17 December 2015
Update | Sector: Technology
Wipro
Neutral
BSE Sensex
25,494
S&P CNX
7,751
CMP: INR555
TP: INR600 (+8%)
Designing Digital prowess
Takeaways from our meeting with Mr Rajan Kohli – Head, Wipro Digital
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
AvgVal (INR m)
Free float (%)
WPRO IN
2,462.4
1,423/20.6
677/513
1/6/8
1034
26.6
Financial Snapshot (INR Billion)
Y/E Mar
2015 2016E 2017E
Sales
469.5 513.6 585.7
EBITDA
104.6 114.8 135.3
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
RoE (%)
RoCE (%)
P/E (x)
86.6
35.1
10.9
23.0
20.2
16.5
93.0 105.5
37.8
7.6
21.8
19.0
15.3
10.9
42.8
13.5
22.0
20.4
13.5
9.0
We met Mr Rajan Kohli, who heads WPRO’s Digital initiatives, to understand the
addressable opportunity for WPRO, its strategic approach and capabilities in the
segment.
While Digital is a big opportunity for service providers, success in Digital is a
function of combining capabilities in: [1] strategic and technical consulting, [2]
designing, and [3] agile and iterative development.
WPRO’s holistic approach in Digital is substantiated by acquisition of DesignIt,
which helps complete the “Imagination to Execution” loop, as WPRO’s technical
capabilities drive implementation of the ideas and strategy laid out by DesignIt.
If we include Digital-related (which are not accounted in Wipro Digital), the
larger piece contributes ~14% to WPRO’s revenues today
While the scale may be small today, its capabilities harbor potential to drive
revival in growth for the company in due course.
Raison d’etre:
Three-pronged need for a separate entity
The carving out of Wipro Digital as a separate entity is a function of three main
factors:
1.
In terms of
talent,
Digital projects require engineers capable of developing
technology at the front end as well as backend (or in other words, full stack
developers). Such personnel have strong algorithmic capabilities in addition to
knowledge of multiple open source technologies, and have to be sourced amidst
competition from start-ups.
2.
Digital requires selling to
stakeholders
beyond the CIO. WPRO’s Design team
(courtesy DesignIt acquisition) and Strategy team bring on the table the skill sets
that enable foot-in-the-doors of CXOs other than the CIO.
3.
Digital is more than a technology, and requires a change in the organizational
DNA.
At the very core, it needs the teams to be agile. Delivery to clients
happens in one-to-two week stints through iterative models using agile / dev-
ops based methodologies.
166.1 181.7 208.9
EV/EBITDA (x) 12.2
What
does Wipro Digital address?
According to WPRO, ~80% of the clients’ incremental IT budgets are being
allocated towards Digital. This is coming at the cost of (spending cuts in) legacy
areas. Through Wipro Digital, the company’s endeavor is to grow this 80%
incremental piece faster than the decline in traditional services. Wipro Digital
addresses this incremental / new areas of client spending, which can be
classified as follows:
1. Spends that fall under the
Chief Marketing Officer (CMO)
– these are
broadly categorized into:
User Experience
– this is an area where multiple technology companies
have built capabilities, from start-ups to large organizations, and
Ashish Chopra
(Ashish.Chopra@MotilalOswal.com); +91 22 3982 5424
Sagar Lele
(Sagar.Lele@MotilalOswal.com); +91 22 3982 5585
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Wipro
Campaign Management
– this is a totally new area where Accenture
has built capabilities through multiple acquisitions (avVenta and
AD.Dialeto)
2.
Internet of Things,
which today holds immense promise for Enterprises to
lower operational expenses, generate new revenue streams, and provide
desired customer experience.
3. Higher level
Analytics
with cognitive and prescriptive capabilities, which are
much more complex than Descriptive and Diagnostic Analytics.
4.
Cloud
– which is simplifying the real estate for customers. Cloud remains a
double-edged sword, as revenue pie for service providers will reduce. That
said, there will be a lot of spending and business opportunity in cloud
migration over the next five years.
Wipro’s Digitization offering
is a broader category and spans beyond Wipro
Digital. It includes work that falls in four broad categories:
1. Digitization process of clients starts with
Re-imagination
of existing
processes / strategies / technology landscape. In the case of customers who
are well entrenched as far as traditional IT Services are concerned,
proposition at this layer can facilitate opportunity to gain incremental share
of the budgets.
2. This is followed by
Application rationalization
– modifying the existing
codes to enable them in the new environments. This can be handled by
separate set of vendors, and hence, acts as the second entry point in the
clients’ Digital cycles – although with relatively lower value add.
3. Digitization also involves
straight through processing and Cognitive
intelligence
– which deals with providing the next level of efficiencies by
taking out manual processes wherever feasible.
4. Lastly,
putting applications / systems of the cloud
and offering flexibility of
use-basis payments are other components of the journey.
Exhibit 1: Elements of Digitization
Cloud migration
& flexi-pricing
models
Re-imagine
process /
business /
technology
Application
rationalization
Cognitive
intelligence
Source: Company, MOSL
If we include Digital-related services (which are not accounted in Wipro Digital)
like Ecommerce work in Retail, High performance computing, Business
Intelligence, Business process management and customer process
transformation, the larger piece contributes ~14% to WPRO’s revenues today.
17 December 2015
2
 Motilal Oswal Financial Services
Wipro
What is the
organization structure
of Wipro Digital?
Given the small size of team as on date, the structure will evolve gradually at
Wipro Digital, but it will definitely not be a pyramid structure. The structure is
relatively flat.
Sales organization:
Digital from customer’s perspective can be classified into
three segments, and the sales organization at Wipro is accordingly aligned:
1.
Digital for Business:
This is where the stakeholders are the likes of CEOs,
CMOs, etc, and re-imagination business strategy is carried out by them.
2.
Digital for Technology:
Where Wipro Digital would extend capabilities in
Digital architecture, cloud, dev-ops, agile development, etc.
3.
Digital for Operations:
Which caters to a COO, for example, and helps drive
efficiencies within the business by using Digital capabilities.
What
differentiates
Wipro Digital from peers?
The unique capability that WPRO Digital now possesses compared to its peers is
the design side of Digital – thanks to the acquisition of DesignIt. DesignIt
empowers WPRO with the ability to design experiences and consequently
business models for end customers. Only Accenture boasts of a similar capability
through its acquisition of Fjord. Design capabilities help the customers define
end-user experiences and their product journey.
Strategic designers are a very different talent breed that cannot be trained. The
segment is all about innovation, which goes towards generating ideas to change
the business, and the resulting design is brought to life by technology – which is
where WPRO comes in.
WPRO now has marquee references through DeisgnIt of delivering cutting edge
design solutions. It is already in the process of cross-selling to its clients. Early
experience suggests potential of not only successful cross-sell but also
significant downstream opportunity arising out of the same.
CUSTOMER PROFILE SHOWCASED ON DEISGNIT’S WEBSITE
Source: DesignIT
17 December 2015
3
 Motilal Oswal Financial Services
Wipro
What are the
new opportunities
spawned by Digital for Wipro?
Spend in the Business segment of Digital is significantly incremental, expanding
the addressable market for WPRO. WPRO’s readiness here is absolute, given
two key factors:
1.
Its ability to address the urgency and criticality of Digital spend by the CXOs
2.
Its relevance in the customers’ “Imagination
to Execution”
cycle by bringing
“Experience” capabilities in conjunction with technology capabilities
Security spend is also seeing a significant increase. Cloud adoption and size of
database/transactions as well as IOT are big drivers for the same. WPRO claims
to have among the strongest capabilities in Security, and its end-to-end Security
and Compliance Solution has enabled over 300 organizations across the globe.
Exhibit 2: DesignIt helps complete the “Imagination to Execution” cycle by focusing on all bits that matter
STRATEGY
interaction
DESIGN
insight
integration
TECHNOLOGY
What is the biggest
challenge
in Digital?
One of the key challenges is
talent
acquisition. Talent is not only restricted to
domain and design capabilities, but also the relatively adept Engineering
resources with a programming / algorithmic bent of mind; and not simply be
qualified in certain languages. Also, those who can deliver the full stack (front
end and backend legacy) are most useful. However, within India, most of such
talent is getting cornered by start-ups and organizations like Google and FB.
Training is a long-term solution that WPRO is actively driving within the
organization.
Another route taken by WPRO is hiring selectively from smaller campuses.
Thirdly, for domain / design capabilities, WPRO has also been hiring from
end enterprises.
Higher qualification programming engineers are available in US / UK and that is
also part of the reason why the nature of Digital work will be
onsite heavy.
WPRO has changed the incentive structure for its technology stars as well – to
disproportionately reward technical talent irrespective of seniority and
designation. WPRO had created a 'fellow' program, offering privileges usually
given to vice president level executives to the selected few, who will be part of
Wipro's Distinguished Members of Technical Staff.
4
17 December 2015
 Motilal Oswal Financial Services
Wipro
How is Wipro addressing the
Digital talent
situation?
Competence in Digital requires technology capabilities that are significantly
different from those that go into serving customers’ needs in traditional IT
Services. The full-stack developers that are needed in Digital are typically
employed by start-ups. These employees know enough open source tools and
have an algorithmic bent of mind to keep pace with the changing landscape.
WPRO conducts a codility test in line with practices followed across the identify
globe to hire such developers. Even internally, WPRO has used this test to select
high potential talent that is undergoing rigorous three-month training process to
get Digital-ready. Apart from internal training, WPRO is also hiring in the market,
and will start visiting campuses next year.
The engineers in WPRO digital have a different career trajectory – instead of
moving on to become managers, employees are rewarded for their seniority
while remaining technical developers even after 5-7 years of coding.
Where is the
client skew
– old or new?
There are obvious opportunities where there is a significant trust that existing
customers have and want help with newer opportunities in digital. The basic
premise of these engagements from WPRO’s perspective is helping them think
through in a disruptive manner.
However, there is limited benefit in knowing the legacy when it comes to Digital.
Many a time, clients are using Digital to identify newer suppliers who are willing
to think disruptively for the benefit of the client and are not tied to legacy
revenue streams, which may see cannibalization as a consequence.
Certain businesses have higher spend in Digital than the others. Financial
Services, Retail & CPG, Media & Telecom are leading the way. Now WPRO is
starting to see Healthcare and Life Sciences adopting Digital too. With IoT, even
Manufacturing is coming to the fore.
How do some of the
operating metrics
stack up in Digital?
Revenue model
is largely
T&M
still, given the non-specific nature of
requirements. The velocity of time-to-market is more important than the
certainty of delivery. This has also prompted WPRO to change the quality
assurance processes to levels that understand the Digital delivery better.
Billing rates
in Digital are higher. That gets compounded with onsite centricity of
the projects. This skew in favor of onsite is likely to remain over the foreseeable
future.
WPRO ran us through some of the successful case studies of both Wipro Digital
and its acquired entity, DesignIt. It showcased how a number of marquee
customers are participating in their Digital journey with WPRO.
While Wipro Digital’s scale may not move the needle on revenue growth yet, its
capabilities harbor potential to drive revival in growth for the company in due
course. As spending in some of these areas becomes mainstream, the company
appears to be well placed to capitalize on the same.
OUR VIEW:
In Summary – How is Wipro positioned?
17 December 2015
5
 Motilal Oswal Financial Services
Wipro
Examples of engagements won by Wipro in Digital
Chosen by Chelsea Football Club as its official digital and IT partner. WPRO will
support Chelsea FC in its transformation by bringing together strategy, design
and technology.
Awarded a strategic Application Development and Management contract by
Allied Irish Bank to manage and transform their Digital and Online Channels,
Data and Enterprise support services & Applications estate over a period of five
years.
Selected by a North American bank to redesign and implement a
transformational B2B payment portal.
Appointed by Lawn Tennis Association of the UK as their official Digital
Technology Services Partner.
DesignIt wins:
Scandinavian Airlines has selected Designit to help the airline rethink and
redesign the future customer experience for its large base of over 4 million
frequent flyers.
Appointed by a major European automotive brand to rethink and redesign its
entire service experience for customers that visit the brand’s dealerships for
maintenance and service work.
Appointed by a global Pharmaceutical brand to work on reimagining and
improving its innovation process and to rethink the business offering beyond the
core pharmaceutical products of today and drive the digital business
transformation of tomorrow.
17 December 2015
6
 Motilal Oswal Financial Services
Wipro
Valuation and view
WPRO has been actively investing over the last few years to revive its growth
closer to industry average. Lower utilization, higher S&M, and investments in
capability building absorbed more than the tailwind from currency, and were
potential levers as revenue growth came through. But growth has
underperformed peers. As a result, since 4QFY13, even though utilization is up
~550bp and INR has depreciated 17%; EBIT margin in IT Services at 20.7% is only
70bp higher.
Growth at WPRO has been driven by select segments – Healthcare and Energy &
Utilities among verticals and IMS among services. Healthcare grew around 20%
CC in FY15 and Energy & Utilities grew 10.2% CC, despite pressure in the vertical
in the last two quarters. IMS, even after factoring the impact of cross currencies,
grew 19%.
WPRO’s broad-based traction of 2QFY16 was encouraging. With only Energy &
Utilities sluggish, there is visibility of that turning around in CY16, as the deals
won in vendor consolidation exercise ramp up. On the flip side, its guidance of
5.1-7.2% YoY CC in 3Q implies loss of momentum from 8.3-8.4% of the last three
quarters. That limits conviction around growth recovery to industry average in
the near term. Consequently, the relatively low valuation multiple may not re-
rate anytime soon.
The stock trades at 15.3x FY16E and 13.5x FY17E EPS. WPRO’s valuation
discount to peers like TCS and INFO suggests attractive upside potential in the
event of growth revival. There have been flashes of broad-based traction at
WPRO, but guidance suggests that consistency in the same may yet take some
time.
We see a combination of Digital and revival in Energy as potential
turnaround agents for the company.
Our target price of INR600 discounts
FY17E EPS by 14x. Maintain
Neutral.
We would be buyers into: [1] further price
correction, and [2] signs of revenue momentum from ramp-ups beginning
January 2016.
Material uptick in YoY CC growth guidance for 4QFY16
Broad-basing of growth across verticals
Uptick in margins from automation and productivity initiatives
Prolonged weakness in Energy & Utilities vertical
Rapid appreciation in INR
Lopsided growth from few segments
Key triggers
Key risk factors
17 December 2015
7
 Motilal Oswal Financial Services
Wipro
Exhibit 3: 1-year forward PE band
32
25
18
11
4
15.4
6.0
PE (x)
Median(x)
Peak(x)
Min(x)
25.1
15.7
13.3
Avg(x)
8.5
6.5
4.5
2.5
0.5
3.6
3.4
1.4
2.8
Exhibit 4: 1-year forward PB band
PB (x)
Median(x)
Peak(x)
Min(x)
7.0
Avg(x)
Exhibit 5: Comparative valuation
Company
TCS
Infosys
Wipro
HCL Tech
TechM
Cognizant
MCap
USDb
70.7
37.6
20.6
18.0
7.5
37.0
TP Upside
EPS (INR)
P/E (x)
(INR)
(%) FY15E FY16E FY17E FY15E FY16E FY17E
Neutral
2550
6.3 110.8 123.7 141.8 21.7
19.4
16.9
Buy
1225 11.9 53.9 57.3 67.6
20.3
19.1
16.2
Neutral
600
8.1
35.1 37.8 42.8
16.5
15.3
13.5
Buy
1000 17.6 50.4 53.2 62.5
16.9
16.0
13.6
Neutral
570
8.6
29.6 33.1 40.5
17.7
15.8
13.0
Not Rated
2.3
2.7
3.1
25.8
22.8
19.3
Rating
FY15E
38.5
26.0
23.0
31.7
24.5
20.7
RoE (%)
FY16E
38.7
24.0
21.8
28.0
22.1
19.1
FY15-17E CAGR (%)
FY17E USD rev. EPS
36.5
11.2
13.1
25.0
10.3
12.0
22.0
7.5
10.5
27.8
12.8
11.4
22.9
13.1
17.0
18.8
18.2
15.5
Source: Company, MOSL
17 December 2015
8
 Motilal Oswal Financial Services
Wipro
Story in charts
Exhibit 6: Growth guidance not picking up materially…
Midpoint of QoQ CC growth guidance (%)
3.0
2.2
1.0 1.2
1.8
0.6
0.9
0.3
5,221
5,921
2.7
3.0
2.9 3.0
2.0
2.5
1.5
5.0
6,218
Exhibit 7: …limiting confidence of growth closer to industry
average
18.9
13.4
10.2
6.4
6,618
7.0
4.9
7,426
8,183
Revenue (USD m)
Grwoth (%)
7,082
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: Utilization fell during the quarter
Utilization % (incl. trainees)
Utilization % (excl. trainees)
Exhibit 9: S&M spend acting as a lever (indexed at 100)
180
160
140
120
100
S&M (IT Serv)
USD revenues
Source: Company, MOSL
Source: Company, MOSL
Exhibit 10: Lever of FPP continues to play…
Revenue proportion fron Fixed price contracts (%)
Exhibit 11: …and gradual improvement
proportion is a potential lever
in
offshore
Revenue proportion from offshore (%)
53
49
46
45
48
Wipro
TCS
Infosys
HCL Tech
(last
reported)
Tech
Mahindra
Source: Company, MOSL
Source: Company, MOSL
17 December 2015
9
 Motilal Oswal Financial Services
Wipro
Exhibit 12: Operating metrics
3QFY14
Services Composition (%)
IMS
BPO
Product Engg and Mobility
Wipro Analytics
Application Services
Total
R&D
Consulting
Verticals (%)
Global Media & Telecom
Finance Solutions
Manufacturing & Hitech
Healthcare Lifescience
Retail & Transportation
Energy, Natural Resources & Utilities
Geography (%)
Americas
Europe
India & Middle East business
APAC and Other Emerging Markets
Customer size distribution (TTM)
> $100M
> $75M
> $50M
> $20M
> $10M
> $5M
> $3M
> $1M
Customer metrics
Revenue from Existing customers %
Number of new customers
Total Number of active customers
Customer Concentration (%)
Top customer
Top 5
Top 10
24.9
8.7
7.6
4QFY14
25.0
9.5
7.6
1QFY15
25.5
9.7
6.9
7.1
50.8
100.0
9.5
2.0
14.3
26.7
18.2
10.8
14.0
16.0
49.8
29.6
9.1
11.5
10
14
29
84
143
224
293
511
2QFY15
27.2
9.2
7.0
7.2
49.4
100.0
9.7
2.0
13.9
26.0
18.2
11.2
13.9
16.8
51.0
27.8
9.2
12.0
10
15
30
85
150
225
292
524
3QFY15
27.7
9.5
7.1
7.0
48.7
100.0
9.8
1.9
13.8
25.7
18.3
11.7
14.1
16.4
51.4
27.6
9.6
11.4
10
16
31
84
153
226
300
526
4QFY15
27.9
9.4
7.6
7.1
48.0
100.0
10.2
1.8
13.5
26.5
18.3
11.7
14.5
15.5
51.7
26.3
10.7
11.3
11
15
31
86
150
231
311
542
1QFY16
28.0
9.3
7.7
7.5
47.5
100.0
10.3
1.7
13.2
26.8
18.6
11.2
15.0
15.2
52.5
25.6
10.6
11.3
10
17
30
86
151
244
314
537
2QFY16
28.0
9.8
7.9
7.5
46.8
100.0
10.5
1.9
13.4
26.7
18.7
11.4
15.1
14.7
53.0
25.2
10.6
11.2
10
17
31
85
154
244
321
533
100.0
10.1
2.4
13.7
26.4
18.6
10.6
14.6
16.1
49.9
29.6
8.5
12.0
11
15
28
80
136
218
280
495
100.0
9.8
2.2
13.9
26.8
18.0
10.6
14.5
16.2
50.0
30.0
8.8
11.2
10
14
29
82
143
220
278
501
98.1
42
966
3.7
14.2
23.0
97.0
59
986
3.7
13.9
22.6
99.6
35
1022
3.7
13.4
21.8
98.6
50
1018
3.5
12.9
21.5
97.7
44
1018
3.8
12.7
21.0
96.7
65
1054
99.6
36
1071
98.5
67
1100
3.8
3.3
3.1
12.6
12.2
11.7
20.6
20.1
19.8
Source: MOSL, Company
17 December 2015
10
 Motilal Oswal Financial Services
Wipro
Exhibit 13: Operating metrics
3QFY14
EMPLOYEE METRICS
Closing Headcount - IT Services
146,402
Sales & Support staff - IT Services (average)
11,225
Utilization (IT Services excl. BPO, IFOX and I&ME)
Gross Utilization (%)
66.0
Net Utilization (excl support) (%)
72.9
Net Utilization (excl trainees) (%)
74.3
Attrition
IT Services excluding BPO and I&ME
Voluntary TTM
14.3
Voluntary Quarterly Annualized
16.3
Involuntary Quarterly Annualized
4.2
BPO - Quarterly
12.6
BPO - Post training
9.3
IT SERVICES (EXCL INFOX, BPO, I&ME)
Service Delivery
Revenue from FPP
50.6
% of onsite revenue
54.1
% of offshore revenue
45.9
IMS
5.9
BPO
4.1
Product Engg and Mobility
2.9
Wipro Analytics
Application Services
R&D
Consulting
Vertical wise
Global Media and Telecom
Finance Solutions
Manufacturing and Hi-Tech
Healthcare, Life Sciences and Services
Retail and Transportation
Energy and Utilities
Geography wise
US
Europe
India & Middle East business
Other Emerging markets
Client Concentration
Top client
top 2-5 clients
Top 6-10 clients
Non top 10 clients
6.7
2.7
1.4
2.9
0.7
8.0
1.5
4.9
3.1
5.4
5.4
-5.0
0.2
7.0
1.7
2.6
4QFY14
146,053
11,172
67.7
74.9
76.5
1QFY15
147,452
11,174
68.7
76.0
77.9
2QFY15
154,297
11,328
70.0
77.5
79.4
3QFY15
156,866
11,603
68.5
75.9
78.8
4QFY15
158,217
11,629
70.5
78.0
80.5
1QFY16
161,789
12,517
71.3
79.4
81.9
2QFY16
163,396
13,068
69.5
77.2
82.3
15.1
15.7
4.2
11.6
8.9
16.1
17.0
-
11.8
10.1
16.5
16.9
-
12.0
10.0
16.5
16.4
-
13.1
9.1
16.5
15.6
-
13.3
9.6
16.4
16.4
-
12.0
9.3
16.4
16.8
-
10.2
8.5
51.3
54.1
45.9
2.9
11.9
2.5
52.1
54.3
45.7
3.2
3.3
-8.2
0.0
0.0
-0.6
-6.1
4.1
0.8
2.3
3.1
-2.3
-0.1
0.8
-0.2
4.6
3.9
1.2
-3.8
-2.3
2.2
53.1
53.7
46.3
8.6
-3.4
3.3
3.2
-1.0
-1.9
-8.0
-1.0
-0.9
1.8
5.6
1.1
6.9
4.3
-4.4
2.9
6.2
-3.7
-1.3
4.2
2.2
55.1
54.3
45.7
3.2
4.7
2.8
-1.5
-0.1
3.9
1.8
0.6
0.2
1.9
5.9
2.8
-1.1
2.1
0.6
5.8
-3.7
10.0
-4.0
-2.2
2.0
55.5
53.7
46.3
-0.5
-2.2
5.8
0.2
-2.6
2.4
-3.7
-3.3
1.9
-1.2
-1.2
1.6
-6.6
-0.6
-5.8
10.2
-2.0
-1.2
-2.3
-4.7
-0.7
54.5
54.6
45.4
1.5
0.0
2.4
6.8
0.1
2.9
-6.4
-1.1
2.2
2.8
-3.2
4.6
-0.9
2.7
-1.6
0.2
1.1
53.4
53.9
46.1
2.1
7.6
4.8
2.1
0.6
4.1
14.1
3.7
1.7
2.7
3.9
2.8
-1.3
3.1
0.5
2.1
1.2
-2.0
-1.2
4.0
4.0
-0.8
2.5
1.8
3.1
2.7
3.9
6.1
-4.3
2.5
-0.4
1.3
3.0
-12.2
-4.1
2.3
-1.3
-0.2
4.7
1.7
2.5
Source: MOSL, Company
17 December 2015
11
 Motilal Oswal Financial Services
Wipro
Financials and valuations
Key Assumptions
Y/E March
INR/USD Rate
Revenues (USD m)
Offshore Revenue (%)
Total Headcount
Net Addition
Per Capita Productivity (USD)
Gross Utilization (%)
IT Services EBIT Margin (%)
2010
46.1
4,391
50.2
108,071
10,261
40,630
74.3
23.4
2011
45.0
5,221
48.3
122,385
14,314
42,658
71.6
22.7
2012
48.0
5,921
46.2
135,920
13,535
43,563
69.0
20.8
2013
54.3
6,218
46.4
145,812
9,892
42,643
66.7
20.5
2014
60.4
6,618
45.9
146,053
241
45,312
66.4
22.6
2015
62.2
7,082
46.0
158,217
12,164
44,759
68.7
22.0
2016E
65.8
7,426
46.1
176,876
18,659
41,982
69.8
21.2
2017E
67.5
8,183
46.8
194,876
18,000
41,990
70.9
21.7
Income Statement
Y/E March
Sales
Change (%)
Operating Costs
SG&A
EBITDA
% of Net Sales
Depreciation & Amort.
EBIT
Margins
Other Income
PBT
Tax
Rate (%)
PAT
Minority Interest
Net Income
Change (%)
2010
271,242
5.6
179,373
32,822
66,581
24.5
7,534
59,047
21.8
3,369
62,946
9,293
14.8
53,653
-184
53,469
17.2
2011
310,986
14.7
204,639
40,467
74,091
23.8
8,211
65,880
21.2
4,718
71,246
9,896
13.9
61,350
-345
61,187
14.4
2012
318,747
2.5
215,665
36,369
66,713
20.9
10,129
56,584
17.8
8,939
65,523
12,955
19.8
52,568
-243
52,325
-14.5
2013
374,256
17.4
250,015
46,245
77,996
20.8
10,650
67,346
18.0
11,250
78,596
16,912
21.5
61,684
-322
61,362
17.3
2014
434,269
16.0
284,383
52,787
97,099
22.4
11,106
85,993
19.8
15,012
101,005
22,601
22.4
78,404
-438
77,966
27.1
2015
469,545
8.1
308,460
56,476
104,609
22.3
12,823
91,786
19.5
19,897
111,683
24,594
22.0
87,089
-531
86,558
11.0
2016E
513,643
9.4
336,036
62,800
114,807
22.4
14,304
100,503
19.6
19,341
119,844
26,567
22.2
93,277
-318
92,959
7.4
(INR Million)
2017E
585,705
14.0
378,316
72,088
135,301
23.1
15,858
119,442
20.4
16,841
136,283
30,592
22.4
105,691
-216
105,475
13.5
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority Interest & others
Loans
Capital Employed
Gross Block
Less : Depreciation
Net Block
Investments
Intangible Assets
Other non current assets
Curr. Assets
Debtors
Inventories
Cash & Bank Balance
Adv., Other Current Assets
Current Liab. & Prov
Net Current Assets
Application of Funds
E: MOSL Estimates
17 December 2015
2010
2,936
193,176
196,112
8,339
62,511
266,962
89,499
36,041
53,458
30,420
57,813
13,143
175,094
67,636
7,926
64,878
34,654
62,966
112,128
266,962
2011
4,908
234,772
239,680
13,710
52,802
306,192
99,346
44,252
55,094
49,282
58,369
22,682
186,016
85,776
9,707
61,141
29,392
65,251
120,765
306,192
2012
4,917
280,397
285,314
10,492
58,958
354,764
113,369
54,381
58,988
41,961
72,166
27,897
234,989
110,353
10,662
77,666
36,308
81,237
153,752
354,764
2013
4,926
278,886
283,812
10,324
63,816
357,952
115,556
65,031
50,525
69,171
56,470
25,332
238,232
108,623
3,263
87,869
38,477
81,778
156,454
357,952
2014
4,932
338,567
343,499
11,440
51,592
406,531
127,586
76,137
51,449
63,233
65,358
28,135
294,129
124,726
2,293
117,862
49,248
95,773
198,356
406,531
2015
4,937
403,045
407,982
15,315
78,913
502,210
143,166
88,960
54,206
54,644
76,009
32,590
382,584
133,869
4,849
164,017
79,849
97,823
284,761
502,210
(INR Million)
2016E
4,940
441,362
446,302
18,725
92,311
557,338
190,302
103,264
87,038
64,931
83,986
33,126
397,749
143,604
2,535
191,658
59,952
109,492
288,257
557,338
2017E
4,940
508,226
513,166
18,725
80,298
612,189
226,160
119,122
107,038
64,931
83,986
35,146
444,542
163,424
2,890
212,868
65,360
123,454
321,088
612,189
12
 Motilal Oswal Financial Services
Wipro
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Book Value
DPS
Payout %
Valuation (x)
P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity Ratio(x)
2010
18.8
80.7
2.4
12.8
2011
21.6
98.2
4.4
20.3
2012
21.3
116.5
6.0
28.2
2013
24.9
115.6
7.0
28.1
2014
31.7
139.9
8.0
25.3
2015
35.1
166.1
12.0
34.2
2016E
37.8
181.7
12.0
31.8
2017E
42.8
208.9
13.0
30.3
18.3
13.3
3.0
4.1
1.4
16.5
12.2
2.7
3.5
2.1
15.3
10.9
2.4
3.2
2.1
13.5
9.0
2.1
2.8
2.2
31.2
24.8
28.0
23.0
19.9
17.1
21.6
18.9
24.9
22.5
23.0
20.2
21.8
19.0
22.0
20.4
88
5.3
90
5.8
112
5.7
107
7.0
98
8.8
101
9.3
99
7.5
96
6.2
0.3
0.3
0.2
0.2
0.2
0.2
0.2
0.2
Cash Flow Statement
Y/E March
CF from Operations
Cash for Wkg. Capital
Net Operating CF
Net Purchase of FA
Net Pur. of Investments
Net Cash from Invest.
Issue of Shares/Other adj
Proceeds from LTB/STB
Dividend Payments
Net CF from Finan.
Free Cash Flow
Net Cash Flow
Opening Cash Bal.
Add: Net Cash
Closing Cash Bal.
E: MOSL Estimates
2010
53,172
-25,743
27,429
-11,198
-12,742
-23,940
24,047
8,742
-13,678
19,111
16,231
22,600
42,278
22,600
64,878
2011
68,827
-12,374
56,453
-9,847
-28,775
-38,622
3,386
-4,592
-25,079
-21,568
46,606
-3,737
64,878
-3,737
61,141
2012
70,711
-16,462
54,249
-14,023
-11,691
-25,714
10,663
2,780
-34,393
-12,010
40,226
16,525
61,141
16,525
77,666
2013
80,868
7,501
88,369
-2,187
-8,949
-11,136
-42,436
4,368
-40,212
-67,030
86,182
10,203
77,666
10,203
87,869
2014
97,042
-11,909
85,133
-12,030
-5,753
-17,783
4,919
-11,324
-45,964
-37,357
73,103
29,993
87,869
29,993
117,862
2015
80,015
-40,250
39,765
-15,580
41,476
25,896
0
30,937
-70,340
-19,506
24,185
46,155
117,862
46,155
164,017
(INR Million)
2016E
123,564
24,145
147,709
-47,136
-18,800
-65,936
-18,707
16,518
-71,283
-54,132
100,573
27,641
164,017
27,641
191,658
2017E
143,104
-11,621
131,484
-35,858
-2,020
-37,878
0
-12,013
-77,224
-72,396
95,625
21,210
191,658
21,210
212,868
17 December 2015
13
 Motilal Oswal Financial Services
Wipro
Corporate profile
Wipro is the third largest Indian IT services
company and the largest third-party BPO operator
in India. It is the largest third-party R&D services
provider globally, employing over 156,000
employees. It offers among the widest range of IT
and ITeS services and its corporate governance and
transparency are at the highest level in the
industry.
Company description
Exhibit 13: Sensex rebased
Exhibit 14: Shareholding pattern (%)
Sep-15
Promoter
DII
FII
Others
73.4
4.6
12.6
9.4
Jun-15
73.4
4.9
12.2
9.5
Sep-14
73.4
4.6
11.0
11.0
Exhibit 15: Top holders
Holder Name
LIC of India
% Holding
1.9
Note: FII Includes depository receipts
Exhibit 16: Top management
Name
Azim H. Premji
T K Kurien
Suresh C Senapaty
Saurabh Govil
Satishchandra D
Designation
Chairman
CEO
CFO
Global Head, HR
COO
Exhibit 17: Director
Name
Azim H. Premji
Suresh C Senapaty
Dr. Jagdish N. Sheth*
Narayanan Vaghul*
William Arthur Owens*
Name
T K Kurien
Dr. Ashok S. Ganguly*
Ireena Vittal*
M. K. Sharma*
Vyomesh Joshi*
*Independent
Exhibit 18: Auditors
Name
BSR & Co LLP
Type
Statutory
Exhibit 19: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
MOSL
forecast
37.8
42.8
Consensus
forecast
37.2
40.9
Variation
(%)
1.5
4.8
17 December 2015
14
 Motilal Oswal Financial Services
WPRO GALLERY
WPRO
OTHER COMPANIES
SECTOR UPDATES
 Motilal Oswal Financial Services
Wipro
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16