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Corporate Finance - II

Lal Bahadur Shastri Institute of Management,

New Delhi

Corporate Finance - II

Submitted By : Sumeet Kachroo

Roll.No 97 ( Sec-B)
Lbsim, New Delhi

Submitted To:
Prof. Anuj Verma

Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro

Corporate Finance - II

Background of Wipro
Wipro Limited is an Indian multinational IT consulting and System Integration services company
headquartered in Bangalore, India. As of December 2014, the company has 154,297 employees
servicing over 900 large enterprise & Fortune 1000 corporations with a presence in 61 countries.
On 31 January 2015, its market capitalization was approximately 1.63 trillion ($26.3 billion),
making it one of India's largest publicly traded companies and seventh largest IT services firm in
the World.
To focus on core IT Business, it demerged its non-IT businesses into a separate company named
Wipro Enterprises Limited with effect from 31 March 2013. The demerged companies are
consumer care, lighting, healthcare and infrastructure engineering which contributed
approximately 10% of the revenues of Wipro Limited in previous financial year. Recently Wipro
has also identified Brazil, Canada & Australia as rapidly growing markets globally and has
committed to strengthen the presence in the respective countries over the next 5 years.

Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro

Corporate Finance - II

Working capital for the last five years

Calculation for Working Capital
Mar '11

Mar '10

Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
(A)

228.3
320.5
785.1
724.9
8,550.90 8,499.40 7,967.00 5,781.30
10,554.90 7,800.40 6,232.80 5,203.30
19,334.10 16,620.30 14,984.90 11,709.50
11,116.70 8,893.80 8,324.80 6,963.50
0
0
0
0

606.9
5,016.40
1,938.30
7,561.60
5,425.90
3,726.00

Current Liabilities
Provisions
Total CL & Provisions (B)

7,992.60 8,792.80
3,878.10 3,638.30
11,870.70 12,431.10

5,121.20
2,967.60
8,088.80

4,874.20
2,230.80
7,105.00

Net Working Capital (A-B)

18,580.10 13,083.00 14,309.50 10,584.20

9,608.50

Particulars

Mar '14

Mar '13

Mar '12
Amount in Rs.

30,450.80 25,514.10 23,309.70 18,673.00 16,713.50

5,984.20
3,016.00
9,000.20

Net working Capital has been positive throughout so that means they are following a conservative
policy that means they are comprising on their profitability to maintain their liquidity i.e they are
paying the cost/price of liquidity.

Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro

Corporate Finance - II

Statement showing Working Capital Turnover

Particulars

Mar '14

Mar '13

Mar '12

Mar '11

Mar '10

Amount in Rs. Cr.

Net Working Capital
% change from the previous
year
Net Sales
% change from the previous
year
Working Capital turnover
% change from the previous
year

18,580.10

13,083.00

14,309.50

10,584.20

9,608.50

42.01712
38,757.20

-8.57123
33,226.50

35.1968
31,682.90

10.15455
26,300.50

22,922.00

16.64545
0.479397

4.872029
0.393752

20.46501
0.451647

14.73912
0.402433

0.419182

21.7511

-12.8187

12.22911

-3.99564

From the above table, we can infer that they are using more of current assets to finance. The companys
sales are increasing and so is the working capital but the percentage of increase in working capital is far
more than the sales.

Sources of Working Capital Financing

Trade payables
A trade payable is an amount billed to a company by its suppliers for goods delivered to or services
consumed by the company in the ordinary course of business. In the accounting system, trade
payables are recorded in a separate accounts payable account, with a credit to the accounts payable
account and a debit to whichever account most closely represents the nature of the payment, such
as an expense or an asset.

Advance from Clients

A liability account used to record an amount received from a customer before a service has been provided
or before goods have been shipped. This account is referred to as a deferred revenue account and could be
entitled Customer Deposits or Unearned Revenues.

Unearned revenue
When an individual or company receives money for a service or product that has yet to be fulfilled.
Unearned revenue is a "pre-payment" for goods or services which a person or company is expected to
produce to the purchaser. As a result of this prepayment, the seller now has a liability equal to the revenue
earned until deliver of the good or services.
Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro

Corporate Finance - II

Loans from Subsidiaries & Directors

Accrued Expenses

Accrued expenses are the opposite of prepaid expenses. Firms will typically incur periodic
expenses such as wages, interest and taxes. Even though they are to be paid at some future date,
they are indicated on the firm's balance sheet from when the firm can reasonably expect their
payment, until the time they are paid.
An example would be accruing interest that is building up on a bank loan.
Commercial Paper
It is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of
accounts receivable, inventories and meeting short-term liabilities. Maturities on commercial paper rarely
range any longer than 270 days. The debt is usually issued at a discount, reflecting prevailing market interest
rates.

Deferred Income
Deferred income represents funds received by the firm for goods and services which it has agreed to
supply in future.

Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro

Corporate Finance - II

Calculation for Dividend Payout Ratio

Calculation for Dividend Payout Ratio

Mar '14

Mar '13

Mar '12
Amount in Rs.

Mar '11

Mar '10

Equity Dividend

19736000000

Shares in issue

2,466,317,000

17247000000
2,462,935,00
0

14752000000
2,458,756,00
0

14726000000
2,454,409,00
0

8809000000
1,468,211,00
0

8.002215449

7.002620857

5.999782004

5.999815027

5.999818827

29.95

22.94

19.05

19.73

33.36

0.267185825

0.305258102

0.314949187

0.304096048

0.179850684

26.71858247

30.52581019

31.49491865

30.4096048

17.98506843

Particulars

Dividend Per
Share
Earnings Per
Share (Rs)
Dividend Payout
Ratio
Dividend Payout
Ratio (%)

The dividend policy from the above table and analysis can be seen as a constant payout, also the company
has a good track record of paying healthy dividends to his share-holders. This shows that company has
always cared about the returns to the share-holders and gave dividends in times of liquidity crunch from
the reserves.

References:http://www.moneycontrol.com/stocks/company_info/print_main.php
www.investopedia.com/terms
Wipro Annual Report - Annual Financial Report of Wipro for the Financial 2014 by Moneycontrol.com
Wipro Balance Sheet, Wipro Financial Statement & Accounts

Calculation of the Working Capital, analysis of its sources and Dividend Policy of Wipro