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Working capital

analysis of Infosys
Presentation by:
Pranav Tripathi
Roll No: NF161719
PGDM (Financial Market) 2016-17

Contents

Basic
overview of
Company

Charts-Trend
analysis
Calculation
Table

Growth of
working capital
Working capital
ratio
Return on
working capital

Findings

Observations

Conclusions

1. Basic overview of company


Industry

: IT services, IT consulting

Founded

: 2 July 1981

Headquarters

: Bangalore, India

CEO and MD

: Vishal Sikka

Area served

: Worldwide

Services

: IT, business consulting and outsourcing services

No of employees

: 197,050

Traded as

: 500209

: BSE

NSE

: INFY

NYSE

: INFY

BSE SENSEX constituent


CNX Nifty constituent
Infosys is the third-largest Indian IT services company by 2016 revenues.
One of its known products is Finacle which is a universal banking
solution.

2. Calculation table
Companies
Infosys
Particulars
2016
2015 2014
2013
2012
2011
Current Assets

Current Investments
2
749 3024
1739
368
140
Trade Receivables
9798
8627 8351
7083
5882
4653
Cash and Cash equivalents
29176
27722 25950 21832 20591 16666
Short Term Loans and
Advances
7121
5654 5753
4689
3420
2544
Total Current Assets
46097
42752 43078 35343 30261 24003
Current Liabialities

Trade Payables
623
124
173
189
23
44
Other Current Liabilities
6105
5546 5449
3941
3059
2540
Short Term Provisions
8809
8045 6409
3969
3820
2540
Total Current Liabilities
15537
13715 12031
8099
6902
5124
PAT
15786
12164 10656
9429
8332
6835
Working Capital
30560
29037 31047 27244 23359 18879
Growth in Working Capital
5%
-6%
14%
17%
24%
Working Capital Ratio
2.97
3.12
3.58
4.36
4.38
4.68
Return on Working Capital 0.516557
0.3432 0.3460 0.3566 0.3620
(In Rs.)
59 0.4189138
22
95
93
42
Return on Working Capital
(In %)
52%
42%
34%
35%
36%
36%

3. Charts-Trend analysis
It includes:
i.

Growth of working capital

ii. Working capital ratios


iii. Return on working capital

Trend Analysis (Contd.)


In Current Assets:
Current investments decreased and Trade receivables increased
during this period.
In Current Liabilities:
Trade payables and Short term provisions have increased.
Year

Current Investments
Short Term Loans and Advances
Trade Receivables
Trade Payables
Short Term Provisions
Other Current Liabilities

2016 2015
Current Assets
2
749
7121 5654
9798 8627
Current Liabilities
623
124
8809 8045
6105 5546

2014

2013

2012

2011

3024
5753
8351

1739
4689
7083

368
3420
5882

140
2544
4653

173
6409
5449

189
3969
3941

23
3820
3059

44
2540
2540

Trend Analysis (Contd.)


It is also evident that Current assets have almost
doubled in past 5 years from Rs 24003 cr in 2011 to Rs
46097 cr in 2016.
Also current liabilities have tripled over the same period
Rs 5124 cr in 2011 to Rs 15537 cr in 2016.
Year

2016

2015

2014

2013

2012

2011

Total Current Assets

46097 42752 43078 35343 30261 24003

Total Current Liabilities

15537 13715 12031

8099

6902

5124

i. Growth of working capital


Working Capital = Current Assets Current Liabilities
Working Capital has increased from 2011 to 2014 with slight reduction in 2015.
Working Capital
31047

30560
29037

27244
23359

18879

2016

2015

2014

2013

2012

2011

ii. Working Capital Ratios


Working capital Ratios = Current Assets/Current Liabilities
Based on Y-o-Y comparison, it is found that working capital ratio is continuously
declining.
It was 4.68 in 2011 to 2.97 in 2016.
Working Capital ratios
4.68
4.36

4.38

2013

2012

3.58
2.97

2016

3.12

2015

2014

2011

iii. Return on Working capital


Return on working capital = PAT/Working Capital
Return on working capital has increased in last 6 years.
It was nearly 1/3rd in 2012 to 1/2 in 2016.
Return on working capital

52%

42%
34%

35%

36%

0%
2016

2015

2014

2013

2012

2011

4. Findings
On YoY basis, rate of increase of working capital has
declined.
From 2012 to 2013, the decrease is 7%
From 2013 to 2014, decrease is 3%.
In 2015, there is negative rate of increase of working
capital.
In 2016, there is optimism and working capital increase
by 5% from previous year.

5. Observations
There is increasing tendency of working capital in last 5 years.
Working capital ratios reduced from 4.68 to 2.97 in last 5 years. Ideal
ratio is assumed to be 2:1.
Current assets doubled

and current liabilities tripled

Current investments decreased significantly.


Trade payables increased significantly.
Short term provisions have been tripled in last 5 years.

in last 5 years.

6. Conclusions
Since working capital ratio is reduced from 4.68 to 2.97,
it seems that company is trying correct its ratio to ideal
ratio of 2:1.
Excessive working capital ratio shows poor investment
policies, that is why company took corrective measures
and reduced current investments.
Company has also tripled short term provisions in last
5 years, which shows that there will be some significant
payment in future for which company is gearing up.