuance of shares by Subsidery 55 35   266.19 147.53Net cash generated by financing Activities 21985 2495 266 -5209

-12954.48

Net increase in cash and cash equivalents During the period 19476 11013 3154 2469.95 -958.77Cash and cash equivalents at the Beginning of the period 19822 8858 5714 3242.7 4210.08Effect of translation of cash balance -28 -49 -10 0.92 -8.61Cash and cash equivalents at the end of Period * 39270 19822 8858 5713.57 3242.7

Bibliography

BIBLIOGRAPHY

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