Wipro Limited (WIPRO) - Form 20-F Summary
Business Context and Reporting Period
Company: Wipro Limited
Reporting Period: Fiscal year ended March 31, 2013
Accounting Standards: International Financial Reporting Standards (IFRS)
Key Event: Effective March 31, 2013, Wipro completed the demerger of its non-IT business segments (Consumer Care, Lighting, Infrastructure Engineering) into a new entity, Wipro Enterprises Limited. These segments are now presented as discontinued operations. Wipro is now focused exclusively on IT Services and IT Products.
Key Financial Metrics (Fiscal 2013)
| Metric | Value (INR Millions) | Value (USD Millions) |
|---|---|---|
| Revenue (Continuing Ops) | 374,256 | 6,865 |
| Profit for the Year (Continuing Ops) | 61,684 | 1,132 |
| Profit for the Year (Total) | 66,696 | 1,224 |
| Operating Income | 69,972 | 1,283 |
| Net Cash from Operating Activities | 70,422 | 1,292 |
| Cash and Cash Equivalents | 84,838 | 1,556 |
| Total Debt | 63,816 | 1,171 |
| Basic EPS (Continuing Ops) | Rs. 25.01 | $0.46 |
Material Changes vs. Prior Period (FY 2012)
- Revenue Growth: Revenue from continuing operations increased by 17.02% to Rs. 374,256 million, driven by a 19.03% increase in IT Services revenue and a 2.09% increase in IT Products revenue.
- Profitability: Profit attributable to equity holders from continuing operations rose 17.27% to Rs. 61,362 million. Operating income increased by 16.79%.
- Margins: Gross margin improved by 95 basis points to 30.84%, primarily due to an 80 bps improvement in the IT Services segment, partially offset by a 145 bps decline in the IT Products segment.
- Discontinued Operations: The demerger resulted in the classification of the Diversified Business as discontinued operations, which contributed Rs. 5,012 million to profit after tax for the year.
- Foreign Exchange: Net foreign exchange gains decreased to Rs. 2,626 million from Rs. 3,328 million in the prior year.
Guidance, Outlook, and Risks
Management Commentary: Management attributes revenue growth to volume increases and favorable onsite-offshore mix. Gross margin improvement in IT Services was aided by the depreciation of the Indian Rupee against the US Dollar, though this was partially offset by rising personnel compensation costs. The company continues to invest in new technology areas (cloud, mobility, analytics) and domain expertise to counter global economic uncertainty.
Risks and Contingencies:
- Foreign Exchange: Significant exposure to currency fluctuations, particularly the INR/USD rate, which impacts revenue realization and margins.
- Taxation: Ongoing disputes with Indian tax authorities regarding deductions under Section 10A of the Income Tax Act, with demands aggregating to Rs. 39,356 million (including interest). Management believes it will prevail.
- Client Concentration: The top 10 clients accounted for 22% of IT Services revenue in FY 2013.
- Competition: Intense competition in the IT services market, with pressure on pricing and rising wage costs in India.
- SEC Inquiry: The company is cooperating with voluntary requests from the SEC regarding auditor independence and accounting entries related to exchange rate fluctuations.
Investor Verification Checklist
- Verify the impact of the demerger on future comparability of financial statements (Discontinued Operations).
- Monitor the outcome of the ongoing tax disputes with Indian authorities regarding Section 10A deductions.
- Assess the sustainability of gross margin improvements given rising wage inflation in India and potential currency appreciation.
- Review the status of the SEC inquiry regarding auditor independence and accounting practices.
- Track client concentration risks, specifically the top 10 clients representing 22% of IT Services revenue.