Fundamental Analysis of Wipro Ltd.

In this article, we will explore Wipro Ltd.. fundamentally, understand its business model and industry, and determine whether it’s a good investment fit for you.

Wipro Ltd.

Wipro is a leading technology services and consulting company that’s focused on building innovative IT-software solutions that address client needs around the world. They have 4 main IT offerings:

• Wipro FullStride Cloud – This is the service that brings their entire suite of cloud capabilities under one roof. This feature enables the company to deliver end-to-end cloud services.
  
• Enterprise futuring – The company also helps clients transform their enterprises by integrating intelligent insight from data and AI. This data includes insights from digital operations, cybersecurity, and other advanced technology like AR/VR and ML.
  
• Engineering – Here, Wipro expands its capability to offer services in emerging industries like the cloud, Industry 4.0, IoT, silicon design, embedded systems, and data.
  
• Consulting – The company also has its hands in tech consulting, which brings together all its operations under one roof and enables end-to-end services for their client’s business transformation.

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Is the IT-software industry a goldmine investment?

The Indian IT industry currently stands tall as a global champion, boasting more than US $245 billion in revenue (as per FY23), and is expected to grow 15% year-on-year. The sector comprises almost 8% of India’s GDP and makes significant contributions to the economy, including in terms of employment generation.

Globally, developed countries outsource a lot of IT-software jobs to the Indian market, owing to significantly lower costs and technical expertise. Revenue generated from the export of IT services abroad amounted to more than US $194 billion last year.

Who are WIPRO’s competitors in the IT-software sector?

Here are some of WIPRO’s competitors:

• Tata Consultancy Services Ltd (TCS)
• Infosys Ltd
• HCL Technologies Ltd
• Tech Mahindra Ltd

History of Wipro Ltd.

Here is a brief summary of the company through the years:

Humble beginnings (1945 – 1980):

• Founded before India’s independence, Wipro was originally Western India Vegetable Products Ltd., created by Azim Premji as a company focusing on vegetable oils and soaps.
• Gradually over the next two decades, the company diversified into hydrogenated oils, industrial oils, and marine products.
• In the 1970s, the company entered the IT space by establishing Wipro Systems & Services Ltd. to manufacture hydraulic cylinders and manage IBM mainframe installations.
• Azim Premji took over as Chairman and made technology Wipro’s primary focus.

Ascending into IT (2000 – 2010):

• By the 1980s, Wipro was experiencing rapid growth within IT, securing contracts with international clients like GE and Kodak.
• IPOed in 1987 and subsequently expanded into software development, IT consulting, and BPO services.
• Eventually, Wipro merged with Wipro Fluid Power Ltd., consolidating its industrial and IT businesses.
• In 2000, Wipro acquired Spectramind, a US-based IT consulting firm.

Global diversification (2011 onwards):

• By 2006, Wipro had established WIPRO Emergis, a joint venture with SAP for enterprise resource planning (ERP) solutions. It also acquired Convergys Corporation, a US-based customer service provider.
• In the last decade, Wipro has been increasing its focus on cloud computing and automation, and has established the Digital Innovation Lab in Silicon Valley to accelerate the same.
• Most recently, Wipro acquired Capco, a global technology consulting firm, bolstering its financial services expertise.

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Company Profile of WIPRO

Pros

• Wipro currently caters to more than 1,100 institutional clients around the globe, with the largest customer contributing only 3% to overall revenues. This indicates significant diversification in terms of sales generation.
• Over the company’s past, it has acquired more than 26 companies across various verticals, but primarily in the IT-tech sector.

Cons

• Over the last 5 years, the company has only grown at a rate of 10%, while the industry average was slightly more than 13.5%.
• Market share and net income have also underperformed the market at 14% and 7.2% respectively, while industry averages sat at 12.5% and 10.14% respectively.

The finances

Shareholding pattern of Titan Ltd.

Here’s the shareholding pattern of Titan:

• Promoters: 72.93%
• Foreign Institutional Investors (FIIs): 6.47%
• Domestic Institutional Investors (DIIs): 8.03%
• Public: 12.43%

Mutual fund holding within DII investment in the company has been volatile since June 2022, but has largely gone down from 2.20% to 2.79%. Other DII investments have, however, dramatically gone up from just 0.14% in June 2022 to more than 5.24% today. FII investment has also gone up in the last 2 years.

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Peer multiple comparison

*As on 15.01.2024

Conclusion

So, that’s a brief overview of everything you need to know about Wipro Ltd.. before investing. This information is by no means, however, exhaustive, and we encourage you to do your own research before investing.

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