ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Wipro Ltd, McDowell and Co, Sesa Goa

WIPRO LTD In Full Swing Wipro holds a prominent position in the world market for information technology (IT) services. It offers software solutions, IT services, IT consulting, business process outsourcing (BPO) services, and research and development (R&D) services in the areas of hardware and software design. The company operates through three divisions: Wipro Technologies (global IT services and products), Wipro Infotech (India and Asia Pacific IT services and products) and Wipro Consumer Care and Lighting (WCCL). The company owns eight facilities in India and has overseas offices in US, UK, Japan, etc.

Companias

WIPRO LTD

In Full Swing

W
ipro holds a prominent position in the world market for information technology (IT) services. It offers software solutions, IT services, IT consulting, business process outsourcing (BPO) services, and research and development (R&D) services in the areas of hardware and software design. The company operates through three divisions: Wipro Technologies (global IT services and products), Wipro Infotech (India and Asia Pacific IT services and products) and Wipro Consumer Care and Lighting (WCCL). The company owns eight facilities in India and has overseas offices in US, UK, Japan, etc.

Keeping up the impressive growth trend, Wipro posted robust financial performance during 2004-05. Its net sales surged by 41 per cent over 2003-04 to Rs 7,233 crore. Likewise net profit rose by 63 per cent to Rs 1,494 crore. The company’s earnings in foreign exchange registered a growth of 40 per cent at Rs 5,373 crore during the year under review. On a consolidated basis, its net sales were augmented by 39 per cent over 2003-04 to Rs 8,160 crore and net profit was boosted by 58 per cent to Rs 1,628 crore.

Wipro Technologies has been an active player in the wave of mergers and acquisition in the IT industry. It acquired US based mPower Inc in an all-cash deal worth $ 28 million. It also acquired NewLogic, a system-on-chip design firm in Austria, for Rs 240 crore ($ 56 million) in an allcash deal. The company set up its second offshore development centre in Bangalore for Toshiba Mobile Communications Company. Wipro Technologies is poised to increase its presence in China, beyond Shanghai, to boost its engineering R&D services and has also established a small team in Beijing, in product engineering. It won a three-year multi-million dollar deal from a Swedish firm, Smart Trust, to build mobile device management solutions. The Andhra Pradesh government and Wipro have entered into a memorandum of understanding on land allotment. The government has allotted 100 acres of land to the company in Hyderabad, and another seven acres in Visakhapatnam to expand its software development operations in the state.

WCCL, a division with around 6 per cent share in the parent company, manufactures a wide range of products like soaps, detergents, talcum powder, baby products, energy drinks, edible oil, bulbs, etc. It recently ventured into the honey segment by launching its product labelled “Sanjeevani” and has also launched new products like Wipro Sanjeevani Isabgol, Wipro Safewash liquid detergent, etc. It is also planning to launch its modular furniture range in Mumbai following the successful launch of the product in southern markets.

Wipro reported an excellent financial performance for first three quarters of 2005

06. The company registered a 28 per cent growth in net sales at Rs 2,262 crore for April-June 2005 and net profit rose by 20 per cent over the corresponding period of the previous year to touch Rs 428 crore. For the quarter ended September 2005, net sales went up by 29 per cent to Rs 2,254 crore and net profit was augmented by

22.4 per cent over the same period of the previous year to Rs 453 crore. Recently, the company declared results for October-December 2005, reporting a 31 per cent rise in net sales over the same period of the previous year at Rs 2,467 crore and net profit increased by 34 per cent to Rs 505 crore. During the quarter under review, the company added 61 clients to its IT business.

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MCDOWELL AND CO

Consolidation on the Cards

M
cDowell and Company is the flagship company of the Vijay Mallyapromoted United Breweries (UB) group. The UB group has become the world’s second largest spirit company since McDowell acquired majority shares in Shaw Wallace and Company and paid Rs 1,545 crore for this acquisition. McDowell is the largest spirit company in India and its famous brands are McDowell’s No 1 Whisky, Bagpiper Whisky, McDowell’s No 1 Celebration Rum, etc. McDowell No 1 Brandy is the largest selling brand of brandy in the world.

McDowell reported a healthy financial performance during 2004-05. The company’s net sales rose by 11 per cent to Rs 1,091 crore over 2003-04 and net profit increased by 25 per cent to Rs 26.7 crore. There was hardly any increase in the company’s earnings per share during 2004

05. The company’s foreign exchange earnings were also nil during the period under review.

McDowell has decided to merge its spirit business under one company. The company is going to merge its 10 companies including Phipson Distillery, United Spirits, Herbertsons, Triumph Distillers and Vintners and other companies owned by the UB group. The new entity called United Spirits will have more than 130 brands. Similarly the UB group is also demerging its investment division into Mcdowell India Spirit. Following the recent announcement to merge the 10 companies, McDowell has proposed to raise Rs 1,100 crore ($ 250 million) from the overseas market. McDowell, in order to enhance its product portfolio, is planning to introduce McDowell’s No 1 DietMate – the world’s first diet whisky in the domestic market.

During April-June 2005, McDowell posted a 17 per cent rise in net sales over the same period of previous year at Rs 326 crore and net profit rose by 90 per cent to Rs 10.4 crore. During the quarter under review, the company’s cost in the form of interest payments rose sharply from Rs 7.3 crore to Rs 14.9 crore. For the quarter ended September 2005, the company’s net sales increased by 5.7 per cent to Rs 304 crore over the same period of previous year and net profit jumped by 26.6 per cent to Rs 5.6 crore.

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SESA GOA

In the Limelight

I
ndia’s largest exporter of iron ore in the private sector, Sesa Goa (SGL), is the flagship company of Sesa Group. The company commenced operations in 1954

Economic and Political Weekly January 28, 2006

The Week’s Companies (Rs lakh) and has been involved in the business of mining, processing and exporting iron ore
Wipro McDowell Sesa Goa and also in support activities like shipping
Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 and shipbuilding. The company’s mines
Income/Appropriations are located in Goa, Karnataka and Orissa. In April 2004, SGL merged one of its
1 Net sales 723316 513268 109186 98409 137423 54923
2 Value of production 724245 514447 109240 98497 138724 54410 subsidiary Sesa Kembla Coke Company,
3 Other income 7544 9327 7854 10461 4957 2367 which is involved in the production of
4 Total income 731789 523773 117094 108958 143681 56778 metallurgical coke (met coke) with itself.
Raw materials/stores and spares/ Following this merger, SGL now operates
power and fuel consumed 123439 88449 74641 63387 22506 7527 in two major divisions, namely, iron ore
6 Other manufacturing expenses 692 351 0 0 17209 10673
7 Remuneration to employees 287853 209620 8382 8176 4099 2943 and met coke. The company has also
8 Other expenses 126737 104922 27286 28784 32637 23670 diversified its business into production of
9 Depreciation 18597 15160 1563 2032 2560 1600 pig iron.
Gross profit 174472 105272 5222 6580 64670 10365 During 2004-05, SGL reported an ex
11 Interest 557 352 3212 3309 550 742
12 Operating profit 173915 104920 2009 3270 64121 9623 cellent financial performance. Its net
13 Non-operating surplus/deficit 1788 3305 1257 635 4621 4655 sales surged by 150 per cent to Rs 1,374
14 Profit before tax 175702 108225 3267 3905 68742 14278 crore over 2003-04; likewise net profit
Tax provisions 26220 16737 594 1770 22504 4400 registered a whopping 368 per cent rise
16 Profit after tax 149482 91488 2673 2135 46238 9878 to Rs 462 crore. The company’s foreign
17 Dividends (includes tax on
dist profit) 35179 67500 1034 1034 8856 1968 exchange earnings spiralled by 75 per cent
18 Retained profits 114304 23988 1638 1100 37381 7910 to Rs 695 crore during the year under
Liabilities/assets review. The company’s sale of iron ore
19 Paid-up capital 14071 4655 5172 5172 3936 1968 increased by 74.8 per cent to Rs 1,105
Reserves and surplus 475173 346104 23576 22083 68489 29583 crore in the same period. A healthy finan
21 Long-term loan 4067 611 5940 5056 1545 2404
22 Short-term loan 2142 9458 51454 27142 111 5386 cial performance also resulted in a strong
(i) of which, bank borrowings 2142 9458 28752 7869 111 4859 turnover ratio and better earnings per
23 Gross fixed assets 200517 146483 28727 27527 45839 30223 share from Rs 50 in 2003-04 to Rs 117
24 Accumulated depreciation 85553 67866 6781 5389 17093 10749 in 2004-05.
Inventories 12737 10208 14062 12875 15942 6294
26 Total assets/liabilities 668787 525770 114074 85992 97198 53453 The company has undertaken various
Miscellaneous items projects and, among them, a power plant
27 Excise duty 4302 5551 62850 57968 10007 8293 project of approximately 30-megawatt
28 Gross value added 477867 324171 8970 7944 66495 12659 capacity is expected to be operational by
29 Total foreign exchange earnings 537369 383575 0 0 69565 39758 the end of 2006-07. Power will be gen-
Total foreign exchange outgo 391446 239363 1241 923 49093 20325
Key financial and performance ratios erated by using “coke oven flue gas” from
31 Turnover ratio(sales to total assets) 1.2 1.1 1.7 1.8 2.0 1.2 the coke plant and “blast furnace gas” from
32 Gross value added to gross the pig iron plant.
fixed assets (%) 275.4 227.4 31.9 29.6 174.8 43.1 SGL has entered into a technology li
33 Return on investment (gross profit
to total assets) (%) 29.2 22.1 5.2 7.6 85.9 20.2 censing agreement with XTnrgy, LLC a
34 Gross profit to sales limited liability company of US. Under
(gross margin) (%) 24.1 20.5 4.8 6.7 47.1 18.9 the agreement SLG has granted XT an
Operating profit to sales (%) 24.0 20.4 1.8 3.3 46.7 17.5 exclusive and non-transferable licence to
36 Profit before tax to sales (%) 24.3 21.1 3.0 4.0 50.0 26.0 use its Indian patented non-recovery coke
37 Tax provisions to profit before tax (%) 14.9 15.5 18.2 45.3 32.7 30.8
38 Profit after tax to net worth making technology for setting up non
(return on equity) (%) 35.6 26.2 9.5 8.0 88.9 35.6 recovery coke oven plants within north
39 Dividend (%) 214.9 1264.2 17.2 17.4 193.6 87.2 America, central America, south America
Earnings per share (Rs) 21.2 39.3 5.2 4.1 117.5 50.2 and the UK.
41 Book value per share (Rs) 69.5 150.7 55.6 52.7 184.0 160.3
42 P/E ratio (multiple) 33.9 36.7 46.2 18.5 11.6 -SGL reported an impressive financial
43 Debt-equity ratio (adjusted for performance for the first two quarters of
revaluation) 0.01 0.03 2.00 1.18 0.02 0.25 2005-06. For the quarter ended June 2005,
44 Short-term bank borrowings net sales of the company increased by
to inventories (%) 16.8 92.7 204.5 61.1 0.7 77.2 104 per cent to Rs 438 crore over the
Sundry creditors to sundry
debtors (%) 23.0 23.8 89.9 74.3 49.0 97.8 same period of the previous year and
46 Total remuneration to employees net profit was boosted by 131 per cent
to value added (%) 60.2 64.7 93.5 102.9 6.2 23.3 to Rs 158 crore. For the quarter ended
47 Total remunerations to employees September 2005, net sales went up by
to value of production (%) 39.7 40.7 7.7 8.3 3.0 5.4
48 Gross fixed assets formation 21 per cent over the corresponding pe
(% growth) 36.9 5.7 4.4 5.0 51.7 6.1 riod of the previous year at Rs 164 crore
49 Growth in inventories (%) 24.8 1.0 9.2 3.4 153.3 -6.2 and net profit rose by 30.5 per cent to

Notes: – not available; P/E multiples are the latest with corresponding last year’s figures. Rs 31.3 crore.

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Economic and Political Weekly January 28, 2006

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