WIPRO LTD.

SPONTANEOUS FINANCING
Spontaneous financing in Wipro refers to the company's short-term financing
sources that arise naturally from its business operations. These sources include
trade credit, accounts payable, and accrued expenses.

Trade credit is the credit that Wipro receives from its suppliers when it purchases
goods and services on credit. This is a major source of spontaneous financing for
Wipro, as it allows the company to finance its operations without having to pay
upfront for all of its inputs.

Accounts payable are the amounts that Wipro owes to its suppliers for goods and
services that have been received but not yet paid for. This is another major source of
spontaneous financing for Wipro, as it allows the company to extend its payment
terms to its suppliers.

Accrued expenses are expenses that have been incurred but not yet paid. For
example, Wipro may accrue salaries and wages at the end of each accounting
period, even though the employees will not be paid until the beginning of the next
period. Accrued expenses are a source of spontaneous financing for Wipro because
they allow the company to delay paying certain expenses until a later date.

The following table shows the amount of spontaneous financing that Wipro had on
its balance sheet as of March 31, 2023:
Amount in crores of
Item
rupees

Trade credit 1,913

Accounts payable 5,141

Accrued expenses 1,232

Total spontaneous
8,286
financing

Spontaneous financing is an important source of working capital for Wipro. It allows

the company to finance its day-to-day operations without having to rely on external
financing sources, such as bank loans or equity issuance.

Example of spontaneous financing in Wipro:

Wipro purchases goods from its suppliers on credit. The supplier allows Wipro 30
days to pay for the goods. Wipro receives the goods and begins using them in its
production process. The goods are sold to customers, and Wipro receives payment
WIPRO LTD.

from the customers. Wipro uses the cash to pay its suppliers for the goods that were
purchased on credit.

In this example, the trade credit that Wipro received from its supplier is a form of
spontaneous financing. It allowed Wipro to finance its production process without having to
pay cash upfront for the goods that it purchased.

Calculations

 Gross Working Capital = Current Assets - Non-Current Assets

 Net Working Capital = Current Assets - Current Liabilities
 Gross Operating Cycle = Inventory Days + Receivables Days - Payables Days
 Net Operating Cycle = Gross Operating Cycle - Payables Days
 Current Asset to Fixed Asset Ratio = Current Assets / Fixed Assets

Calculations for Wipro as of March 31, 2023

Gross Working Capital

Gross Working Capital = Current Assets - Non-Current Assets

= 77,026 crores - 56,750 crores
= 20,276 crores

Net Working Capital

Net Working Capital = Current Assets - Current Liabilities

= 77,026 crores - 49,415 crores
= 27,611 crores

Gross Operating Cycle

Gross Operating Cycle = Inventory Days + Receivables Days - Payables Days

Inventory Days

Inventory Days = Inventory / Cost of Goods Sold * 365

= 11,849 crores / 61,538 crores * 365
= 91 days

Receivables Days

Receivables Days = Accounts Receivable / Net Sales * 365

= 15,404 crores / 68,189 crores * 365
= 59 days

Payables Days
WIPRO LTD.

Payables Days = Accounts Payable / Cost of Goods Sold * 365

= 5,141 crores / 61,538 crores * 365
= 32 days

Therefore, the Gross Operating Cycle for Wipro is 150 days.

Net Operating Cycle

Net Operating Cycle = Gross Operating Cycle - Payables Days

= 150 days - 32 days
= 118 days

Current Asset to Fixed Asset Ratio

Current Asset to Fixed Asset Ratio = Current Assets / Fixed Assets

= 77,026 crores / 56,750 crores
= 1.36

Conclusion

 Wipro's Gross Working Capital is 20,276 crores.

 Wipro's Net Working Capital is 27,611 crores.
 Wipro's Gross Operating Cycle is 150 days.
 Wipro's Net Operating Cycle is 118 days.
 Wipro's Current Asset to Fixed Asset Ratio is 1.36.

Overall, Wipro has a healthy financial position with a strong balance sheet. The company's
working capital is positive, and its operating cycle is relatively short. This indicates that
Wipro is able to efficiently manage its inventory and collections.

Conclusion + Comparative Analysis

Working Capital Policies of Tech Mahindra, Wipro, HCL Technologies, and TCS

All four companies have conservative working capital policies. This is evident from their high
levels of spontaneous financing, short net operating cycles, and low current asset to fixed
asset ratios.

TCS has the most conservative working capital policy of the four companies. This is evident
from its lowest current asset to fixed asset ratio and shortest gross operating cycle.

HCL Technologies also has a conservative working capital policy. It has a slightly higher
current asset to fixed asset ratio than TCS, but it has a similar gross operating cycle.
WIPRO LTD.

Tech Mahindra has a slightly less conservative working capital policy than TCS and HCL
Technologies. It has a slightly higher current asset to fixed asset ratio and a slightly longer
gross operating cycle.

Wipro has the least conservative working capital policy of the four companies. It has the
highest current asset to fixed asset ratio and the longest gross operating cycle.

Overall, all four companies have conservative working capital policies. However, TCS has the
most conservative policy, followed by HCL Technologies, Tech Mahindra, and Wipro.

Here are some specific comments on the working capital policies of each company:

 TCS: TCS has a very conservative working capital policy. This is evident from its low
current asset to fixed asset ratio and short gross operating cycle. This means that
TCS is very efficient at converting its cash into cash.

 HCL Technologies: HCL Technologies also has a conservative working capital policy. It
is not as conservative as TCS, but it is still more conservative than Tech Mahindra
and Wipro.

 Tech Mahindra: Tech Mahindra has a slightly less conservative working capital policy
than TCS and HCL Technologies. This is evident from its slightly higher current asset
to fixed asset ratio and slightly longer gross operating cycle.

 Wipro: Wipro has the least conservative working capital policy of the four companies.
This is evident from its high current asset to fixed asset ratio and long gross operating cycle.
This means that Wipro takes slightly longer to convert its cash into cash than the other three
companies.

For example, a company in a cyclical industry may need to hold more inventory to
meet customer demand during peak periods. A company with a complex business
model may need to hold more receivables to ensure that customers pay their bills on
time. And a company with a high risk tolerance may be willing to hold less cash in
order to invest in growth initiatives.

Overall, the working capital policies of Tech Mahindra, Wipro, HCL Technologies, and
TCS are all sound. The companies have a good balance of liquidity and efficiency.