1 SYNOPSIS Wipro is 4 th largest Company in the world in terms of market capitalization in IT services. During the quarter ended, the robust growth of revenue is increased by 17.64% Rs. 90945.00 million. Wipro Tech. has entered into an alliance with Workday to help customers build 21st Century HR organizations. Wipro named as one of the Global Top Companies for Leaders by Aon Hewitt, The RBL Group and Fortune in the Prestigious Global Rankings. Wipro Technologies has won the 2011 Microsoft Software Development Partner of the Year Award. Wipro BPO inaugurated its first rural BPO center at Manjakkudi Village in Tamil Nadu. Wipro wins engagement with UK based food retailer- Premier Foods as a strategic technology partner. The Company’s revenue and PAT are expected to grow at a CAGR of 16% and 13% over FY10 to FY13E respectively. Years Net sales EBITDA Net Profit EPS P/E FY 11 310987.00 72531.00 52977.00 21.59 17.44 FY 12E 366964.66 82407.50 58365.70 23.78 15.83 FY 13E 414670.07 92861.04 66039.95 26.91 13.99 Stock Data: Sector: IT Face Value Rs. 2.00 52 wk. High/Low (Rs.) 496.30/310.20 Volume (2 wk. Avg.) 214000.00 BSE Code 507685 Market Cap (Rs in mn) 924176.40 Share Holding Pattern 1 Year Comparative Graph Wipro Ltd. BSE SENSEX C.M.P: Rs. 376.60 Target Price: Rs. 425.00 Date: Nov. 29 th 2011 BUY WIPRO LTD. Result Update: Q2 FY 12
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SYNOPSIS
Wipro is 4th largest Company in the world in terms of market capitalization in IT services.
During the quarter ended, the robust growth of revenue is increased by 17.64% Rs. 90945.00 million.
Wipro Tech. has entered into an alliance with Workday to help customers build 21st Century HR organizations.
Wipro named as one of the Global Top Companies for Leaders by Aon Hewitt, The RBL Group and Fortune in the Prestigious Global Rankings.
Wipro Technologies has won the 2011 Microsoft Software Development Partner of the Year Award.
Wipro BPO inaugurated its first rural BPO center at Manjakkudi Village in Tamil Nadu.
Wipro wins engagement with UK based food retailer- Premier Foods as a strategic technology partner.
The Company’s revenue and PAT are expected to grow at a CAGR of 16% and 13% over FY10 to FY13E respectively.
Years Net sales EBITDA Net Profit EPS P/E
FY 11 310987.00 72531.00 52977.00 21.59 17.44
FY 12E 366964.66 82407.50 58365.70 23.78 15.83
FY 13E 414670.07 92861.04 66039.95 26.91 13.99
Stock Data:
Sector: IT
Face Value Rs. 2.00
52 wk. High/Low (Rs.) 496.30/310.20
Volume (2 wk. Avg.) 214000.00
BSE Code 507685
Market Cap (Rs in mn) 924176.40 Share Holding Pattern
Wipro Ltd has posted a consolidated result for the quarter ended September 30,
2011. During the quarter, the company has posted a net profit of Rs 13009.00
million for the quarter ended September 30, 2011 as compared from Rs 12803.00
million for the quarter ended September 30, 2010, rise of 1.61%. Net sales are
surged by 17.64% to Rs. 90945.00 million from Rs.77305.00 million same quarters
last year. Company posted earnings of Rs. 5.29 a share during the quarter,
registering 1.38% increment over prior year period.
Quarterly Results - Consolidated (Rs. in mn)
As At Sep-11 Sep-10 %change
Net sales 90945.00 77305.00 17.64%
PAT 13009.00 12803.00 1.61%
Basic EPS 5.29 5.22 1.38%
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� Net Sales & PAT growth
During the quarter, Net sales rose by 17.64% to Rs.90945.00 million from
Rs.77305.00 in the same the quarter last year and the Total Profit for quarter ended
September 2011 was Rs.13009.00 million grew by 1.61% from Rs.12803.00 million
compared to same quarter last year.
� EPS
Due to increase in equity capital the basic EPS of the company stood at Rs.5.29 for
the quarter ended Sep 2011 from Rs.5.22 for the quarter ended Sep 2010.
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� Wins engagement with UK based food retailer - Premier Foods
Wipro Technologies has been chosen by Premier Foods, the United Kingdom’s
largest food producer, as a strategic technology partner. Premier Foods plc produces
and markets over 40 iconic British brands. Wipro will be supporting both systems
and processes to enhance efficiency of Premier Foods’ supply chain for five year
strategic relationship.
� Named as one of the Global Top Companies for Leaders by Aon Hewitt, The
RBL Group and Fortune
Wipro was the only Indian IT company ranked in the prestigious Aon Hewitt 'Top
Companies for Leaders' global list. The 'Top Companies for Leaders' study is
conducted by Aon Hewitt, a global human resource consulting firm, in partnership
with The RBL Group, a strategic HR and leadership advisory firm, and FORTUNE
magazine. This year's winners were selected based on strength of leadership
practices & culture, examples of leader development on a global scale, alignment of
business and leadership strategy, business performance and company reputation.
� Launches new version of Wipro Hospital Information Management System
Wipro InfoTech, the India, Middle East and Africa, IT Business unit of Wipro Ltd
and a leading provider of IT and business transformation services launched a new
version of its Hospital Information Management System (HIMS) with enhanced
business functionalities. The new version of the HIMS has been developed to cater
to the future needs of large healthcare providers, Hospital chains, Government
hospitals, clinics, and diagnostic centers in India, the Middle East and Africa.
� Recognized as 2011 Microsoft Software Development Partner of the Year
Wipro Technologies has won the 2011 Microsoft Software Development Partner of
the Year Award. The company was honored among a global field of top Microsoft
partners for demonstrating excellence in innovation and implementation of
customer solutions, based on Microsoft technology.
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� Wipro and Workday enter into an alliance
Wipro Technologies, the global Information Technology has entered into an alliance
with Workday to help customers build 21st Century HR organizations. Wipro will
provide Consulting and IT Services to clients deploying Workday
solutions. Workday is the leader in SaaS-based enterprise solutions for global
human resources, payroll, and financial management.
� Recognized as Asia's Most Admired Knowledge Enterprise (MAKE) Winner
Wipro Technologies has been recognized as Asia's Most Admired Knowledge
Enterprise (MAKE) winner 2011 for the 9th consecutive time, the only company in
Asia to have achieved this distinction in the IT sector. The Award was handed out
in the 12th World Knowledge Forum at Seoul, South Korea.
� Sets up its first Rural BPO Center
Wipro BPO inaugurated its first rural BPO center at Manjakkudi Village in Tamil
Nadu. The Manjakkudi center has a capacity of 120 seats, and will open with a 50
seat pilot project for an international client in the retail sector. Wipro plans to
expand its rural BPO operations to 500 seats by March 2013, in Tamil Nadu and to
replicate this BPO model across other states in India, in the near future.
� Helps UGI Utilities create agile IT Systems based on new Oracle platform
Wipro Technologies implemented latest Oracle Financial suite (12.1.3) of products
for UGI Utilities Inc., a natural gas and electric utility, and a wholly-owned
subsidiary of UGI Corporation, based in the United States. The solution helps UGI
Utilities streamline financial processes, update latest compliance mandates and
create agile IT systems, to effectively support their new business processes.
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� Revenue Composition (Q2 FY12)
� Geography Composition (Q2 FY12)
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� Service Line Distribution (Q2 FY12)
� Customer Concentration
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� Onsite/Offshore Revenue
� Head Count
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Company Profile
Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services Company globally. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro’s ADSs are listed on the New York Stock Exchange, and its equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange, among others. Wipro Ltd provides comprehensive information technology (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 through its IT services, solutions and products division. The following are the different verticals where Wipro is working:
• Aerospace, Defense & Satellite • Automotive Electronics • Automotive IT • Broadband & Optical Networks • Chemicals • Computing Peripherals • Computing Platforms • Consumer Electronics • Consumer Packaged Goods • Distribution • Energy • Finance • Health Science • High Technology • IP Multimedia Networks
• Industrial Automation • Insurance • Manufacturing • Media & Entertainment • Medical Devices • Mobile Devices • Retail • Semiconductors • Software Products Group • Storage Technologies • Telecom - Equipment Vendors • Telecom - Service Providers • Travel & Transportation • Utilities • Wireless Networks & Devices
Alliances The company has alliance with the following companies:
• Actuate • Amber Point • Aprision • Ariba • ARM • Artisan • ATG • Autonomy • Axiom • BEA • Blue Titan • Business Objects • Cape Clear • Cognos • Cisco • Computer Associates • Data Flux
• Data Foundations • DSPA • Embedded Linux Consortium • FileNet • GXS • HP • Hyperion • Subex • UMC • CEVA • JDA • Hyundai • IBM • Informatica • Interwoven ITKO • Magic Software • Microsoft
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• Nortel • Obilcore • OM Partners • Oracle • PeopleSoft • Real Time Image • RSA • SAS • SAP • Siebel
Profit Before Tax 16278.00 16384.00 15741.00 16971.81
Tax -2604.00 -3096.00 -2841.00 -2970.07
Profit After Tax 13674.00 13288.00 12900.00 14001.74
Minority interest -59.00 -49.00 10.00 0.00
Share of Profit & Loss of Asso 139.00 110.00 99.00 103.95
Net Profit 13754.00 13349.00 13009.00 14105.69
Equity capital 4908.00 4911.00 4915.00 4915.00
Face value 2.00 2.00 2.00 2.00
EPS 5.60 5.44 5.29 5.74
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Key Ratios
Particulars FY10 FY11 FY12E FY13E
No. of Shares (in Million) 1468.00 2454.00 2454.00 2454.00
EBITDA Margin (%) 23.49% 23.32% 22.46% 22.39%
PBT Margin (%) 20.23% 20.06% 19.12% 19.14%
PAT Margin (%) 16.81% 16.94% 15.76% 15.79%
P/E Ratio (x) 12.04 17.44 15.83 13.99
ROE (%) 22.88% 22.05% 19.49% 18.08%
ROCE (%) 27.33% 27.68% 26.06% 24.54%
Debt Equity Ratio 0.31 0.22 0.19 0.16
EV/EBITDA (x) 8.68 12.74 11.21 9.95
Book Value (Rs.) 135.71 97.33 120.90 147.58
P/BV 2.77 3.87 3.12 2.55
Charts:
Net sales & PAT:
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P/E Ratio(x):
Debt Equity Ratio:
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EV/EBITDA(x):
P/BV:
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Outlook and Conclusion
� At the current market price of Rs.376.60, the stock is trading at 15.83 x FY12E
and 13.99 x FY13E respectively.
� Earning per share (EPS) of the company for the earnings for FY12E and FY13E
is seen at Rs. 23.78 and Rs. 26.91 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 16% and
13% over 2010 to 2013E respectively.
� On the basis of EV/EBITDA, the stock trades at 11.21 x for FY12E and 9.95 x
for FY13E.
� Price to Book Value of the stock is expected to be at 3.12 x and 2.55 x
respectively for FY12E and FY13E.
� We expect that the company will keep its growth story in the coming quarters
also. We recommend ‘BUY’ in this particular scrip with a target price of
Rs.425.00 for Medium to Long term investment.
Industry Overview
Indian information technology (IT) and IT enabled Services (ITeS) sectors have seen
stupendous growth during the last decade. The IT industry, as a whole, has placed
India on the world map as a major knowledge-based economy and outsourcing hub.
Business Process Outsourcing (BPO) segment, which is an industry in itself, has
played a vital part in fuelling economic growth. The industry not only influences
people’s lives through an active direct and indirect contribution to the various socio-
economic parameters such as employment, standard of living and diversity, but also
has played a significant role in transforming India’s image to a land of innovative
entrepreneurs and a global player in providing world class technology solutions and
business services.
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Nearly one million jobs were created in India during 2010-11, of which 70 per cent
were from the IT and BPO sectors, according to data released by the Ministry of
Labour and Employment. Various industry experts believe that the workforce in
Indian IT industry will reach 30 million by 2020 and this sunrise industry is expected
to continue its mammoth growth.
The sector is estimated to have grown by 19 per cent in the FY2011, aggregating
revenue of almost US$ 76 billion. India’s outsourcing industry has witnessed a
rebound and registered better than expected growth according to National Association
of Software and Service Companies (NASSCOM).
The export revenues are estimated to have aggregated to US$ 59 billion in FY2011 and
contributed 26 per cent in total Indian exports (merchandise plus services), according
to a research report ‘IT-BPO Sector in India: Strategic Review 2011’, published by
NASSCOM.
Within exports, ITeS segment (contributed 57 per cent of total IT exports), grew by
22.7 per cent for FY11, while BPO export segment grew by 14 per cent.
Driven by increasing use of electronics, technology alignment and demand for
localised products, engineering design and products development segments generated
revenues of US$ 11.3 billion in FY2011, growing by 13.4 per cent.
The domestic IT-BPO market marked an improvement of 16 per cent to aggregate
revenues of US$ 17.6 billion. Massive expansion in technology adoption across
government and private sectors has driven customer services and internal controls to
get efficient which has led to an increase in outsourcing within domestic market also.
Market Dynamics
Top 200 Indian IT companies have garnered combined revenues of US$ 84 billion,
achieving an average growth rate of 25 per cent in 2010-11, the highest since 2007,
according to an annual research by Cybermedia’s Dataquest magazine. According to
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the survey, the top 5 Indian IT companies in FY11 were Tata Consultancy Services
(TCS), Infosys, Wipro, Hewlett Packard (HP) and Cognizant with revenues of US$ 7.4
billion (25 per cent growth over 2009-10), US$ 5.8 billion (22 per cent), US$ 5.6 billion
(13 per cent), US$ 5.2 billion (30 per cent) and US$ 4.8 billion (37 per cent),
respectively.
IT & ITeS - Key Developments and Investments
Between April 2000 and April 2011, the computer software and hardware sector
received cumulative foreign direct investment (FDI) of US$ 10,821 million, according to
the Department of Industrial Policy and Promotion (DIPP).
• Latin American nations, in a bid to have closer ties with India, have indicated
development of bilateral trade pacts and free trade agreements, wherein there is
a growing interest for co-operation in IT.
• Tech giant IBM and telecom service provider Bharti Airtel have signed a 10-year
deal wherein former will provide IT solutions to the latter’s employees in 16
African countries.
Cloud Computing is an increasingly upcoming concept in the Indian markets. It is
basically a technology that enables organisations to have network access to a shared
pool of computing resources like servers, networks, storage and applications. This
implies that users need not invest in infrastructure set-ups as they can avail third-
party services for all IT requirements and pay according to their usage. Apart from
global players like Amazon, Google, IBM, HP, Cisco and Oracle, Indian players like
TCS and Netcore offer these services.
Zinnov Management Consulting conducted a study on Indian cloud computing market
and stated that the current estimation of around US$ 400 million market size is
anticipated to reach US$ 4.5 billion in 2015. It stated that about 75 per cent of the
total market would be driven by private clouds as their deployment would help
companies reduce operational costs by 50 per cent. The study also revealed that IT
expenditure on cloud technology is expected to grow from 1.4 per cent in 2010 to 8.2
per cent by 2015.
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Software as a service (SaaS), a variation of cloud computing, has also gained
significant importance over the past couple of years. The market for such service is
estimated to grow by 20.7 per cent in 2011, valuing up to US$ 120 million, as against
US$ 99.5 million in 2010, according to IT advisory firm Gartner.
Customer relationship management (CRM), the largest market for SaaS, is expected to
reach US$ 37.7 million in 2011 to represent 32 per cent of total CRM market in India.
Some of the recent key developments pertaining to cloud computing are-
• In a bid to widen its ‘Cloud 2015’ vision, Intel has announced two new Intel
Science and Technology Centers (ISTC) - both headquartered at Carnegie Mellon
University. Entailing an investment of about US$ 30 million, the two centers
would focus on collaboration between university deemed leaders and Intel.
• Indian firms like Oxford Bookstore, Reilto Enterprises, Ryan International,
Kaya, Manav Rachana, Four Fountain, Karrox and United Biscuits have
adopted cloud computing.
Consulting
Consulting is the buzzword for IT firms these days. Major players like TCS, Infosys,
Wipro, Cognizant and HCL are relying on consulting services to extract maximum
business from existing accounts and win quality ones. Though the companies are said
to be in nascent stage under this concept, their revenues and client base are soaring
because of consulting, to a major extent. For instance, Infosys’ number of high profile
customers has gone up to 31 by the end of quarter ended June 30, 2011 from 28 in
the previous quarter while Wipro’s average revenue from top 10 clients has gone
beyond US$ 100 million in 2010-11 from about US$ 72 million in 2009-10.
Industry experts believe that Indian IT firms are winning lots of transformational deals
by leveraging upon their consulting strengths and providing consulting and solution
oriented modules rather than transactional ones to their clients.
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Government Initiatives
In a bid to connect Indian villages and classrooms across the country with knowledge
centres, the government has taken up a task of providing broadband connectivity to
all the village panchayats by 2012. Sufficient funds have been allocated for the same.
Minister of State for Communications and IT Sachin Pilot believes that broadening
connectivity in such a manner would improve the way government interacts with
people.
The IT wing of West Bengal government is planning to come up with clusters of small
and medium enterprises (SMEs) to promote IT as a focus industry for growth of the
state. To improve the stature for SME IT clusters, the state government is also
contemplating to increase state’s venture capital fund which is worth US$ 2.2 million
currently.
IT & ITeS in India - Road Ahead
According to ‘India Information Technology Report Q1 2011’, released by Research and
Markets, Indian market for IT services and products is anticipated to grow from US$
18.6 billion in 2011 to US$ 40.5 billion in 2015. During the year 2011, government
procurement is expected to grow substantially while opportunities in healthcare,
education, telecom and financial services would broaden further.
Further, NASSCOM expects software and services exports growth at 16-18 per cent,
clocking US$ 68-70 billion of revenues in FY2012 whereas domestic market is
anticipated to grow by 15-17 per cent with revenues of US$ 20.12- 20.56 billion.
Newer phenomenon like cloud, analytical services, advanced mobile applications,
healthy environment for start-ups and SaaS will drive the industry growth.
According to latest projections released by Cybermedia Research, the aggregate market
size of domestic IT products and ITeS would reach US$ 52.3 billion crore by 2014,
growing 17.3 per cent between 2010 and 2014.
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Disclaimer: This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision.
