Fundamental Analysis of Wipro: A Comprehensive Financial Overview

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WIPRO

Wipro Limited, a stalwart in the global IT and consulting sector, has a rich history of innovation and growth. This blog delves into Wipro’s financial health, providing insights into its asset and liability distribution, and highlighting its strengths and weaknesses. Whether you’re an investor or an industry enthusiast, this analysis offers a detailed look at what makes Wipro tick.

Company History

Wipro Limited, founded in 1945 by Mohamed Premji as Western India Vegetable Products Limited, originally produced refined oils. Over the decades, Wipro transformed into a global IT and consulting powerhouse under the leadership of Azim Premji, the founder’s son. The company diversified into IT services in the 1980s and quickly gained a reputation for innovation and excellence. Today, Wipro is a multinational corporation with a presence in over 50 countries, offering a range of services including IT consulting, business process outsourcing, and system integration.

Lets checkout the balance sheet dashboard and lets dive into analysis

Fundamental Analysis Of Wipro

Sales, Net Profit & Operating Profit

Wipro has shown consistent revenue growth from ₹54,487 Cr in March 2018 to ₹90,488 Cr in March 2023, with a projected increase to ₹96,401 Cr by March 2025. Net profit and operating profit have also followed an upward trend, indicating robust financial health.

Operating Profit Margin

The operating profit margin (OPM) has seen fluctuations, peaking at 23.85% in March 2021 before a projected decline to 18.44% by March 2025. This variability suggests challenges in maintaining consistent profitability.

Earning Per Share (EPS) in Rs

Wipro’s EPS has steadily increased from ₹13.27 in March 2018 to ₹20.68 in March 2023, with a forecasted rise to ₹22.14 by March 2025. This growth reflects the company’s strong earnings performance.

Return on Equity (ROE)

Wipro’s ROE has shown a downward trend, dropping from 16.70% in March 2018 to a projected 14.41% by March 2025. This indicates a decrease in the efficiency of generating profit from shareholders’ equity.

Asset and Liability Position

Asset Distribution

Wipro’s asset distribution reveals a strong financial base with significant investments in fixed assets (₹43,628 Cr, 38%) and other assets (₹36,873 Cr, 32%). Investments amount to ₹33,384 Cr (29%), indicating a diversified and strategic asset portfolio.

Liability Distribution

The company’s liability distribution shows prudent financial management, with reserves accounting for 64% (₹73,488 Cr), ensuring a stable financial position. Borrowings are kept relatively low at 14% (₹16,465 Cr), while equity capital stands at 1% (₹1,045 Cr) and other liabilities at 21% (₹23,611 Cr).

Strengths and Weaknesses

Strong Points:

  • Robust Revenue Growth: Consistent increase in sales from ₹54,487 Cr in 2018 to ₹90,488 Cr in 2023.
  • Strong Asset Base: Significant investments in fixed assets and diversified asset portfolio.
  • High Reserves: Large reserve fund ensuring financial stability and flexibility.
  • Global Presence: Widespread operations in over 50 countries, enhancing market reach and customer base.
  • Technological Innovation: Continuous investment in technology and innovation, maintaining a competitive edge.

Weak Points:

  • Fluctuating Operating Profit Margin: Inconsistent OPM with a decline to 18.44% by 2025.
  • Decreasing ROE: Return on equity has shown a downward trend, reaching 14.41% by 2025.
  • High Other Liabilities: Significant portion of liabilities categorized as ‘Other Liabilities’ (21%).
  • Dependency on IT Services: High reliance on IT services, with less diversification in other sectors.
  • Competitive Market: Intense competition in the IT and consulting industry, affecting profit margins and market share.

What is Wipro’s primary business?

Wipro is primarily engaged in IT consulting, business process outsourcing, and system integration services.

What are Wipro’s main strengths?

Wipro’s strengths include robust revenue growth, a strong asset base, high reserves, global presence, and technological innovation.

What are Wipro’s main weaknesses?

Wipro’s weaknesses include fluctuating operating profit margins, decreasing return on equity, high other liabilities, dependency on IT services, and intense market competition.

What is Wipro’s ROE trend?

Wipro’s return on equity has shown a downward trend, reaching 14.41% by 2025.

What challenges does Wipro face?

Wipro faces challenges such as fluctuating profit margins, intense competition, and dependency on IT services.

Now checkout the performance of WIPRO stock starting from the period 2018 to till Date:

Conclusion

Wipro’s strategic asset management and robust revenue growth highlight its strong market position. However, challenges like fluctuating profit margins and intense competition present areas for improvement. For investors and stakeholders, understanding these dynamics is crucial for making informed decisions about the company’s future prospects.

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Anirban Paira brings over 6 years of robust experience in the banking industry, specializing in various loan segments including Retail, MSME, and Corporate Loans. Leveraging his extensive background, Anirban excels at delivering in-depth balance sheet analysis of listed companies, transforming complex financial data into actionable insights. Through his expertise, Equity Alchemy aims to empower investors and financial enthusiasts with clear, detailed, and visually compelling company analysis.

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