Comparison Result

INFOSYS LTD Infosys is India's second largest software company and is recognised globally for its world-class management practices and work ethics. It offers services like software development, maintenance, consulting, testing and packaging implementation. Infosys offers all these services through its highly integrated and globally recognised delivery model. The company's revenues and profits grew at average annual rates of 26% and 27% respectively during FY05 to FY10. WIPRO Wipro is India's third largest software services exporter and also has interests in the hardware and consumer care and lighting businesses. The IT Services segment provides research and development services for hardware and software design to technology and telecommunication companies and software application development services to corporate enterprises. The BPO services segment provides services to global corporations. The India and Asia Pacific IT Services and Products segment focuses on addressing the IT and electronic commerce requirements of companies in India, Middle-East and Asia-Pacific regions. Over the period FY05 to FY10, Wipro's consolidated revenues and profits have grown at average annual rates of 27% and 23% respectively. EQUITY SHARE DATA
INFOSYS LTD 31/3/2012 High Low Sales per share Earnings per share Cash flow per share Dividends per share Dividend yield (eoy) Book value per share Shares outstanding (eoy) Bonus/Rights/Conversions Price / Sales ratio Avg P/E ratio P/CF ratio (eoy) Price / Book Value ratio Dividend payout Avg Mkt Cap x x x x % Rs m Rs Rs Rs Rs Rs Rs % Rs m 3,306 2,190 590.4 145.8 162.1 47.00 1.7 548.3 571.40 11 4.7 18.8 17.0 5.0 32.2 1,570,207 WIPRO 31/3/2012 490 311 151.3 22.8 26.8 6.00 1.5 110.0 2,457.14 ESOS 2.6 17.6 15.0 3.6 26.3 984,085 INFOSYS LTD/ WIPRO 674.7% 704.2% 390.1% 639.3% 605.2% 783.3% 114.2% 498.7% 23.3% 175.9% 107.3% 113.4% 137.6% 122.5% 159.6%

No. of employees Total wages/salary Avg. sales/employee Avg. wages/employee Avg. net profit/employee

`000 Rs m Rs Th Rs Th Rs Th

150 183,400 2,249.0 1,222.7 555.5

136 154,074 2,736.0 1,133.6 412.3

110.4% 119.0% 82.2% 107.9% 134.7%

INCOME DATA
Net Sales Other income Total revenues Gross profit Depreciation Interest Profit before tax Minority Interest Prior Period Items Extraordinary Inc (Exp) Tax Profit after tax Gross profit margin Effective tax rate Net profit margin Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m Rs m % % % 337,340 19,040 356,380 107,230 9,280 0 116,990 0 0 0 33,670 83,320 31.8 28.8 24.7 371,878 12,685 384,563 68,241 9,754 1,025 70,147 -257 0 0 13,845 56,045 18.4 19.7 15.1 90.7% 150.1% 92.7% 157.1% 95.1% 0.0% 166.8% 0.0% 243.2% 148.7% 173.2% 145.8% 163.9%

BALANCE SHEET DATA

Current assets Current liabilities Net working cap to sales Current ratio Inventory Turnover Debtors Turnover Net fixed assets Share capital "Free" reserves Net worth Long term debt Total assets Interest coverage Debt to equity ratio Sales to assets ratio Return on assets Return on equity Return on capital Exports to sales Imports to sales Net fx Rs m Rs m % x Days Days Rs m Rs m Rs m Rs m Rs m Rs m x x x % % % % % Rs m 302,610 69,020 69.2 4.4 0 64 61,450 2,860 307,480 313,320 0 447,720 52.0 0.0 0.8 18.6 26.6 37.3 0.0 0.0 176,550 269,027 134,889 36.1 2.0 10 79 59,860 4,915 255,813 270,173 22,510 432,141 69.4 0.1 0.9 13.2 20.7 24.2 2.3 6.3 111,043 112.5% 51.2% 192.0% 219.8% 0.0% 80.7% 102.7% 58.2% 120.2% 116.0% 0.0% 103.6% 74.9% 0.0% 87.6% 140.9% 128.2% 154.1% 0.0% 0.0% 159.0%

Infosys v/s Wipro: The final frontier

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While doing comparative analysis of Infosys and Wipro, in the first article of the series, we talked about the revenue distribution of the two companies. We also talked about the difference or similarities in client focus. In thesecond article, we talked about the business strategies adopted by the companies in the past. Then, in the third article , we compared them on the basis of their present business strategies, management quality and some of the financial performance parameters. In this article, we are going to compare Infosys and Wipro on the basis of returns generated by these companies to their shareholders and their valuations. Please note that so far, for the sake of apple-to-apple comparison we had referred only to Wipro's IT services business which contributes around 75% of the company's total revenues. In this article, we are going to discuss shareholder's returns and the companies' valuations. In this regard, taking total business of the company into account makes more sense. After all, shareholders own all business segments of the company irrespective of their size or contribution to the total revenues. And therefore get affected by the performance of the whole business. Besides, stock markets value the whole business, not just one part of the business. Return of Equity A very important metric to measure shareholder returns is return on equity (RoE). On this front, Infosys is way ahead of Wipro. Average consolidated RoE for last seven years is around 36% for Infosys as compared to around 30% for Wipro.

Source: Equitymaster Research, Company's Annual Reports

On the back of higher margins at operating levels and rock solid balance sheet, Infosys generated better returns for its shareholders as compared to Wipro. At this front, Infosys seems to be a clear winner. Valuations It is clear that Infosys has been generating higher returns on equity. But the question now is how are investors valuing these higher returns? Considering all the positive factors discussed so far, one should expect Infosys to command higher valuation multiples as compared to Wipro. However, that does not seem to be the case if we look at the following chart.

Source: Ace Equity Database

You must be surprised to see the earlier trend when Wipro used to command higher price-to-earnings (P/E) multiples. You may wonder as to the reason for the same. The historical Wipro's premium valuation has nothing to do with the financial performance or any sustainable competitive advantage of the company. It was primarily due to the low liquidity in the stock. Wipro remains, in spirit, a closely held company. Its promoter Mr Azim Premji, along with family and friends, used to control around 84% of the company's equity during 2004. That created a kind of liquidity crunch for the big investors, especially of the institutional variety. These investors had to pay a premium to own the Wipro stock. By comparison, the Infosys stock was more readily available to the public, as its promoters, led by Mr N.R. Narayana Murthy, had just around 22 per cent of the company's equity during 2004. This valuation gap was unsustainable and had to come down with the increase in liquidity in the Wipro counter. Gradually promoters' holding in Wipro came down to around 78%, at the end of March 2012. In

the past 4 years, Infosys traded at an average of 17% higher P/E multiple than that of Wipro. And considering the quality of business the higher valuations of Infosys appears to be quite justified. Besides, 25% of the Wipro's business is non-IT services which in general commands lower P/E multiple. This is also an important reason for Wipro's lower valuation multiples. What lies ahead? Well, both the companies are currently feeling the heat due to the prevailing uncertainty in the global demand environment. Both the companies had to face the management issues in recent times. Wipro seems to be doing well under the new regime after dismantling the joint CEO model. Infosys has been a professionally managed firm. And it is expected that the new management team would continue the company's spectacular growth story once demand environment stabilizes. At present, both the companies seem to be following similar strategies to grow their business in the future. Undoubtedly, Infosys is a bigger brand and a notch ahead of Wipro. But will that trend continue in the future? Only time can answer this question.

Infosys: The halo has fallen a tad

1

It is a watershed year for the company in several

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respects. But more so as the new CEO now has to grapple with the task of re-engineering its skills, and in doing so by realigning its offerings more closely to the business priorities of its clientele,and A to take on watershed the emerging competition. year

The year 2012 marks a watershed in the history of Infosys Ltd. Its chief mentor Mr N.R. Narayana Murthy has finally cut the umbilical cord that has bound the company to his coattails from inception in 1981. The corner office that he occupied has a new incumbent -the battle hardened veteran banker Kundapur V Kamath. The latter in his burning desire to retire in a blaze of glory from his long serving job as the CEO of ICICI Bank almost ran the venerable institution up the wall in the process towards the end of his tenure. It appears that Infosys is also at a point of inflexion. And we will now have to wait and see what Kamath has up his sleeve to revive its wavering brand equity and bring about an upward re-rating of its sentimental price earnings ratio. This is not an easy task given its business portfolio of still primarily generating software for third parties, the heightened competition, and the fact that the vast bulk of its succour still accrues from North America and Western Europe - and Europe is in turmoil leaving all concerned flummoxed. India centric revenues are still pitiful - a mere 2.3% in the overall context.

Halo

down

tad

It would appear from media reports that this bellwether stock of well over the past decade has sung its swan song - at least for some time to come. And the task of nurturing the company's fallen halo has ironically enough fallen in the lap of the last of the founding sons - S. D. Shibulal. The CEO set the ball rolling by announcing rather matter of factly that there will be no emolument increments in the current year for one. Making a public pronouncement on a matter of such import, calls for more than some spunk, as the company boasted employee strength of almost 1.25 lakh at year end. Employees play a dual role in IT companies in the sense that they constitute both the fixed assets and the current assets of the company. Infosys on its part shelled out some Rs 155 bn during the accounting year for their services. On a rough basis this outflow would work out to an average per employee remuneration of Rs 1.2 m per year! This is the largest single item of expenditure for the company, and by a mile at that. By deferring the increment the company is of course banking on the past goodwill of the promoters in sharing the wealth that it has created with its employees (Is it not ironical that IT software primarily aims to reduce the dependence of human labour in the functioning of enterprises, but its creation requires a surfeit of human hands?) . And, by performance results which are not on keel with the prognostications of analysts on the other. This is further compounded by quarterly management projections of the conservative kind. Infosys however has a history of giving muted outlooks, as the management invariably prefers to err on the side of caution in its public pronouncements of import. And, like in the West, India too has become a slave of the utterings and the crystal gazing 'infallibility' of the analyst fraternity. This is the unfortunate All reality of life whether stock you like no it or not. more

weather

How times change too! Till not too long ago IT stocks were elevated to the medium of all weather stocks, and the IT industry constituted one of the three legs comprising the ICE triumvirate which ruled the markets (the other two being communications and entertainment). All the three counters have now been relegated to the background as the old manufacturing sector has regained its rightful place of honour on the podium. The all weather stocks now stand renamed as fair weather friends. A finely tuned ship sailing on the high seas

But more to the point, what does the latest annual report of Infosys have to foretell if any. For one it has a rock solid balance sheet - with figures that are difficult to emulate. Consider some of the more telling figures. It has a paid up equity of Rs 2.8 bn, gargantuan reserves and surplus of Rs 298 bn, NIL borrowings, a net fixed asset base of Rs 40 bn which drummed up revenues of Rs 313 bn for the year ended March 2012, trade debtors of Rs 54 bn accounting for 63 days revenues, cash balances of Rs 180 bn, gross current assets of Rs 295 bn and net current assets of Rs 235 bn. The current assets are

bloated due to the humungous cash reserves. There are not many corporates in the Indian firmament that can drum up such a delectable frosted cake. It also boasts the most enviable cash flow statement that any corporate can boast of - a surfeit of cash generated from operations. This in turn led to a cash surplus of Rs 43 bn at year end. It also has investments valued at Rs 10 bn in group companies. They comprise among others, nine subsidiaries and not including four step-down subsidiaries (subsidiaries of subsidiaries). The dividend returns from these investments are close to zilch but that obviously was not the objective in promoting the siblings in the first place. These companies collectively clocked a turnover of Rs 42 bn and registered a pre-tax profit of Rs 6 bn. Of this lot, only three companies - Infosys Technologies Australia, Infosys BPO, and Infosys Technologies China amount to anything. Statistics don't lie

But more to the point, the company has furnished some basic statistics of its historical data. The turnover accelerated by 23.1% during 2011-2012. In the last five accounting years this is the second highest percentage increase in revenues that it has recorded. The highest percentage jump was recorded in 2008-09 - a rise of 29.5%. Equally significantly, the company recorded an operating margin of 32.2% in the latest year. (This operating profit for the year excludes other income, which is significant, and is before deducting depreciation, which is insignificant). The highest return in the five years past was recorded in 2009-10 when it clocked a margin of 34.8%. Other income (basically comprising interest income) is a big ticket item for Infosys and the bulk of the excess moolah is kept in risk free havens. For the matter of record other income at Rs 18.3 bn accounted for 16.5% of the pre-tax profit for the year, against a lower 13% or Rs 11.5 bn previously.

One may however add here that the annual report for the latest year is considerably slimmer than that of the preceding years. But that is basically because the company has deliberately chosen to report only the abridged statement of the full fledged accounts. The strength of the Infosys annual reports till its current decision to curtail the contents was the fact that it used to brim with figures of every hue - and which unintendedly confused all readers. Why the management has chosen the short cut route in the current year is not known. Or was this an attempt to cut down on administrative expenses? If so it makes to look for a very poorly thought out exercise. Not that the annual report is lacking in data though. The company is faring well rupee wise

S D Shibulal, the CEO, in his letter to the shareholders admits tacitly that the company came up short in its dollar growth projections. Against an estimated revenue growth of 18-20% in dollar terms it could only make do with 15.8%. But what is left unsaid here is that simultaneously it has also exceeded rupee growth projections. For, on an estimated rupee growth of 15.4% to 17.3% the company actually grew 22.7%. But this ludicrous looking mismatch is also due to the depreciation of the rupee and its related

consequences. So if the company has come up short in dollar terms, it also stands to reason that it has come up trumps in rupee terms. So what is this hungamma all about? And given the continued precipitous drop in the value of the rupee, the sensible guess here is that the rupee growth in the current year will exceed the rupee growth estimates by a mile and some more. And for the Indian shareholders it is The the rupee CEO's figures that matter! take

The lengthy directors' report and the Management discussion and analysis consist of a heavy load of tech heavy mumbo jumbo of the company's activities which is totally unintelligible to the lay public. So there is no purpose looking for leads here. One wonders who the company has in mind when mailing out its only public offering of each year's working to its shareholders. Thus one has to go by the more sane verbiage content in the CEO's address to the shareholders.

Shibulal says - 'we had two choices for the road ahead. Continue to play the traditional outsourcing game by commoditising more of the existing business and concentrating on short term growth, or to redefine the industry with a new strategy that addresses the current challenges and enables the company to achieve superior growth in the medium to long term. The company has chosen the latter path - to enable it to balance high quality, industry leading growth, high revenue productivity and relatively superior margins'. Shibulal stops short of saying which garden path it is leading up to, but going to the extent of saying that its endeavour in building tomorrow's enterprise strategy continues to see good traction with its clients. Our business model he adds 'was built on Predictability, Sustainability, Profitable and De-risking. However this predictability in recent quarters has been impacted by challenges in the global economy coupled with internal organisational changes'. The management he says 'is working harder than before to get back to delivering predictable performance'. For the present though it has predicted a weak performance going by analysts expectations. This has led to a substantial de-rating of its P/E multiple. How soon the predictability pendulum will swing in the other direction is the moot point. Disclosure: I hold 938 shares in Infosys This column Cool Hand Luke is written by Luke Verghese. Luke has been a business journalist, financial analyst and knowledge management head with a professional experience of more than 20 years. An avid watcher of the stock market, he has written extensively on stock market trends. His articles have featured in Business Standard, Financial Express and Fortune India amongst others. He has also been the Deputy Editor, Fortune India and the Financial Editor of The Business and Political Observer.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Infosys v/s Wipro: Strategies and numbers

2

In the first article of the series, we compared the

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revenue distribution of Infosys and Wipro. In the next article, we talked about the business strategies adopted by the companies in the past. In this article, we are going to compare Infosys and Wipro on the basis of their present business strategies, management quality and some of the financial performance parameters. Present Business Strategy In the past one year, a lot of things have changed for Wipro. In the beginning of year 2011, the company decided to dismantle its Joint-CEO model. The new structure now focuses on four key industry verticals 'Banking, Financial Services and Insurance (BFSI)', 'Energy & Utility', 'Retail and consumer products' and 'Healthcare'. These have been identified by the company as the core momentum verticals. The new restructured Wipro is more simple, agile and customer centric. There is a single account manager in a particular vertical who would concentrate on not just acquiring new customers but also focus on getting more business from the existing client pool. This one point accountability would remove confusion and multi-point intervention and thus help in establishing a better client relationship. Going forward, Wipro plans to increase investments in analytics, mobility and cloud services which would help the company increase the non-linear business. On the other side of the table, Infosys has completed 30 years of its journey. Now it is into its third phase of journey, Infosys 3.0 after pioneering Global Delivery Model (GDM) and developing capabilities of providing end-to-end solutions and consulting services in the first two phases. Now the management of the company is talking about "Building Tomorrow's Enterprise". They are focusing on transformation, optimization and innovation to serve their clients in the best possible way. The company would continue its go-to-markets strategy through industry verticals. Towards this, the management has consolidated all its industry verticals into four verticals- "Financial Services and Insurance", "Manufacturing", "Retail, Logistics, Life Sciences and healthcare" and "Energy & Utilities, Communications and Services". On the client delivery side, the business offerings are structured into three categories- "Consulting and System Integration", "Business IT" and "Products, platforms and Solutions". At present, Business IT contributes

almost 60% of total revenues. Now, the company aims to draw one third of its revenues from each of these service lines. The company has kept Business Process Outsourcing (BPO) and high growth areas such as cloud and enterprise mobility as separate units which are outside the main structure. In a nutshell, both the companies seem to be following the similar strategies to grow their business in the future. Management Quality Undoubtedly, both the companies have equally competent as well as ethical management teams. However, in case of Wipro, it has been more of a family business driven by its visionary leader. On the other hand, in the case of Infosys, it has been more of a professionally managed firm wherein a set of professionals are key to decision making. Revenues Growth The consolidated revenues of Infosys grew at an average rate of almost 29% (compounded annual growth rate or CAGR) from FY03 to FY11. During the same period, Wipro's IT services revenues also grew by the same pace of 29% (CAGR).

Source: Equitymaster Research, Company's Annual Reports

Both the company fared equally well as far as revenues growth is concerned. However, for Wipro, some of the growth came on the back of acquiring some small companies. On the other hand, Infosys mostly followed organic growth path. Operating margins

On operating margin front, Infosys is way ahead of Wipro. Average EBIT (Earnings before interest and taxes) margin for last eight years is almost 29% for Infosys as compared to 23% for Wipro.

Source: Equitymaster Research, Company's Annual Reports

Global Delivery Model has been a differentiating factor for Infosys in the past. The company pioneered GDM which became the de-facto standard in the software industry later on. On the back of superior project delivery capability and bigger brand name, Infosys did command premium pricing for its services. That resulted into higher margins for the company. On operating margin front, Infosys is a clear winner. In the fourth and final article of the series, we would talk more on financial performance. And discuss the valuations of the companies.

Infosys v/s Wipro: Their business strategy

1

While doing comparative analysis

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of Infosys and Wipro, in the first article of the series, we talked about the revenue distribution of the two companies. We also talked about the difference or similarities in client focus. In this article, our discussion would be focused on different business strategies adopted by the companies. Business strategies change with time and they should. After all whole business environment keeps changing all the time. This is more evident in the field of technology. True that the Indian software companies are primarily service oriented. However, their ways of servicing the client have been changing in the past. Now this industry is witnessing the era of cloud computing and mobile computing. More clients are relying on services such as Infrastructure-as-a-Service and Software-as-a-Service (SaaS). Before going more into the current business environment and strategies, let us first peep into the history.

In the past, there was a stark difference between the growth strategies followed by these companies. Acquisition strategy Companies look for acquisition for various reasons like achieving greater economy of scale, increasing market share, gaining taxation advantage, creating synergies between operations of two entities or for vertical integration. Sometime it is also done for diversification or to expand the business houses footprint. However, in case of an IT company, the acquisition works a little differently. The acquiring company gets very little tangible assets in the process of acquisition. Rather it gets a foothold in the form of an expanded client base or an entry into a new geographical market. The most important asset that the company acquires is the people asset. Till recently, IT bellwethers like Infosys and Tata Consultancy Services (TCS) mostly refrained from acquisitions. Lack of right-fit acquisition targets at attractive valuations was the rationale cited by their respective managements. On the other hand, Wipro followed the much talked about 'string of pearls' acquisition strategy, which is a fairly aggressive acquisition strategy. This was to make acquisitions to plug gaps in its client offerings and ramp up quickly in these areas. Wipro integrated the acquisitions of small companies such as mPower, New Logic, cMango, Saraware, Enabler, Quantech and Infocrossing during 2006-2008. However, the acquisition strategy changed to 'move the meter as a whole' by the new management. Recently, Wipro has acquired the IT related Oil & Gas business of Science Applications International Corp (SAIC). This acquisition is very strategic to the company. It is expected to enhance Wipro's domain capabilities in the upstream area and make it an end-to-end service provider in the Oil & Gas space. As far as Infosys is concerned, the company has been and is still sitting on a huge cash pile. The management has stated that it is on the lookout for proper acquisition targets. But they have not really made any big ticket acquisitions as of now. The reason - the management has set very stringent criteria. While this is good to some extent as the company has not made any wasteful or value destructive acquisitions, however, it has also lost out on some attractive opportunities which its peers have capitalized upon. Recently, Infosys has said that it is eyeing opportunities in the emerging healthcare space. But then again from a shareholders perspective one does not know when this acquisition would happen. Focus on India Infosys has always focused on the high margin business. For this, it has concentrated on the business

from the developed markets such as the North America and the Europe. And, it has definitely worked well for the company till now. But in the process Infosys has ended up ignoring the emerging market opportunities particularly those from India. On the other hand, Wipro has been catering to domestic market as well. And during the time of slowdown in the developed economies, this focus on India has worked in the favour of Wipro and has helped it in growing its business. Of late, though Infosys has started focusing on Indian market. But till now its name has not really featured in the big ticket contracts awarded by the Indian government or domestic companies. Its portion of revenues from India still remains quite low. Present Situation In the beginning of year 2011, Wipro decided to dismantle its traditional Joint-CEO model. The management has identified four industries as the core momentum verticals. On the other hand, Infosys has completed 30 years of its journey. It is now in the third phase of its growth. The management has set out new visions for the next 30 years. In the subsequent articles of the series, we would talk about their current business strategies in detail. In addition, we would also discuss the management quality, financial performance and valuations.

Infosys v/s Wipro: Which is better?

6

Information Technology (IT) sector has been one of

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the biggest growth drivers for the Indian economy, especially for the exports. As a proportion of India's Gross Domestic Product (GDP), the sector revenues have grown from 1.2% in FY98 to 6.4% in FY11. The sector has witnessed a spectacular growth in the last decade. The size of the India's information technology and outsourcing industries is expected to cross US$ 100 bn by FY12. And the sector continues to present a good opportunity in the future as well. Naturally, companies in this sector have been on the investors' radar all the time. In fact, Indian IT majors such as Infosys, Tata Consultancy Services(TCS) and Wipro have become household names in the country. After all, they are among the biggest recruiters in India. All these companies are doing the same business. And it seems all they are same at the first glance. However, scratching the surface tells the different story. In the next few articles, we are going to compare Infosys and Wipro , the second and third largest companies in the Indian software sector. At the onset, we would like to clarify two important points. First, the focus of these articles is to is to provide information so that the investors can decide for themselves as to which is a better company.

Second, Wipro has diversified business interests, which include IT services (Including BPO business), IT products (hardware such as desktop computers, servers and notebooks), consumer care and lighting and Infrastructure engineering. On the other hand, Infosys is purely an IT services company. Therefore, for the sake of apple-to-apple comparison we would be referring only to Wipro's IT services business which contributes around 75% of the company's total revenues. Let's get on with the key points of distinction between the two: Geographical focus Both the companies generate a large part of their revenues from the developed economies such as America and Europe. However, Infosys earns a larger chuck from the North American market. As compared to Infosys, Wipro has a higher share of revenues from the European markets. This makes Wipro more vulnerable to the prevailing uncertainty in the European markets. But the saving grace for the company is that it generates a large part of the ROW (Rest of the World) business from Indian and Middle East Markets, which have been growing in recent times.

Data source: Company's results documents LTM - Last 12 months ended December 2011

Industry wise client distribution Banking, Financial Services & Insurance (BFSI) industry has been the biggest growth driver for the IT sector. And the same is true for Infosys as well. In fact, Infosys derives a large part of its revenues from this sector. Recently, Infosys has started focusing on the healthcare vertical which presents a good

growth opportunity in the future. As for Wipro, all the industry verticals contribute almost evenly to total IT revenues.

Data source: Company's results documents

Service focus Here, Infosys seems to have some upper hand over Wipro as the former generates a larger share from the high end services such as consulting. A note to the readers is that these are also the higher margin businesses. Several IT services such as Application Development & Maintenance (ADM) are already commoditized. Hence, they do not offer better profitability. Considering this, Infosys had started focusing on high end services. And this helped company maintain its margins.

Data source: Company's results documents, *Consulting, System Integration and R&D Business #ADM, Infrastructure Management, Testing etc, PES- Product Engineering Services

Generally Indian IT companies are services oriented. Hence, they do not generate much from the product offering. However, since the advent of cloud computing companies have started focusing on Product, Platform & Solutions services. Infosys aims to grow this business to as high as 1/3rd of its total revenue. On similar lines, Wipro is also focusing on mobility, analytics and cloud computing. However, neither company can brag of a large contribution from cloud computing as of now as the offering is still at a relatively nascent stage. So far, we have just talked about what these companies are and from where they earn their revenues. In the subsequent articles, we would compare their business strategies, financial performance and valuations of the companies. Difference Between Infosys and Wipro
Feb 15th, 2011 | By olivia
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Infosys vs Wipro Infosys and Wipro are two of the leading IT service providers in India. When it comes to information technology in India, three names stand out among others, Infosys, Wipro, and TCS, and not necessarily in that order. For those aspiring to have a career in IT sector, these three are the companies that provide excellent opportunities in terms of perks, job satisfaction and career growth. In this article, we would concentrate on Infosys and Wipro and try to find out the basic differences in areas of functioning and objectives of the two companies. Both are natural competitors and there is a great, healthy rivalry between the two IT giants when it comes to acquiring deals and generating profits. Infosys Founded by N.R. Narayanamurthy along with 6 other entrepreneurs in 1981, Infosys is one of the leading information technology service companies in India. Headquartered in Bangalore in Karnataka, it was started with a meager INR 10000. Today it employs over 120000 people and has operations in many countries of the world including China, Japan, Australia, UK, US, Canada and Indonesia. It is listed in BSE and NASDAQ. Infosys brought a public issue in 1993 but it was undersubscribed. At that time its issue was bailed out by Morgan Stanley, and since then the company has not looked back with its share value rising exponentially over the years. Its operating income in 2010 was USD 4.59bn and profits stood at USD 1.26bn. It is rated as the best employer of the country. Infosys received more than 1.3 million applications in 2010 of which it hired less than 3% of the candidates. Wipro Ltd WIPRO is another giant IT services company in India, and incidentally, it is also headquartered in Bangalore, Karnataka. Apart from IT, WIPRO also has presence in consumer care, lighting, healthcare and engineering. It was rated as the 9th most valuable brand in 2010. Azim Premji is the chairman of the company and also its founder. Business Process Outsourcing is one of the chief operations of the company and it employs nearly 22000 people in WIPRO BPO. Differences between Infosys and Wipro

 WIPRO employs more than 115000 people in its different operations. Its operating income in 2010 stood at $1.144bn and the profits were $1.02bn. Though it lags behind INFOSYS in terms of operating income, it is rubbing shoulders with Infosys when it comes to profits generated. Among the two, Infosys is more active when it comes to hiring new people. Currently Infosys is hiring nearly 6000 people every year. Wipro focuses on hiring fresh graduates, while Infosys is more into luring professionals from other companies. As far as acquiring new clients with their products and services is concerned, both appear to be on the same platform but whereas Infosys is keep on expanding its operations abroad, Wipro seems content with expanding within the country. Summary Both Infosys and Wipro are giant IT companies of India. While Infosys is listed in NASDAQ, Wipro is not. Infosys concentrates solely on IT, while Wipro has operations in other sectors also. Infosys has business centers in many other countries.

Abstract
India has emerged as the fastest growing IT hub in the world, its growth dominated by IT software and services. The present study focuses on the financial performance of IT companies. For this study there are 10 top software companies in India were selected. The Secondary data is used for the mode of the collection of data from capital line financial data base. The period ranging from 199798 to 200607 has chosen for the study. Selected ratios have chosen for the study as the reason considered an important tool for analyzing the profitable performance of the IT company. The present analysis uses the technique of mean score and One-way ANOVA to examine and compare 21 most critical profitability ratios of the selected companies. The appropriateness of the profit is studied by using correlation. The need to identify the key profitability ratio of the selected IT firms provides a scientific and middle empirically tested framework to measure it. The result of the study is, the Mean Ratio of the profitability of two companies have registered a high ratio in the period and then declines. When growth in percentage of operating income for both the companies compared, operating income of Infosys Technologies is gone higher than Wipro. Hence Wipro Technologies should give emphasis on their operating income by minimizing their operating expenses. As per the growth in percentage of total Assets, Infosys performed well, on the total assets than the Wipro. Hence Wipro should increase the level of total assets by investing various types of Assets. Infosys continues to command higher rates because of its better marketing. Finally the overall findings from the data show that Infosys is more focused on cost than Wipro. Infosys are more regimented than Wipro, and programmed better to implement projects on time.

Green Innovation
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Infosys among the world's top 10 companies: Newsweek's Green Rankings

Infosys ranked among Newsweek's top 10 green global companies. Newsweek magazine partnered with Trucost and Sustainalytics, environmental research groups, for the Green Rankings 2011' that rate global companies on their environmental impact, management and disclosure. Footprint Infosys' new buildings comply with the Leadership in Energy and Environmental Design (LEED) platinum standard. Our sustainable infrastructure is 25% more efficient than global energy efficiency standards. Resource management Our Mysore, Hyderabad, Pune, and Mangalore development centers harvest rain water in reservoirs with a cumulative capacity of 300 million liters. We set a goal to source 20% of our energy from green power by 2012. Reporting Infosys adopts the Global Reporting Initiative (GRI) framework version 2.0 for sustainability reporting and upholds the principles of the United Nations Global Compact (UNGC), World Economic Forum (WEF) and The Energy and Resources Institute (TERI). Published with permission of The Newsweek/Daily Beast Company LLC

How we do it
Infosys helps companies derive the measurable business value that they have always been looking for from business and IT investments. We deliver measurable business value in 3 ways: Transform We can transform the fundamental shape of your business P&L. Regardless of which team you engage with, we have a best-practice process for delivering value. We call it IMPACT to ensure a clear line of sight from process change to bottom-line impact, ensuring that you receive the business value you were promised. Optimize Beyond transformation and innovation, it boils down to execution - delivering on time, on budget and "on value". We can optimize your core operations to drive best-in-class efficiency and help fund the transformation and innovation. Innovate We can inject a level of product and service innovation into your business to create new revenue opportunities through collaboration and co-creation. We keep abreast of the latest technology and how it applies to your business issues. What you get from us is best-of-breed solutions. The foundation of our innovation capability is our core lab network Infosys Labs and the new thinking that our team of over 600 researchers brings to the table.

Who we are
Our Vision, Mission and Values Vision "We will be a globally respected corporation." Mission "Strategic Partnerships for Building Tomorrows Enterprise." Values We believe that the softest pillow is a clear conscience. The values that drive us underscore our commitment to: CLIFE Client Value: To surpass client expectations consistently Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves Integrity and Transparency: To be ethical, sincere and open in all our transactions Fairness: To be objective and transaction-oriented, and thereby earn trust and respect Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and products to become the best Fact File Quick facts about Infosys Read History Trace the milestones since Infosys' inception in 1981 Read Locations Locate the nearest Infosys office in your region Management Infosys' board brings together a team of technology, business, and social visionaries. More Financial snapshot

Q1, 2013 Fiscal 2011-2012

Subsidiaries Learn more about our subsidiaries Annual Reports

Infosys 3.0: Accelerating growth 2011-12 PDF

30 years of Infosys 2010-11 PDF View past reports Corporate Governance It reflects our culture, policies and our relationship with stakeholders. More Awards Infosys has consistently been honored by influencers.

Overview
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History
Established in 1981, Infosys is a NASDAQ listed global consulting and IT services company with more than 151,000 employees. From a capital of US$ 250, we have grown to become a US$ 7.075 billion (LTM Q1 FY13 revenues) company with a market capitalization of approximately US$ 26 billion. Over the years, we have catalyzed some of the major changes that have led to India's emergence as the global destination for software services talent. We pioneered the Global Delivery Model and became the first IT company from India to be listed on NASDAQ. Our employee stock options program created some of India's first salaried millionaires. Read more about the defining moments in Infosys' history. Milestones 2012

Forbes ranks Infosys among the world's most innovative companies Infosys among top 25 performers in Caring for Climate Initiative Infosys crosses the US$ 7 billion revenue mark

2011

N. R. Narayana Murthy hands over chairmanship to K V Kamath Infosys crosses US$ 6 billion revenue mark, employee strength grows to over 130,000

2010

Infosys crosses the US$ 5 billion revenue mark

2009

Infosys opens its first development center in Brazil and second Latin American development center in Monterrey, Mexico Infosys selected as a member of The Global Dow Employee strength grows to over 100,000

2008

Infosys crosses revenues of US$ $ 4.18 billion Annual net profits cross US$ 1 billion

2007

Infosys crosses revenues of US$ 3 billion. Employees grow to over 70,000+ Kris Gopalakrishnan, COO, takes over as CEO. Nandan M. Nilekani is appointed Co-Chairman of the Board of Directors Opens new subsidiary in Latin America Reports Q2 revenue of over US$ 1billion

2006

Infosys celebrates 25 years. Revenues cross US$ 2 billion. Employees grow to 50,000+ N. R. Narayana Murthy retires from the services of the company on turning 60. The Board of Directors appoints him as an Additional Director. He continues as Chairman and Chief Mentor of Infosys

2005

Records the largest international equity offering of US$ 1 billion from India Selected to the Global MAKE Hall of Fame

2004

Revenues reach US$ 1 billion Infosys Consulting Inc. is launched

2003

Establishes subsidiaries in China and Australia Expands operations in Pune and China, and sets up a development center in Thiruvananthapuram

2002

Touches revenues of US$ 500 million Nandan M. Nilekani takes over as CEO from N.R. Narayana Murthy, who is appointed Chairman and Chief Mentor Opens offices in the Netherlands, Singapore and Switzerland Sponsors secondary ADS offering Infosys and the Wharton School of the University of Pennsylvania set up The Wharton Infosys Business Transformation Awards (WIBTA) Launches Progeon, offering business process outsourcing services

2001

Touches revenues of US$ 400 million. Opens offices in UAE and Argentina, and a development center in Japan N. R. Narayana Murthy is rated among Time Magazine/CNN's 25 most influential businessmen in the world Infosys is rated as the Best Employer by Business World/Hewitt

2000

Touches revenues of US$ 200 million

Opens offices in France and Hong Kong, a global development center in Canada and UK, and three development centers in the US Re-launches Banks 2000, the universal banking solution from Infosys, as Finacle

1999

Touches revenues of US$ 100 million. Listed on NASDAQ Infosys becomes the 21st company in the world to achieve a CMM Level 5 certification Opens offices in Germany, Sweden, Belgium, Australia, and two development centers in the US Infosys Business Consulting Services is launched

1998

Starts Enterprise Solutions (packaged applications) practice

1997

Opens an office in Toronto, Canada Infosys is assessed at CMM Level 4

1996

The Infosys Foundation is established

1995

Opens first European office in the UK and global development centers at Toronto and Mangalore. Sets up e-Business practice

1994

Moves corporate headquarters to Electronic City, Bangalore. Opens a development center at Fremont

1993

Introduces Employee Stock Options (ESOP) program Acquires ISO 9001/TickIT certification Goes public

1987

Opens first international office in Boston, US

1983

Relocates corporate headquarters to Bangalore

1981

Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India, with an initial capital of US$ 250 Signs up its first client, Data Basics Corporation, in New York

Fact File
Infosys Limited (NASDAQ: INFY) delivers IT-enabled business solutions to enable Global 2000 companies to build their enterprises of tomorrow. Our solutions focus on providing strategic differentiation and operational superiority to clients. We leverage our domain and business expertise along with a complete range of services. With Infosys, clients are assured of a transparent business partner, world-class processes, speed of execution and the power to stretch their IT budget by leveraging the Global Delivery Model that Infosys pioneered. Infosys has a global footprint with sales offices in 29 countries and development centers in India, US, China, Australia, UK, Canada, Japan and many other countries. Infosys has over 151,151 employees of 92 nationalities.

Subsidiaries
Infosys Limited has four subsidiaries:

Infosys BPO
Infosys BPO provides outsourcing solutions across several industries and functional focus areas. It operates in India, the Czech Republic, China, Philippines, Poland, Thailand and Mexico. Learn more Infosys Consulting Infosys Consulting partners with companies to find the fastest route to competitive advantage. The company focuses on functional areas and delivers solutions that enhance performance and profitability. Learn more Infosys China Infosys Technologies (China) Company Limited (ITSCo), is a fully owned subsidiary of Infosys Technologies Ltd.

Infosys has invested an initial capital of US$ 5 million in this subsidiary. Our 20,000 sq. ft. office in the Shanghai Pudong Software Park serves as an alternate delivery hub for Infosys in the Asia Pacific region. ITSCo seeks to achieve a high level of maturity in terms of software engineering process, by being CMM compliant. We will offer surety of IP protection with a secure development environment by being BS7799 compliant. Infosys Mexico Infosys Technologies S. De RL De CV is the Latin American subsidiary of Infosys. Our development center in Monterrey, Mexico serves as a nearshore facility for clients in North America, Latin America and Europe.

Company Description: Infosys Technologies Ltd. provides consulting and IT services to clients globally
- as partners to conceptualize and realize technology driven business transformation initiatives. With over 49,000 employees worldwide, we use a low-risk Global Delivery Model (GDM) to accelerate schedules with a high degree of time and cost predictability. As one of the pioneers in strategic offshore outsourcing of software services, Infosys has leveraged the global trendof offshore outsourcing. Even as many software outsourcing companies were blamed for diverting global jobs to cheaper offshore outsourcing destinations like India and China, Infosys was recently applauded by Wired magazine for its unique offshore outsourcing strategy it singled out Infosys for turningnfosys provides end-to-end business solutions that leverage technology. We provide solutions for a dynamicenvironment where business and technology strategies converge. Our approach focuses on new ways of business combining IT innovation and adoption while also leveraging an organization's current IT assets. We work with large global corporations and new generation technology companies - to build new products or services and to implement prudent business and technology strategies in today's dynamic digital environment. the outsourcing myth around and bringing jobs back to the US. Different Services offered by Infosys:

Application and Development and Maintenance Corporate Performance Management Independent Validation Infrastructure Services Packaged Application Services Product Engineering System Integration.

WIPRO INTRO
WIPRO is one of the largest IT services companies in India. Established in 1980 as subsidiary of WIPRO limited listed on New York Stock Exchange. WIPRO was initially set up in 1945 with main product of producing sunflower Vanaspati Oil and different soaps. At that time Company was called Western India Vegetable Products limited with representative offices in Maharashtra and Madhyapardhesh states of India. During 1970s and 1980s it shifted its focus and begin to look into business opportunities in IT and computing industry which was at nascent stages in India at that time. WIPRO was the first company which marketed the first indigenous homemade PC from India in 1975. In 1966 Azim Premji, still the majority shareholder in WIPRO, took over as the chairman of the company at the age of 21 and with the passage of time transformed it into one of the finest and largest IT outsourcing services provider of the world. It is now considered the world's largest independent R&D service provider. It offers different technology driven services all over the globe with 46 development centers. Azim Premji is still the Chairman of the WIPRO along with other top class professionals heading different wings of the business.

Wipro Tech is an information technology service company established in India in 1980. It is the global IT services arm of Wipro Limited (in operation since 1945, incorporated 1946). It is headquartered in Bangalore and is the third largest IT services company in India[citation needed]. It has more than 78,000 employees as of September 2007, including its business process outsourcing (BPO) arm which it acquired in 2002. Wipro Technologies has over 300 customers across U.S., Europe and Japan including 50 of the Fortune 500 companies. Some of its customers are Nortel, Boeing, BP, Cisco, Ericsson, IBM, Microsoft, Prudential, Seagate, Sony, Win driver and ToshibaIt is listed on the New York Stock Exchange and is part of its TMT (technology media telecom) index testing. With revenue in the excess of US $3 billion, Wipro is one of India's major IT companies. It has dedicated development centers and offices across India, Europe, North America, Latin America and Asia Pacific. The current Chairman, Managing Director and majority stake owner is Azim Premji, who has headed the software and hardware divisions since Wipro's inception. Examples of Wipro's product design work include developing an Internet-browsing phone for a Japanese telecom company in 1998, helping chipmaker Texas Instruments produce digital signal processing software, and creating an automotive display unit for Italian manufacturer Magneti Marelli that combined functions including cell phone capability, global position system technology, a navigation system and a CD player. Wipro was set up in 1945. Primarily an edible oil factory, the chief products were Sunflower Vanaspati and 787 laundry soap (a by-product of the Vanaspati operations). The company was called Western India Vegetable Products Limited; it had a minor presence in Maharashtra and Madhya Pradesh. In the 1970s and 1980s, it began to expand and made forays into computing. In 1975, Wipro marketed India's first homegrown PC. Wipro was the sole representative for Sun Microsystems in India, before the Sun liaison office was set up in India, in the early 1990s. Wipro is the highest-ranked Indian IT provider by International Association of Outsourcing Professionals. Financials Wipro posted a net profit of Rs. 7.3 billion and growth of 17% in the Q1 2007-08. Staff
Innovation at Wipro

As we enter the second decade of the 21st Century, change seems to be the only constant. This dynamic means that businesses are facing challenges and opportunities which are very different to what they were a decade ago or even a year ago. The world of tomorrow is one where uncertainty and fierce global micro-competition is going to be the norm. Rightly so, the world is looking up to innovation in the triangle of technology, sociology and the environment to help them deal with these changes. This innovation is coming to the fore in various hues and has shifted from the core to the edge of the enterprise. This is being driven by the rise of trends like analytics, mobility, cloud and as-a-service, even as the future will see newer technologies such as machine-to-machine (M2M) communication and natural user interface (NUI) fast becoming mainstream. In this fast changing world, Wipro believes it can leverage on its institutionalized innovation culture to push the boundaries for delivering solutions that provide enhanced value and direct impact for our customers. This culture has brought to the fore innovations like India's most powerful supercomputer, a cost-effective Base Terminal Station designed for GSM networks in underserved markets, a mobile switching router for emerging markets, connected home concept and Wipro Energy Manager that uses M2M communication, among others. Taking forward our legacy in pioneering the ODC concept, Wipro has also developed application-based innovations like Flex and Cigma delivery models which are service-based as opposed to resource-based. Wipro is also partnering with European research institute IMEC to co-innovate and develop next-generation

intelligent systems based on nanoelectronics and aimed at emerging markets through an initiative called Applied Research in Intelligent Systems Engineering (ARISE).

FACTORS AFFECTING RETENTION IN WIPRO

Retention is a costly affair for any company. Wipro, with the highest rates of attrition, needs to work really hard on its retention management strategies. Wipro registered an attrition rate of 0.3% in the year 2008-2009. When an employee leaves an organization, the organization not only looses out on the cost of training the employees but also the loss of intellect from the talent pool. Today, every organization istrying to increase its talent pool. The organizations strive on their intellectual capital and any loss on thesame hits the company really hard. This is so because the projects undertaken by the company wouldrequire talent of special expertise and loosing that level ofexpertise would make it difficult for thecompany to complete the same projector even take up a new one.. The case with Wipro is no different.Wipro conducts campus recruitments in all major engineering colleges in India. The number of recruitsper year is large. However, so is the level of attrition, the number of recruits barely balances thenumber of cases of attrition per year. These effects the companys cost and the budget for the year concerned.When asked about the reasons why people would generally leave Wipro, the answers were varied.However, most employees agreed on some common parameters. They feel they are not paid at par withindustry standards. Some feel that the training does not develop

http://www.scribd.com/doc/49630906/RETENTION-OF-EMPLOYEES-A-CASE-STUDY-OF-WIPRO http://www.scribd.com/doc/33599063/Infosys