CHAPTER: 6 FINDINGS, SUGGESTIONS AND CONCLUSION 6.1 Introduction This chapter is the heart of the whole It provides its emerging conclusion based on the analysis carried out during the contemplative The exertion has been made to summaries and conclude the whole study and to give some suggestions to attain the objectives of the Thus, this chapter accommodates major findings and suggestions regarding improving efficiency, effectiveness and profitability. When the organization acquires higher level of value edition if leads to sharply increased productivity of capital. In course of time this leads to maximization of returns on investment (ROI). In other words, higher value added leads to higher surplus/profit, leading ultimately higher return on investment. If a private enterprise makes profit, it can generate its own money for future growth without becoming a burden on the exchequer; it can repay its loan. It can also reward its shareholder through higher annual dividends and frequent bonus issues of shares. To study the capacity of earnings return one need to start with analyzing the profitability performance which starts where the financial statements ends. To analyze the profitability performance means to answer such question whether the company is earning profit or not whether the company is able to earn on its investments from its investments or not? 6.2 Major Findings Tata Consultancy Services, Infosys, Wipro, Tech Mahindra, Mphasis, Zensar Technologies, NIIT Technology, Persistant System, Tata Elxis, Mastek - these are all the Information Technology Companies are providing various products or services in Various state of India as well as abroad. The major findings of Tata Consultancy Services, Infosys, Wipro, Tech 324
Mahindra, Mphasis, Zensar Technologies, NIIT Technology, Persistant System, Tata Elxis, and Mastek have been summarized below: 1. Operating profit per share of Infosys Company was better compared to other selected companies during the study period. Looking to year-wise average of operating profit per share, the highest average 93.002 was observed in 2013-14 and lowest 49.299 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 906.93 and average 181.36 was marked for Infosys and lowest total 89.22 and average 17.844 was observed for Mastek for the period under the 2. Net operating profit per share (Rs.) of Infosys Company better compared to other selected companies during the contemplative period. Researcher remarking to year wise average net operating profit per share (Rs.), the highest average 439.309 was noticed in 2013-14 and lowest 246.928 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 3108.76 and average 621.75 was marked for Infosys and lowest total 796.32 and average 159.26 was examined for Wipro for the period under Therefore other selected IT Companies should improve growth rate. However we can observe that all selected companies should deficiency cost of raw material used, wages, direct expenses and all manufacturing expenses. 3. Operating profit margin of Infosys Company better match to other selected companies during the study period. Researcher finds out yearwise average of operating profit per share, the highest average 93.002 was noticed in 2013-14 and lowest 49.299 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 906.93 and average 181.36 was marked for Infosys and lowest total 89.22 and average 17.844 was observed for Mastek for the period under Over all rank was given to selected Information Technology companies 325
on the basis of average operating profit margin. Infosys stood at first (1 st ) rank and Mastek got tenth (10 th ) rank. 4. Profit before interest and tax margin of Tata Consultancy Services were better compared to other selected companies during the study period. Finding out year wise, the highest average 16.783 was observed in 2013-14 and lowest 14.782 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 133.05 and average 26.61 was marked for Tata Consultancy Services and lowest total 4.14 and average 0.828 was noticed for Mastek for the period under There for Other selected IT Companies should improve growth rate. Over all rank was given to selected IT companies on the basis of average profit before interest and tax margin. Tata Consultancy Services achieve first (1 st ) rank and Mastek got tenth (10 th ) rank. 5. Gross profit margin of Tata Consultancy Services is more, compared to other selected companies during the contemplative period. Judgment of year wise, the average of gross profit margin, the highest average 17.18 was observed in 2013-14 and lowest 15.17 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 135.58 and average 27.116 was marked for Tata Consultancy Services and lowest total 4.03 and average 0.806 was observed for Mastek for the period under Therefore other selected IT companies should rectify growth rate. However we can notice that all selected IT companies have lower gross profit margin, there for all selected companies should decrease extra expenses. 6. The highest cash profit margin of 29.5 was observed for Infosys in 2010-11 and lowest -7.69 were recorded for Mastek in the year of 2010-11. Seeing to year-wise average of cash profit margin, the highest average 17.18 was observed in 2013-14 and lowest 15.17 was witnessed in 2010-11. Further in case of company-wise total and average, the highest total 135.58 and average 27.116 was marked for Tata Consultancy Services 326
and lowest total 4.03 and average 0.806 was observed for Mastek for the period under 7. The highest net profit margin of 24.85 was noticed for Infosys in 2010-11 and lowest -9.41 were recorded for Mastek in the year of 2010-11. Looking to year-wise average of net profit margin, the highest average 14.073 was observed in 2013-14 and lowest 12.974 was witnessed in 2014-15. Further in case of company-wise total and average, the highest total 117.35 and average 23.47 was marked for Infosys and lowest total 3.03 and average 0.606 was noticed for Mastek for the period under 8. The highest adjusted net profit margin of 23.9 was observed for Infosys in 2010-11 and lowest -9.1 were recorded for Mastek in the year of 2010-11. Observing to year-wise average of adjusted net profit margin, the highest average 13.736 was noticed in 2013-14 and lowest 12.537 was witnessed in 2014-15. Further in case of company-wise total and average, the highest total 111.22 and average 22.244 was marked for Infosys and lowest total 3.17 and average 0.634 was observed for Mastek for the period under 9. The highest return on capital employed of 51.44 was observed for Tata consultancy services in 2013-14 and lowest -5.48 were recorded for Mastek in the year of 2010-11. Seeing to year-wise average of return on capital employed, the highest average 30.31 was observed in 2013-14 and lowest 23.311 was witnessed in 2010-11. Further in case of companywise total and average, the highest total 240.89 and average 48.178 was marked for Tata consultancy services and lowest total 21.84 and average 4.368 was observed for Mastek for the period under 10. The highest adjusted return on net worth of Rs. 38.89 was observed for Tata consultancy services in 2013-14 and lowest Rs. -11.4 were recorded for Mastek in the year of 2010-11. Looking to year-wise average of return on net worth, the highest average Rs. 22.925 was observed in 2013-14 and lowest Rs. 20.2 was witnessed in 2012-13. Further in case of 327
company-wise total and average, the highest total Rs. 186.5 and average Rs. 37.3 was marked for Tata consultancy services and lowest total Rs. 7.34 and average Rs. 1.468 was observed for Mastek for the period under 11. The highest adjusted return on net worth of 39.23 was observed for Tata consultancy services in 2013-14 and lowest -5.85 were recorded for Mastek in the year of 2010-11. Seeing to year-wise average of adjusted return on net worth, the highest average 22.949 was noticed in 2013-14 and lowest 20.191 was witnessed in 2011-12. Further in case of companywise total and average, the highest total 187.56 and average 37.512 was marked for Tata consultancy services and lowest total 14.85 and average 2.97 was observed for Mastek for the period under 12. The highest return on long term funds of 51.58 was remarked for Tata consultancy services in 2013-14 and lowest -5.52 were recorded for Mastek in the year of 2010-11. Looking to year-wise average of return on long term funds, the highest average 31.228 was noticed in 2013-14 and lowest 24.309 was witnessed in 2010-11. Further in case of companywise total and average, the highest total 241.38 and average 48.276 was marked for Tata consultancy services and lowest total 21.9 and average 4.38 was observed for Mastek for the period under 13. The highest current ratio of 4.82 was noticed for Infosys in 2010-11 and lowest 1.09 was recorded for Tech Mahindra in the year of 2011-12. Observing to year-wise average of current ratio, the highest average 2.282 was observed in 2013-14 and lowest 2.108 were witnessed in 2011-12. Further in case of company-wise total and average, the highest total 20.48 and average 4.096 was marked for Infosys and lowest total 7.68 and average 1.536 was observed for Tech Mahindra for the period under 14. The highest Quick ratio of 4.76 was noticed for Infosys in 2010-11 and lowest 1.37 was recorded for Tech Mahindra in the year of 2011-12. Looking to year-wise average of Quick ratio, the highest average 2.285 328
was observed in 2013-14 and lowest 2.248 were witnessed in 2012-13. Further in case of company-wise total and average, the highest total 20.23 and average 4.046 was marked for Infosys and lowest total 8.45 and average 1.69 was observed for Tech Mahindra for the period under 15. The highest debtor s turnover ratio of 9.18 was observed for Mphasis in 2010-11 and lowest 3.5 were recorded for Tata Elxsi in the year of 2010-11. Looking to year-wise average of debtor s turnover ratio, the highest average 5.899 was noticed in 2014-15 and lowest 5.553 were witnessed in 2012-13. Further in case of company-wise total and average, the highest total 39.02 and average 7.804 was marked for Mphasis and lowest total 23.5 and average 4.7 was noticed for Tata Elxsi for the period under 16. The highest fixed assets turnover ratio of 8.59 was remarked for Zensar Technologies in 2011-12 and lowest 2.24 were recorded for Persistant system in the year of 2011-12. Discovering to year-wise average of fixed assets turnover ratio, the highest average 4.949 was observed in 2014-15 and lowest 3.883 were witnessed in 2010-11. Further in case of companywise total and average, the highest total 34.67 and average 6.934 was marked for Zensar Technologies and lowest total 13.16 and average 2.632 was observed for Persistant system for the period under 17. The highest total assets turnover ratio of 3.78 was noticed for Zensar Technologies in 2012-13 and lowest 0.79 were recorded for Mphasis in the year of 2013-14. Looking to year-wise average of total assets turnover ratio, the highest average 2.016 was observed in 2014-15 and lowest 1.66 were witnessed in 2010-11. Further in case of company-wise total and average, the highest total 16.91 and average 3.382 was marked for Zensar Technologies and lowest total 5.67 and average 1.134 was noticed for Infosys for the period under 18. The highest assets turnover ratio of 3.17 was observed for Tata Elxis in 2013-14 and lowest 0.47 were recorded for Mphasis in the year of 2013-14. Observing to year-wise average of assets turnover ratio, the highest 329
average 1.762 was noticed in 2013-14 and lowest 1.467 were witnessed in 2010-11. Further in case of company-wise total and average, the highest total 13.51 and average 2.702 was marked for Tata Elxsi and lowest total 5.19 and average 1.038 was observed for Mphasis for the period under 19. The highest Dividend payout ratio net profit of 91.22 was observed for Tata consultancy services in 2014-15 and lowest 0.00 were recorded for Mastek in the year of 2010-11 and 2011-12. Looking to year-wise average of Dividend payout ratio net profit, the highest average 45.475 was observed in 2014-15 and lowest 29.221 were witnessed in 2010-11. Further in case of company-wise total and average, the highest total 321.08 and average 64.216 was marked for Tata Elxsi and lowest total 65.02 and average 13.004 was observed for Tech Mahindra for the period under 20. The highest Dividend payout ratio cash profit of 83.64 was observed for Tata consultancy services in 2014-15 and lowest 0.00 were recorded for Mastek in the year of 2010-11 and 2011-12. Seeing to year-wise average of Dividend payout ratio cash profit, the highest average 35.912 was noticed in 2014-15 and lowest 23.644 were witnessed in 2010-11. Further in case of company-wise total and average, the highest total 234.78 and average 46.956 was marked for Tata consultancy services and lowest total 37.1 and average 7.42 was observed for Mastek for the period under 21. The highest earning retention ratio of 92.05 was noticed for Tech Mahindra in 2010-11 and lowest 0.00 were recorded for Mastek in the year of 2010-11. Discovering to year-wise average of earning retention ratio, the highest average 69.061 was observed in 2012-13 and lowest 58.333 were witnessed in 2014-15. Further in case of company-wise total and average, the highest total 428.25 and average 85.65 was marked for Tech-Mahindra and lowest total 224.61 and average 44.922 was noticed for Tata Elxsi for the period under 330
22. After testing hypothesis by using regression, it can be concluded that the current ratio, total debt to owners fund, fixed assets turnover ratio and assets turnover ratio has major impact on return on capital employed. 23. It can be said after testing regression, current ratio and debt equity ratio have foremost impact on capital employed ratio. 24. It can be apparently said after regression that fixed asset turnover ratio, current ratio and quick ratio have major impact on return on capital employed. 6.3 Suggestions 1. Cost control is an important part to increase financial performance for companies under the And so, it is suggested that companies under study must try to control its various costs including cost of goods sold, operating expenses, and other revenue expenses. 2. The solvency position of the Information Technology companies can be further rectified to excess the productivity with a view to connect the increased demand. 3. The total and average operating profit per share of Mastek, Tata Elxsi and Wipro are very low compare to other IT companies so Mastek, Tata Elxsi and Wipro must have to improve their Operating Profit. And to improve their operating profit Mastek, Tata Elxsi and Wipro have to perform their guts in increasing its operating profit. 4. The net operating profit per share of Wipro, Tata Elxsi, Mphasis and Persistant System are very poor to other IT companies so Wipro, Tata Elxsi, Mphasis and Persistant System should have to improve their Net Operating Profit per Share. 5. Mastek, Tata Elxsi, Zensar Technologies, Operating Profit Margin is very poor among the elected companies. There for companies should focus on improving to payoff current liabilities in time without its accumulation to improve working capital of position. It doesn t give a strong signal for the long term survival and hence the trend needs to be checked in future. The 331
company should be more careful in dealing three most influential factors which are affecting its cash flow pattern. First, change in creditors, second change in debtors followed by change in influential factor. 6. Mastek, Tata Elxsi, Zensar Technologies, NIIT Technology, should develop profit before interest and tax margin, gross profit margin ratio, cash profit margin ratio, net profit margin ratio to the, management should try to control the cost like cost of production, purchase of raw material on reasonable prices, manufacture expenses and selling expenses, and other indirect expenses efficient use of plant and machinery investment. However all selected companies are required to decrease the cost as profit before interest and tax margin, gross profit margin ratio, cash profit margin ratio, net profit margin ratio was lower compare to other selected companies. 7. The gross profit ratios of Mastek, Tata Elxsi, Zensar Technologies NIIT Technology are low among the selected companies. Therefore these companies have to increase in sales revenue by adopting batter methods of price negotiation. 8. So far as this suggestion is concerned, we have observed that the cash profit margin of Mphasis, NIIT Technology, continuously decreasing, and other companies are fluctuating trend during the study period, Mphasis and NIIT Technology must try to maintain cash profit margin. 9. Net profit, Adjusted Net profit margin of Mastek, Tata Elxsi, Zensar Technologies, NIIT Technology, is lower as compare to other companies there for company should improve net profit by decreasing cost. Observing the present situation of the study period we can suggest that Mphasis, NIIT Technology must have to improve their Net profit. 10. Return on capital employed of Mastek, Tech Mahindra, Mphasis, Persistant System, is very poor therefore company should take lower rate of interest from borrowings and to post pond some capital expenditure which is nit urgent. 332
11. Looking towards to return on net worth and Adjusted return on net worth we come to know that Tata Consultancy Services, Zensar Technologies, Infosys, Tech Mahindra and Wipro have balanced their return on net worth, so we can give a suggestion to NIIT Technology to increase its return on net worth and remaining companies must try to maintain their return on net worth. 12. Return on long term fund of Mastek, Mphasis, Persistent System, is very poor during the study period. To overcome the state of under capitalization the companies may raise long term funds for investment in modern technology through long term loans from bank, if possible. 13. Current ratio and average current ratio of Tech Mahindra, Tata Elxsi, Mphasis, was not satisfactory during the study period it was found less than standard ratio. Therefore, the companies need improvement in current ratio and average current ratio. 14. Quick ratio of Zensar Technologies, Tech Mahindra, Mphasis, and Mastek is not satisfactory during the study period it is being observed less than standard ratio. Therefore, the companies need improvement in current ratio and average current ratio. 15. Debtors turnover ratio is quite higher than the other selected companies therefore should improve ratio expedite collection from the debtors. To speed up debtors collection. For that, selection and collection policy of debtors must to be improving further as the company is still lagging behind the industry. 16. Wipro, and Zensar Technologies have maintained their fixed assets turnover ratio, total assets turnover ratio looking towards them other selected companies have also decided to maintain or to improve their fixed assets turnover ratio. 17. Those companies (Tech Mahindra, Mastek, Zensar Technologies, and Persistent System) who have the lowest dividend payout ratio net profit and cash profit have to return maximum profit to their share holders. 333
6.4 Conclusion Information Technology drives innovation and innovation is the path to business success. In fact it s hard to imagine any business that has not benefited from digital revolution. Even agriculture uses computers. Farmers use computers for production records, financial planning, research on technical issues and procurement. Nowadays the formula for business success is simple: drive innovation with information technology. So the first thing startups in any industry try to figure out is how to make smart IT recruiting choices. Without a back bone of Information Technology, a business is not going speedily. Profit is life blood for any business. Without profit any organization cannot survive. In this research an attempt has been made to understand financial performance of selected Information Technology companies in India. For that purpose 10 Information Technology companies were selected based on purposive sampling and analysis was done based on selected 21 ratios. Result shows that overall performance of all the information Technology companies was found good, weather it is Net Operating Profit per Share, Cash Profit Margin, Current Ratio, Quick Ratio, Debt Turnover Ratio, Fixed Assets Turnover Ratio, Total Assets Turnover Ratio, Assets Turnover Ratio, Dividend Payout Ratio Net Profit, Dividend Payout Ratio Cash Profit, and Earning Retention Ratio Except Mastek Ltd. The performances of other companies are very attractive. Efficiency ratios of selected companies are also good. Management efficiency ratios are excellent during the study period of selected companies. In conclusion we can say that futures of Information Technology Companies are bright as overall financial performances are very good. 334