PROJECT REPORT

COURSE: FINANCIAL ACCOUNTING (SEMESTER I)

Review of Financial Statements of Tech Mahindra Ltd

and Wipro Tech Ltd.
Contents
A. About the company
B. Overview of sector
C. Review of Financial Statements
1. Statement of Profit and Loss
2. Balance Sheet
3. Cash flow statement
D. Summary and Conclusions

A. About the company and its competitor:

Tech Mahindra
 Tech Mahindra Limited is an Indian multinational provider of information
technology (IT), networking technology solutions and Business Process Outsourcing (BPO) to
the telecommunications industry headquartered in Pune. It was founded in 1986, it began as a
joint venture between Mahindra and British Telecom (BT). It is also one of the Fab 50
companies in Asia. Today it is 5th largest software exporter in India. It has 115900 employees
across 90 countries. It took over Satyam computer in 2009 and named as Mahindra Satyam.
Mahindra Satyam merged with Tech Mahindra and now it is known as Tech Mahindra Ltd. After
successful acquisition of Satyam computer it now operates in 2 sectors namely
Telecommunication (Telco) sector and Enterprise sector. Some of the key persons are,
Anand Mahindra - Chairman
VineetNayyar - Executive vice chairman
C. P. Gurnani - MD & CEO
Milind Kulkarni - CFO

Wipro
Wipro Limited Western India Palm Refined Oils Limited or more recently, Western India
Products Limited is an Indian Information Technology Services corporation headquartered
in Bengaluru, India. In 2013, Wipro demerged its non-IT businesses into separate companies to
bring in more focus on independent businesses. The company was incorporated on 29 December
1945, in Amalner a small town in Jalgaon district by Mohamed Premji as 'Western India
Products', later abbreviated to 'Wipro'. It was initially set up as a manufacturer of vegetable
and refined oils in Amalner, Maharashtra, India under the trade names of Kisan, Sunflower and
Camel. In 1980 Wipro entered in the IT domain. In 1982, the name was changed from Wipro
Products Limited to Wipro Limited. Wipro Infotech and Wipro Systems were amalgamated with
Wipro in April 1995. In February 2002, Wipro became the first software technology and services
company in India to be certified for ISO 14001 certification. Wipro also achieved ISO
9000 certification to become the first software company to get SEI People Capability Maturity
Model (PCMM) Level 5 in 2002. Some of the key members are,
Azim H. Premji - Chairman
Abidali Z. Neemunchwala - CEO & Member of the board
Rishad Premji - Chief Strategy Officer & Member of the Board
B. Overview of the sector
Information technology in India is an industry consisting of two major components: IT
services and business process outsourcing (BPO).The sector has increased its contribution to
India's GDP from 1.2% in 1998 to 7.5% in 2012.India's current Prime Minister Narendra Modi
has started a project called 'Digital India' to help secure IT a position both inside and outside of
India. India's IT Services industry was born in Mumbai in 1967 with the establishment of the
Tata Group in partnership with Burroughs. The first software export zone, SEEPZ – the
precursor to the modern-day IT park – was established in Mumbai in 1973. More than 80 percent
of the country's software exports were from SEEPZ in the 1980s. The Indian IT market currently
focuses on providing low-cost solutions in the services business of global IT. The presence of
Indian companies in the product development business of global IT is very meager, however, this
number is slowly on the rise. The other prominent trend is that IT jobs, once confined to
Bangalore, are slowly starting to experience a geographical diffusion into other cities like
Chennai, Hyderabad and Pune. According to Google estimates, the Indian community of
developers will be the largest in the world by 2018. Some of the key players are TCS, Infosys,
Wipro, HCL, Tech Mahindra etc. TCS is the market leader, accounting for about 10.4 per cent of
India’s total IT &ITeS sector revenue in FY16. The top 5 IT firms contribute over 25 per cent to
the total industry revenue, indicating the market is fairly competitive. The domestic revenue of
the IT industry is estimated at US$ 38 billion and export revenue is estimated at US$ 117 billion
in FY17. Currently IT sector all over the world is going through a transition phase which might
lead to some of the jobs becoming obsolete in the near future. So upskilling to the market is the
key to survive and grow up the ladder in the IT industry in the future.
C. Review of Financial Statements
1. Statement of Profit and Loss
 Tech Mahindra Ltd. applies the percentage of completion method in accounting for its
fixed price contracts. Use of the percentage of completion method requires the Company
to estimate the efforts or costs expended to date as a proportion of the total efforts or
costs to be expended. On a similar note even Wipro Ltd. uses the percentage of
completion method using the input (cost expended) method to measure progress towards
completion in respect of fixed price contracts. Percentage of completion method
accounting relies on estimates of total expected contract revenue and costs. This method
is followed when reasonably dependable estimates of the revenues and costs applicable to
various elements of the contract can be made.
 No there isn’t any change in accounting policy with respect to revenue/ expense
recognition from previous year.
 In case of Tech Mahindra Ltd, for year 2017 Rental income on foreign exchange(1.3%),
Rental income on sundry balances returned back(0.42%) & Interest income on bank
deposits (0.28%) are the 3 main items accounting to total revenue while for the year 2016
Rental income on sundry balances returned back (0.4%), Rental income on foreign
exchange (0.37%) &Dividend Income on Investments carried at fair value through profit
and loss (0.31%) are the 3 main items accounting to total revenue. So it can be clearly
seen that 2 of the above mentioned items have contributed nearly same to the revenue for
both the financial years but in year 2017 interest on bank deposits is the 3rd highest
contributor to the revenue while in 2016, Dividend Income on Investments carried at fair
value through profit and loss was the 3rd highest contributor to the total revenue. On a
contrary in case of Wipro Ltd. for year 2017 Interest income (3.5%), Foreign exchange
gain (8.6%) & net gain on sale of investments (0.7%) are the 3 main items accounting to
total revenue while for the year 2016 also Interest income (4.3%), Foreign exchange gain
(0.7%) & net gain on sale of investments (0.5%) were the 3 main items accounting to
total revenue. So it can be clearly seen that all of the above mentioned items have
contributed in the same order for both the financial year
 The sources of other income for the Tech Mahindra Ltd. are Interest income on, Bank
deposits, Intercorporate deposits, other financial assets carried at amortised cost, dividend
income and Rental income, from Investment property, Foreign exchange gain, Sundry
balances written back, Miscellaneous income etc. The ratio of other income to the
revenue for the year 2017 is 0.026 while for the year 2016 it was 0.016. It can be clearly
seen that the ratio of other income to the revenue is more in the year 2017 which simply
means that the share of the other income in the total revenue in the year 2017 is more
than that in the year 2016.
 Yes the company has reported other expenses in both the financial years. The
components of other expenses are, Power and fuel expenses, Rent, Rates & Taxes,
Communication expenses, Travelling expenses, Recruitment expenses, Training, Hire
charges, Legal & other professional costs, Repair & maintenance expenses, Insurance
charges, Advertisement, Promotion & Selling Expenses, Donation, Provision for
 Impairment of Goodwill, Miscellaneous Expenses, Software, Hardware and Project
Specific Expenses etc. Yes for both the financial years Software, Hardware and Project
Specific Expenses& travelling expenses are significantly more than the rest of the
expenses incurred.
 Yes the provisions are made for the employee benefits i.e. Gratuity & others such as
claims and warranties & Contingencies. Provision is recognized when the Company has a
present obligation as a result of past event and it is probable that an outflow of resources
will be required to settle the obligation, in respect of which a reliable estimate can be
made.
 There aren’t any extraordinary / exceptional incomes/expenses reported in the P/L
statement.
 As it can be clearly seen from the graph that the sales of the Wipro ltd. are much more
than that of the Tech Mahindra Ltd. Also it can be observed that in every aspect both the
companies have outperformed as compared to their previous year performance in case of
revenue from the operations but it is more or less closer to the previous year’s
performance for rest of the parameters.

Chart Title
600000

500000

400000

300000

200000

100000

0
Revenue from EBIT PAT Diluted EPS
Operations

Tech M 2017 Tech M 2016 Wipro 2017 Wipro 2016

 Since past 3 years Tech Mahindra’s revenue as well as income has risen considerably
compared to previous year. At the same time its expenses also increased and hence the
profit margin slightly increased compared to previous year. Diluted earnings per share
decreased in the year 2017 compared to that of the year 2016. The interest on bank
deposits and that on Foreign exchange has increased considerably over the previous year
and hence occupies major share of the other income. Also in case of expenses the
expenses on travelling and software, hardware and project specific expenses is a matter of
concern as travelling expenses in 2017 have almost doubled as compared to that of the
year 2016. While in case of Wipro Ltd. the revenue increased considerably but other
income decreased by some margin. Also its employee benefit expenses have increased as
a result their net profit reduced over that of the year 2016. Diluted earnings per share
increased marginally in the year 2017 compared to that of the year 2016. Except interest
income rest all the incomes increased considerably compared to that of the year 2016.
2. Balance Sheet
 The movement in Fixed Assets of Tech Mahindra Ltd. is shown in the table below:
(Rs. in Million)
As of March 31 2017 2016
Gross Book Value
Land - free-hold 473 690
Buildings 18,987 15,911
Leasehold 1,067 1,163
Improvements
Plant & Equipments
Leased 207 207
Owned 14,072 12,894
Computer equipments:-
Leased 3,335 2,185
Owned 12,374 10,712
Office Equipments 1,429 1,294
Furniture and fixtures 6,383 5,653
Vehicles:-
Leased 12 55

Owned 208 233

Intangible assets 4,462 3,587

Total 63,009 54,584

Less: Accumulated 38,482 33,359
depreciation &
amortization

Net block 24,527 21,225

Add: Capital work-in- 3,618 6,275

progress

Net fixed assets 28,145 27,500

 The Net Block of Fixed Assets and Capital Work in Progress stood at Rs. 28,145 Million
as on March 31, 2017 as against Rs. 27,500 Million as on March 31, 2016. During the
year, the Company incurred capital expenditure (gross) of Rs. 9,719 Million (previous
year Rs. 8,507 Million). The major items of Capital Expenditure included Office
Building, Plant and Equipment, Computer equipment, Software & Furniture.
 The movement in Fixed Assets of Wipto Ltd. is shown in the table below:
(Rs. in Million)
As of March 31 2017 2016
Land 3,490 3,490

Buildings 22,112 21,772

Plant and 64,729 59,293

Equipment
Furniture and Fixtures 8,927 8,506
Vehicles 331 490
Office equipment 4,047 3,511
Total 103,636 97,062
Less: Accumulated 66,081 60,644
depreciation &
amortization
Net block 37,555 36,418

Add: Capital work-in- 6,941 3,251

progress

Net fixed assets 44496 39669

 The Net Block of Fixed Assets and Capital Work in Progress stood at Rs. 44496 Million
as on March 31, 2017 as against Rs. 39669 Million as on March 31, 2016. The major
items of Capital Expenditure included Office Building, Plant and Equipment, Office
equipment, Land.
 In case of both Tech Mahindra Ltd. as well as Wipto Ltd. the depreciation on Property,
Plant & Equipment including assets taken on lease, other than freehold land is charged
based on straight line method on an estimated useful life as prescribed in Schedule II to
the Companies Act, 2013 from the date the assets are available for use.
 (Rs. in Million)

As of March 31 2017 2016

Land 3,490 3,490

Buildings 22,112 21,772

Plant and 64,729 59,293

Equipment
Furniture and Fixtures 8,927 8,506
Vehicles 331 490
Office equipment 4,047 3,511
Total 103,636 97,062
Less: Accumulated 66,081 60,644
depreciation &
amortization
Net block 37,555 36,418

Add: Capital work-in- 6,941 3,251

progress

Net fixed assets 44496 39669

 The movement in Current Assets of Tech Mahindra Ltd. is shown in the table below:
(in Rs. Million)
As of March 31 2017 2016
(a) Financial Assets
Investments 19,688 10,497
Trade Receivables 45,717 51,544
Cash and Cash 9,717 17,118
Equivalents
Other Balances with 11,122 15,731
Banks
Loans 5,174 1,612
Other Financial 21,746 15,478
Assets
(b) Other Current 17,860 11,567
Assets
Assets held-for-sale 265 -
Total Current Assets 131,289 123,547
 In case of Tech Mahindra Ltd. current assets were composed of Investments, Trade
Receivables, Cash and Cash equivalents, Other Balances with banks, Loans and other
financial assets. It can be clearly seen that other than trade receivables and balances with
banks all others have considerably increased in 2017 over that of the year 2016.
 The movement in Current Assets of Wipro Ltd. is shown in the table below:

(in Rs. Million)

As of March 31 2017 2016
Financial Assets
Investments 291,467 204,195
Trade Receivables 81,299 83,980
Cash and Cash 35,166 84,088
Equivalents
Derivative assets 9,747 5,549
Unbilled revenues 32,845 37,100
Loans to subsidiaries 1,917 -
Other financial assets 6,151 7,658
Current tax assets 7,701 6,519
Other current assets 17,419 18,252
Total current assets 17,419 18,252

 In case of Wipro Ltd. current assets were composed of Investments, Trade Receivables,
Cash and Cash equivalents, Derivative assets, Unbilled revenues, Loans to subsidiaries,
other financial assets and other current assets. It can be clearly seen that other than trade
receivables, cash and cash equivalents and other financial assets all others have
considerably increased in 2017 over that of the year 2016.
 In case of Tech Mahindra Ltd. For the year 2017 the valuation of the inventory was Rs.
255 Million so total percentage of inventory in relation to sales is 96.22%. Components
and parts are valued at lower of cost or net realizable value. Cost is determined on First-
In-First Out basis.
 In case of Wipro Ltd

March 31, 2017 March 31, 2016

Raw materials - -
Work-in-progress - -
Finished goods 5 8
Stock-in-trade 2,746 4,383
Stores and spares 808 871
Total 3,559 5,262
 Even in case of Wipro Ltd. The cost is determined on First-In-First Out basis.

 In case of Tech Mahindra Ltd. Trade receivables as on March 31, 2017 was at Rs.
45,717 Million as compared to Rs 51,544 Million as of March 31, 2016.

 Sundry debtors were Rs. 45,717 Million (net of provision for doubtful debts of Rs.3,708
Million) as of March 31, 2017 as compared to Rs. 51,544 Million (net of provision for
doubtful debts of Rs.4,212 Million) as of March 31, 2016. Debtor days as of March 31,
2017 (calculated based on per-day sales in the last quarter) were 93 days as compared to
102 days as of March 31, 2016.
 In case of Wipro Ltd. Trade receivables as on March 31, 2017 was at Rs. 85297 Million
as compared to Rs 85342 Million as of March 31, 2016.

 Sundry debtors were Rs. 85,297 Million (net of provision for doubtful debts of Rs.1,825
Million) as of March 31, 2017 as compared to Rs. 85,342 Million (net of provision for
doubtful debts of Rs.1,939 Million) as of March 31, 2016.
3. Cash flow Statement
 In case of Tech Mahindra Ltd.
(Rs. Million)
Particulars March 31, 2017 March 31, 2016
Cash and Cash Equivalents * 20,013 23,978
Unrealized Loss/(Gain) on 35 (40)
Foreign Currency Balances
Total 20,048 23,938
* Cash and Cash Equivalents
Comprises of
(a) Cash in Hand 6 12
(b) Cheques in hand 1,512 -
(c) Funds in Transit 201 1,583
Balances with Banks :
(a) In Current Accounts 12,048 13,553
(b) In Deposit Accounts 6,246 8,830
20,013 23,978

 During the current year, it has acquired assets on finance lease amounting to Rs. 1,206
Million as compared to Rs. 2,225 Million of March 31, 2016. It isn’t reflected in
statement of cash flows being non cash in nature. Cash and Cash Equivalents include
Equity Share Application Money of Rs. 19 Million (March 31, 2016 Rs. 14 Million).

 In case of Wipro Ltd.

(Rs. Million)
Particulars March 31, 2017 March 31, 2016
Balances with banks
Current accounts 27,163 62,836
Unclaimed dividend 50 53
Demand deposits 24,902 35,531
Cheques, drafts on hand 593 628
Cash in hand 2 1
Total 52,710 99,049
Bank overdrafts (1,992) (657)
50,718 98,392

 These deposits can be withdrawn by the Company at any time without prior notice and without
any penalty on the principal. Demand deposits with banks include deposits in lien with banks
amounting to Rs. Nil.
 The company has generated total cash and cash equivalent of Rs. 20,013 Millions in the year
2017 as compared to that of Rs. 23,798 Millions in the year 2016. So it is clear that the cash
flows have considerably reduced in the year 2017 as compared to that of 2016.
 The cash in hand in 2017 has reduced to 50% as that of the same in the year 2016. Company
has received Rs. 1512 Millions of payment by cheques in 2017 where as in the year 2016
company didn’t have received any payments by cheques.
 But as per the cash flow report all the components of the cash and cash equivalents have
considerably reduced in 2017 as compared to that of the same in the year 2016.
D. Summary and conclusion
 Tech Mahindra Limited is an Indian multinational provider of information
technology (IT), networking technology solutions and Business Process
Outsourcing (BPO) to the telecommunications. Tech Mahindra Ltd. applies the
percentage of completion method in accounting for its fixed price contracts.
 The major sources of other income for the Tech Mahindra Ltd. are Interest income on,
Bank deposits, Inter corporate deposits etc. Also, the share of the other income in the
total revenue in the year 2017 is more than that in the year 2016.
 The company has made provisions for the employee benefits i.e. Gratuity & others such
as claims and warranties & Contingencies. Also, it hasn’t reported any extraordinary /
exceptional incomes/expenses in the P/L statement.
 Since past 3 years Tech Mahindra’s revenue as well as income has risen considerably
compared to previous year. At the same time its expenses also increased and hence the
profit margin slightly increased compared to previous year.
 The expenses on travelling and software, hardware and project specific expenses is a
matter of concern as travelling expenses in 2017 have almost doubled as compared to that
of the year 2016.
 The company charges depreciation on Property, Plant & Equipment including assets
taken on lease, other than freehold land based on straight line method on an estimated
useful life as prescribed in Schedule II to the Companies Act, 2013 from the date the
assets are available for use.
 Other than trade receivables and balances with banks all other current assets have
considerably increased in 2017 over that of the year 2016.
 It values Components and parts at lower of cost or net realizable value and cost is
determined on First-In-First Out basis in case of inventories.
 Debtors marginally reduced in the year 2017 compared to that of 2016 and hence net of
provision for doubtful debts was also reduced for the financial year 2017.
 Cash and Cash Equivalents of the company in the year 2017 have considerably decreased
over that of the year 2016 which includes Cash in hand, Cheques in hand, funds in transit
and balances in current and deposit accounts.