This article provides an in-depth fundamental analysis of Wipro, which is one of the biggest IT companies in India. In this article, we have Analyzed the business, financials, fundamentals, and stock performance of Wipro.
This will help you evaluate is Wipro better for investment. But before I proceed, please note that our analysis is only for educational purposes and not to provide stock tips. This article is to empower you with the right knowledge so that you can make an informed investment decision.
Wipro fundamental analysis: Company profile
Wipro began its business as a vegetable oil manufacturer in 1945 at Amalner, a small town in western India, and after that Wipro entered into soaps and other consumer care products. Wipro entered the IT industry in the 1980s by manufacturing and selling mini computers.
Wipro started offering software services in the 1990s by leveraging hardware R & D design and software development expertise. Wipro emerged the non-IT business and Now, Wipro has been in the IT industry for 30 years and is ready to focus entirely on the global information technology business.
Wipro is listed on three stock exchanges, 1) National stock exchange, 2) Bombay stock exchange in India and 3) New York stock exchange in the US.
Now, Wipro is one of the leading global information technology, consulting, and business process services company. Wipro has over 2,00,000 dedicated employees serving clients across six continents.
Strengths
- Low-cost advantage and high-quality standards.
- Broad rabge of research and development services,
- Wipro has an impressive list of clients and mega partnerships with Cisco, Oracle, EMC, Microsoft, and SAP.
Weaknesses
- Low operating margins as compared to peers.
- Has underperformed peers in terms of sales & profit growth.
Strategic partnerships
Wipro has partnerships with key alliances like Amazon web services, Microsoft, Google cloud platform, ServiceNow, Salesforce, SAP, and IBM. Wipro is trying to build its own dedicated cloud studios and centers of excellence, talent, and their own capability to take joint business solutions to their clients.
Wipro R&D expenses
An IT company needs to research and develop new services and products to stay in the race. Wipro’s spendings on R&D has increased from 3,942 million rupees in the financial year 2019 to 4,619 million rupees in the financial year 2020, and fallen to 3,702 million rupees in the financial year 2021.
Patents filed cumulatively till date
Patents granted till date
Patents are also very important to an IT company because the number of patents of a company defines that the company is researching and developing new technologies, services, and products to stay in the race.
If a company stops researching or developing, sooner or later the company will be kicked out of the market.
Wipro is continuously investing in building a patent portfolio and during the year ended March 31, 2021, Wipro has filed 2,085 patents of which 904 have been approved.
Wipro revenue distribution
IT companies operate in different verticals, for example, a banking company will go to an IT firm for services and a healthcare company will also go to an IT company for services and products.
So it is important to keep in mind the revenue % from all the different verticals of an IT company.
Wipro’s top customers revenue contribution
- 3.1% of total revenue is from the top one customer.
- 11.9% of the total revenue is from the top 5 customers.
- 18.9% of the total revenue is from the top 10 customers.
- remaining 66.1% of the revenues are from other customers.
From the above pie chart, you can clearly understand that Wipro’s revenue is well-diversified and not dependent on only one customer or top 5 customers. even if they lose their top customers it will not affect Wipro’s performance.
Geography wise revenue distribution
Most of the Indians think Wipro is an Indian company, so most of the revenues of Wipro are also from India. But this is wrong, Majority of the revenue of Wipro is from America and Europe.
- 58% of the total revenue is from America.
- 25% of the total revenue is from Europe.
- Remaining 17% of the revenue is from rest of the world.
Sector wise revenue distribution
- BISF – Banking and financial services.
- CBU – Consumer business unit.
- COMM – Communications.
- ENU – Energy, natural resouces and utilities.
- HBU – Health business unit.
- MFG – Manufacturing.
- TECH – Technology.
Wipro is the most dependent on the banking and financial services sector which generates 31% of the total revenue, followed by consumer business with 16%, ENU at 13%, Technology at 13%, manufacturing at 8%, health business at 14%, technology at 13%, and communications at 5%.
Wipro’s sector-wise performance
| Sector | Revenue FY20 | Revenue FY21 |
|---|---|---|
| BFSI | 2,563 | 2,501 |
| CBU | 1,346 | 1,334 |
| COMM | 470 | 419 |
| ENU | 1,062 | 1,064 |
| Health BU | 1,088 | 1,099 |
| MFG | 669 | 662 |
| TECH | 1,054 | 1,057 |
| Total | 8,253 | 8,136 |
Service wise revenue distribution
Wipro service offerings
- AS – Application services.
- CIS – Cloud and infrastructure services.
- DO&P – Digital operations and pltform.
- DA & AI – Data analytics and artifical intelligence.
- I&ES – Industrial & engineering services.
Application services: The majority of Wipro’s revenues are from application services. Application services are software solutions that improve the speed, security, and operability of applications. This contributes to 44% of the company’s revenue
Cloud and infrastructure services: Cloud infrastructure consist of all hardware and software components that are needed to support the delivery of cloud services to the customer. Cloud computing is the delivery of different services through the internet. This segment contributes to 26% of the revenue.
Digital operations and platform: A digital operations platform brings together B2B back-office operations and unifies them to a single view. Enterprise resource planning software installed in different firms is a good example of this. This segment contributes to 16% of the revenue.
Data analytics & artificial intelligence: AI or artificial intelligence is a technology designed to emulate the human mind, particularly in areas such as analysis and learning. AI is designed to draw conclusions on data, understand concepts, become self-learning, and even interact with humans. Data analytics refers to technologies that study data and draw patterns. This segment contributes to 7% of Wipro’s revenue.
Industrial & engineering services: Wipro provides onsite and offshore technology and engineering services to airframe manufacturing, original equipment manufactures, tier 1 and 2 suppliers. This segment contributes to 7% of the revenue.
Wipro presence in different industries
- Aerospace & defence.
- Automotive.
- Banking.
- Capital markets.
- Communications.
- Consumer electronic.
- Consumer packaged goods.
- Education.
- Engineering, construction & operations.
- Healthcare.
- Insurance.
- Medical devices.
- Natural resources.
- New age marjets.
- Networdk & edge providers.
- Oil & gas.
- Pharmaceutical & life sciences.
- Platforms & software products.
- Industrial & process manufacturing.
- Professional services.
- Retail.
- Semiconductors.
- Travel & transportation.
Total employees
Wipro has 1,75,690 employees in the financial year 2019, 1,88,270 employees in the financial year 2020, and 2,01,665 employees in the financial year 2021. Where 35.2% of the employees are women in FY2019, 35% in the financial year 2020, and 35.7% in the financial year 2021.
Milestones in the journey of Wipro
Wipro fundamental analysis: Financials
| Particulars | Wipro |
|---|---|
| Market cap | 3,54,474 Cr |
| Price to earnings ( P/E ) | 36.11 |
| Price to book value ( P/B ) | 7.15 |
| Price to sales ( P/S ) | 7.05 |
| Price to cash flow ( P/CF ) | 27.85 |
| Sales growth ( 5 years ) | 2.4% |
| Profit growth ( 5 years ) | 4.17% |
| ROE ( 5 years) | 18.62% |
| ROCE ( 5 years) | 22.05% |
| Debt to equity | 0.13 |
Price to earnings
PE stands for the price to earnings. It signifies how many times an investor is paying for 1 rupee of earnings, the PE of Wipro is 36, which means an investor is paying 36 rupees for 1 rupee of Wipro earnings.
If the PE is high, it means the company is trading at a higher valuation. The PE of Wipro is 36, which is not an overvalued stock, in comparison the PE multiple of TCS is 35, and Infosys PE is also 35.
Sales and profit growth
Wipro is failing to generate sales and profits efficiently. The numbers quoted by Wipro are very poor. The sales have grown at a CAGR of just 2.4% over the last five years, 4% over the last three years, and -0.21% for the last year.
The profits of Wipro have grown at a CAGR of 4.17% over the last five years, 9.22% over the last 3 years, and 15.9% for the last year.
ROE
ROE stands for return on equity. ROE signifies how efficiently the company is using its funds or cash to generate revenues or profits. The higher the ROE is, the higher the Efficiency, which is positive for the company.
The five years average ROE of Wipro is just 18.62%, three years average is 18.98%, and the last one-year average is 22.06%.
ROCE
ROCE stands for return on capital employed. ROCE is also the same as ROE, the only difference is ROCE considers the debt of the company. Whereas, ROE does not consider the debt of the company. So if a company has a debt, the ROE doesn’t make any sense, as it does not consider the debt of the company.
The five years average ROCE of Wipro is just 22.05%, three years average is 22.52%, and the last 25.52%.
Wipro profit & loss
| Particulars | Wipro ( FY 2020-21 ) |
|---|---|
| Net sales | 50,299 Cr |
| Profit before tax | 12,684 Cr |
| Net profit | 10,060 Cr |
| EPS | 18.36 |
The net sales of Wipro is 50,299 crore rupees, profits before tax are 12,684 crore rupees, net profit is 10,060 crore rupees, and EPS is 18.36.
Earnings per share
EPS stands for earnings per share.
EPS = net profit / total number of shares.
A higher value of EPS is positive for a company. The EPS of Wipro is very low when compared to its peers, for example, the EPS of TCS is 96, EPS of Infosys is 46, and EPS of HCL tech is 33.
Wipro EPS is not even close to its competitors, which is a negative thing. Wipro needs to increase its profits in order to increase the value of EPS.
Wipro fundamental analysis: Balance sheet
| Particulars | Wipro ( FY 2020-21 ) |
|---|---|
| Equity & liabilities | |
| Share capital | 1,095 |
| Total reserves | 44,145 |
| Borrowings | 14 |
| Other N/C liabilities | 2,300 |
| Current liabilities | 18,132 |
| Total liabilities | 65,688 |
| Assets | |
| Net block | 7,288 |
| Capital WIP | 1,848 |
| Intangible WIP | 0 |
| Investments | 8,206 |
| Loans & advances | 2,336 |
| Other N/C assets | 630 |
| Current assets | 45,379 |
| Total assets | 65,688 |
How to read, analyze or understand a Balance sheet.
Wipro cash flow statement
| Particulars | Wipro ( FY 2020-21 ) in cr |
|---|---|
| Profit from operations | 12,684 |
| Adjustments | -693 |
| Changes in assets & liabilities | 3,012 |
| Tax paid | -2,275 |
| Operating cash flow | 12,727 |
| Investing cash flow | -1,282 |
| Financing cash flow | -12,105 |
| Net cash flow | -660 |
How to understand a cash flow statement.
Wipro fundamental analysis: Shareholding pattern
| Shareholders | Holding % |
|---|---|
| Promoters | 73.02 |
| FII | 9.69 |
| DII | 2.05 |
| Public | 12.6 |
| Others | 0 |
Wipro fundamental analysis: stock performance
Wipro stock price has grown at a CAGR of 30.2% for the last 5 years, 37.8% for the last 3 years, and 93.2% from the last year.
Wipro has given a positive return of just 3% from 2015 to 2020, but from the last year, this stock has zoomed from 188 to 646 rupees which is more than 350% returns.
Wipro has given stellar returns for its investors and it will continue to give even in the future as the demand for IT services and products like digital, AI, and cloud will rapidly increase in the near future.
Wipro fundamental analysis: Peer comparison
| COMPANY | PRICE RS | MCAP CR | P/E | P/B | P/S | EPS RS | ROE % | ROCE % |
|---|---|---|---|---|---|---|---|---|
| Infosys | 1,709 | 7,18,797 | 38.31 | 9.48 | 8.37 | 44.61 | 27.12 | 36.79 |
| TCS | 3,655 | 13,52,007 | 37.72 | 16.06 | 9.94 | 96.91 | 42.02 | 56.24 |
| Wipro | 672 | 3,68,639 | 36.11 | 7.15 | 7.05 | 18.36 | 18.62 | 22.05 |
| HCL Tech | 1,265 | 3,43,373 | 37.92 | 7.43 | 9.63 | 33.37 | 21.56 | 30.89 |
| Tech Mahindra | 1,402 | 1,35,998 | 31.11 | 5.32 | 4.59 | 45.07 | 18.26 | 22.47 |
| L & T Infotech | 5,951 | 1,04,252 | 53.02 | 14.02 | 9.02 | 112.24 | 29.83 | 40.47 |
| Mindtree | 4,363 | 71,916 | 57.96 | 15.42 | 9.03 | 75.29 | 29.79 | 41.43 |
Frequently asked questions
Is Wipro undervalued?
No, Wipro is not an undervalued stock. The PE multiple of Wipro is 38, which is the same as the industry average. For example, the PE multiple of TCS and Infosys is also close to 38. But the ROE and ROCE of Wipro is very low when compared to its peers like Infosys and TCS.
Is wipro good for long term investment
Yes, Wipro is a very good stock for long-term investment. From 2015 to 2020 Wipro has given just 3% returns, But from the last year, Wipro stock has zoomed from 118 to 646 rupees. It will continue to give stellar returns even in the future as demand for IT services, and products like digital, AI, and cloud will rapidly increase in the near future.
Is wipro better than TCS?
No, Wipro is not better than TCS. TCS is the biggest IT company in India and in the top 3 in the world. Both Wipro and TCS are better, but in terms of financials, TCS performs well when compared to Wipro. The EPS, ROE, ROCE, sales growth, and profit growth of TCS are better than Wipro.
