Title of the Paper

Financial Performance Analysis of Selected Indian IT Companies by Using DuPont Model

First Author#1 Second Author#2

#1
Prof. Ashok Bantwa
Assistant Professor,
Faculty of Management,
GLS University,
Ahmedabad -380 006
[email protected]
Mobile No. + 91 9727575382

#2
Mr. Faizanulhaqq Ansari
Student,
I-MBA Programme, Faculty of Management,
GLS University,
Ahmedabad -380 006
[email protected]
Mobile No. +91 8141904083

Keywords
DuPont Analysis, Financial Performance, IT Companies, Return on Equity
 FINANCIAL PERFORMANCE ANALYSIS OF SELECTED INDIAN IT COMPANIES
BY USING DUPONT MODEL

ABSTRACT
This study attempts to measure the performance of 10 Indian IT companies & all companies
selected from Nifty IT Index. The main objective of this study is to determine the financial
performance of IT companies through the DuPont model. Here, Return on equity (ROE), PBIT
efficiency, Interest burden ratio, Tax burden ratio, Asset turnover ratio & Equity multiplier or
Leverage of the companies have been considered for the analysis. The study had been undertaken
for a five-year period from 2014 to 2018. A detailed financial analysis of all ten companies using
the DuPont model shows that TCS has higher ROE among all selected companies whereas Oracle
Fin Serv & TATA Elxsi are at 2 nd & 3rd position. And based on ANOVA test/analysis it can be
concluded that the ROE, PBIT efficiency, Tax burden ratio, Asset turnover ratio & Leverage or
Equity multiplier position of all selected companies differs significantly & the Interest Burden
position of all selected companies don’t differ significantly.

Keywords: DuPont Analysis, Financial Performance, IT Companies, Return on Equity.

 1. INTRODUCTION
DuPont Mode is a tool to start off with financial statement analysis because it is based on return
on equity. Return on Equity (ROE) is therefore most crucial ration which indicates the rate at
which owner capital is increasing.
The DuPont model was created by DuPont Corporation in 1920s. Today there are two variants of
DuPont model is used. the original three-step model and an extended five-step model. The original
three step model deconstruct the above formula in three parts and at each point we can measure
different efficiency. The five-step model further add two more parts just to enhance the
measurement.
The three-step DuPont Model helps us to check what is driving a company’s return on equity. We
can see if a company is boosting its ROE by improving its profitability, by using its assets more
efficiently, or by taking on additional leverage. However, companies that boost ROE by adding
leverage will eventually reach a point where the cost of debt will diminish profit margins and
decrease asset turnover.
This limitation with the three-step model led to the development of an expanded, five-step model
of DuPont analysis, which breaks down the net profit margin even further to assess the impact of
higher borrowing costs associated with increased leverage. If a company has a high cost of
borrowing, its interest expense on more debt could offset the positive effects of increased leverage.
In addition, interest expenses for most companies are tax-deductible, so the extended model
considers interest charges and the company’s tax burden. The extended five-step DuPont Model
breaks return on equity down into five components:
• PBIT Efficiency
• Interest Burden
• Tax Burden
• Asset Turnover Ratio
• Equity Multiplier or Leverage
When multiplied together, the PBIT Efficiency, Interest Burden and Tax Burden ratio give us net
profit margin (net income ÷ sales). Multiplying all five ratios together gives us return on equity.
Here, we have used the five-step model. these five components will be examined by calculating
and comparing DuPont ratio using financial statement/Annual reports of all IT companies, who
falls in Nifty IT Index.

2. LITERATURE REVIEWS
(Rooplata, 2016)1 The objective is to demonstrate that in most cases the most profitable companies
are not the most attractive for investors – through DuPont Analysis method. In order to do this, we
take into account the top 20 most profitable companies in India in 2015. Decomposition of Return
on Equity (ROE) after Return on Assets (ROA), Return on Sales (ROS), Total Assets Turnover
(TAT) and Equity Multiplier (EM) provides an analytical framework appropriate for observing
factors that make and influence financial profitability, represented by the value of ROE.

(Ramesh, 2015)2 Return on Equity can be calculated through traditional as well as DuPont model.
Here, an attempt is made to calculate ROE of Axis Bank by using three step DuPont model to
measure the efficiency of the company’s in respect of profit margin and management effectiveness.
The data analysis part is made on Annual Report of Axis Bank for the financial year 2013-14.
Conclusion is drawn by comparing the ROE of peer banks (ICICI Bank, HDFC Bank & SBI Bank)
with the Axis Bank return to measure its efficiency.

(Soma Panja Chowdhury, 2010) 3 This study considers DuPont analysis as tool to measure the
financial performance of the 12 selected Indian commercial banks. The data considered for the
purpose of the study is pertaining to the period from 2000 to 2009. This study has performed
subjective analysis of the DuPont ratios and ROA in order to reach to conclusion. Result have
suggested that Kotak Mahindra bank is the best among the lot followed by HDFC bank. The study
can be an eye opener so that banks having small asset side may not be neglected for long.

1
An Empirical study of top 20 profitabile companies in India in 2015 by using DuPont Model. International Journal
of Research in Finance and Marketing, 11-16,Volume 6, Issue 2.
2
DuPont Analysis of Axis Bank. Asian Journal of Management Research, 566-569,Volume 5, Issue 4.
3
DuPont Analysis of selected indian commercial bank to make informed decision: An empirical investigation.
International Journal of Research in Commerce & Management, 121-129,Volume1, Issue 5.
(Junda Yang, 2018) 4 Financial statements are an important part of corporate financial
management. Through analysis of corporate financial statements, management can timely identify
the strengths and weaknesses of the company and make appropriate financial adjustments in a
timely manner. Excel is a powerful tabular analysis tool that sorts, filters, and aggregates large
amounts of data, simultaneously. Taking the financial statements of By-Health Co., Ltd as an
example, it constructs DuPont analysis system through Excel to analyse financial statements and
explore the application of Excel in financial statements.

(R Deepak, 2018) 5 This study attempts to measure the performance of the top 10 Indian companies
in the Information Technology industry. The main objective of this study is to determine the
financial performance of IT companies through internal and external measures. The internal
performance is measured by applying the DuPont model of analysis. The study had been
undertaken for a ten-year period from 2007 to 2017. A detailed financial analysis of all ten
companies using the DuPont system shows that L&T Infotech has higher ROE, ROI, Net profit
margin, Financial leverage.

(Hada Teodor, 2014)6 It presents aspects of the study of financial performance determined for 64
companies listed on BSE on the basis of the profit or loss Account and on the DuPont model. The
aim is to provide a framework for studying the performance by two complementary methods: the
calculation of rates of return and the DuPont analysis, achieving also a case study sample of
companies selected. In the case study we presented the method for determining the rate of
financial, economic and commercial return, then, by applying the DuPont analysis, companies
were ranked and the Pearson's correlation coefficient was determined for the study of factors that
influence the profitability of the DuPont model.

4
The application of excel in financial statement analysis cunstructing DuPont analysis system Model. International
Journal of Business and Management Review, 47-55, Vol 6, No. 9.
5
Financial performance of information technology industry in India using DuPont Analysis. International Journal of
Management and Commerce Innovations, 355-364, Vol 6, Issue 1.
6
The profit and loss account and the DuPont Analysis- Study Models of performance in companies listed on BSE.
WSEAS Transaction on Business and economics, 592-607, Vol 11.
(Cristina, 2013)7 The purpose of this article is to compare the annual financial individual
statements over a period of 4 years for 5 pharmaceutical listed companies through the DuPont
method and to verify the hypothesis that a high rate of profitability on employed capital translated
into higher tradable value of the company’s shares. The experimental part of the paper has shown
that between the return on equity and the average price of the company’s share are no direct
connections.

(Carl B. McGowan, 2012)8 Here they use an expanded version of the DuPont system of financial
analysis to perform a financial analysis of a bank using disaggregated data to computer return on
assets. The DuPont system of financial analysis is based on return on equity which is based on net
profit margin, total asset turnover, and the equity multiplier. The analysis covers the period from
2003 to 2010. This analysis demonstrates that return on assets for Monarch Bank derives primarily
from return on loans. That is, 86% of the investment weighted return on assets for Monarch Bank
derives from return on loans.

(Prof. Laxman B. Doiphode, 2016) 9 This paper shows Firms having high profit margin but low
asset turnover accepts differentiation strategy, firms however, having low profit margin but high
asset turnover go with cost leadership strategy. The result shows Companies under category of
Differentiation Strategy outperform those companies under category of Cost Leadership Strategy.
The result shows that the ranking according to DuPont method are more reliable for investors as
compare to profit (net income). How performance can be improved and control can be exercised
using Du Pont Model is explained in this paper.

(Vasile Burja, 2014) 10 The main objective of this paper is to present factors that can influence the
performance of the DuPont analysis in five large companies with activity in the furniture industry.

7
Comparison of profitability for pharmaceutical romanian listed companies using DuPont identity. The USV Annals
of Economics and Public Administration , 78-83,Vol 13 Issue 1.
8
Using disaggregated return on Asset to Conduct a financial analysis of a commercial bank using and extension of
the DuPont System of financial analysis. Accounting and Financial Research, 152-161,Vol 1, No. 1.
9
A study on profit margin, asset turnover and its impact on stragy using DuPont model. International Journal of
Research in Finance and Marketing, 79-91, Vol6, Issue 5.
10
The study of factors that may influence the performance by the DuPont analysis in the furniture industry. Procedia
Economy and Finace, 213-223.
This study presents the indicators and the calculation of ROE by the DuPont analysis on a time
horizon of 13 years to observe the influences of indicators in the model on profitability. Applying
the methodology of calculating the Pearson correlation coefficient, it also studied the correlations
of Turnover and ROE indicators with other indicators of the model and presented the main existing
influences.

3. IMPORTANCE OF THE STUDY

• It will allow the company's stakeholders to understand the return on equity.
• It will help investors to track the company performance, and can help to take needed steps
further.
• An investor can analyse our research, can do investment in obtained best performing
companies and can get best return.

4. OBJECTIVES OF THE STUDY

• To analyse the performance of Indian IT companies by using 5 step DuPont
analysis/model.
• To do comparative analysis of Indian IT companies.
• Identify best performing Indian IT companies among all companies from nifty IT index.

5. HYPOTHESIS
H0 (1):- There is no significant difference between average ROE of selected IT companies.
H1 (1):- There is significant difference between average ROE of selected IT companies.

H0 (2):- There is no significant difference between average PBIT Efficiency of selected IT

companies.
H1 (2):- There is significant difference between average PBIT Efficiency of selected IT
companies.

H0 (3):- There is no significant difference between average Interest Burden of selected IT

companies.
H1 (3):- There is significant difference between average Interest Burden of selected IT companies.
H0 (4):- There is no significant difference between average Tax Burden of selected IT companies.
H1 (4):- There is significant difference between average Tax Burden of selected IT companies.

H0 (5):- There is no significant difference between average Asset Turnover Ratio of selected IT
companies.
H1 (5):- There is significant difference between average Asset Turnover Ratio of selected IT
companies.

H0 (6):- There is no significant difference between average Equity Multiplier or Leverage of

selected IT companies.
H1 (6):- There is significant difference between average Equity Multiplier or Leverage of selected
IT companies.

6. RESEARCH METHODOLOGY
This study has used descriptive research design, because this study describes various variables
(financial ratios) of selected Indian IT companies. It has found related variables such as,
𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 & 𝑇𝑎𝑥
• PBIT Efficiency:-
𝑆𝑎𝑙𝑒𝑠
𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝑇𝑎𝑥
• Interest Burden:-𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 & 𝑇𝑎𝑥
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
• Tax Burden:- 𝑃𝑟𝑜𝑓𝑖𝑡 𝐵𝑒𝑓𝑜𝑟𝑒 𝑇𝑎𝑥
𝑆𝑎𝑙𝑒𝑠
• Asset Turnover Ratio:- 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡
• Equity Multiplier or Leverage:- 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦

This study has used secondary data collection method, last 5 years (2014-2018) trailing data of
Indian IT companies is taken for analysis. The data is collected from annual report of a company,
website of NSE, as well as journal and research papers related this topic and book.
We had selected whole Nifty IT Index (There are 10 companies in nifty IT index) (selected from
NSE website).

7. ANALYSIS & INTERPRETATION

 Table 1: TCS’s DuPont Analysis
Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.328 0.325 0.339 0.335 0.364 0.338
Interest Burden 0.999 0.999 1.000 0.997 0.999 0.999
Tax Burden 0.790 0.787 0.786 0.784 0.785 0.786
Assets Turnover Ratio 1.069 1.033 1.106 1.167 1.123 1.099
Leverage or Equity Multiplier 1.200 1.150 1.319 1.389 1.308 1.273
Return on Equity by using DuPont 33.271 30.316 38.872 42.401 41.939 37.360

Return on Equity (Net Profit÷Shareholder's

33.271 30.316 38.872 42.401 41.939 37.360
Equity)

Interpretation
• According to DuPont Analysis, average ROE of TCS is 37.360%.
• In 2014, ROE of TCS is 41.939%, which increased to 42.401% in 2015, because of TCS
improved its efficiency of use its assets to generate sales & increases its leverage.
• But in 2016, ROE of TCS came down to 38.872%, because of Asset turnover and leverage
is decreased.
• In 2017 also, PBIT efficiency, Asset turnover & leverage is decreased, so, ROE of TCS is
also decreased to 30.316%.
• And in 2018, ROE increased to 33.271%, because of TCS improved its Asset turnover &
leverage.
• There is no significant difference between DuPont analysis & normal ROE analysis of
TCS.

Table 2: HCL Technologies’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.414 0.431 0.433 0.452 0.453 0.437
Interest Burden 0.997 0.993 0.992 0.992 0.989 0.993
Tax Burden 0.807 0.830 0.821 0.824 0.809 0.818
Assets Turnover Ratio 0.673 0.597 0.505 0.688 0.756 0.644
Leverage or Equity Multiplier 1.191 1.246 1.237 1.284 1.385 1.269
Return on Equity by using DuPont 26.710 26.462 22.008 32.701 38.008 29.178

Return on Equity (Net Profit÷Shareholder's

26.710 26.462 22.008 32.701 38.008 29.178
Equity)

Interpretation
• According to DuPont Analysis, average ROE of HCL Technologies is 29.178%.
• In 2014, ROE of HCL Technologies is 38.008% & it decreased to 32.701% in 2015,
because of HCL Technologies decreased its Asset Turnover & leverage.
• In 2016, ROE of HCL Technologies was again decreased & came down to 22.008%,
because PBIT efficiency, Asset turnover & leverage is decreased.
• But in 2017, Asset turnover & leverage is increased, so, ROE of HCL Technologies is
increased to 26.462%.
• And in 2018, ROE increased to 26.710%, because of improvement in its Asset turnover.
• There is no significant difference between DuPont analysis & normal ROE analysis of
HCL Technologies.

Table 3: Infosys’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.321 0.319 0.383 0.355 0.316 0.339
Interest Burden 1.000 1.000 1.000 1.000 1.000 1.000
Tax Burden 0.811 0.730 0.763 0.724 0.728 0.751
Assets Turnover Ratio 0.816 0.742 0.742 0.765 0.841 0.781
Leverage or Equity Multiplier 1.195 1.174 1.273 1.286 1.252 1.236
Return on Equity by using DuPont 25.440 20.316 27.619 25.306 24.218 24.580

Return on Equity (Net Profit÷Shareholder's

25.440 20.316 27.619 25.306 24.218 24.580
Equity)
 Interpretation
• According to DuPont Analysis, average ROE of Infosys is 24.580%.
• In 2014, ROE of Infosys is 24.218%, which increased to 25.306% in 2015, because of
Infosys improved its PBIT efficiency & increased its leverage.
• In 2016, ROE of Infosys improved again to 27.619%, because PBIT efficiency & Tax
burden ratio is increased.
• But in 2017, PBIT efficiency, Tax burden ratio & leverage is decreased, so, ROE of Infosys
is decreased to 20.316%.
• And in 2018, ROE increased to 25.440%, because of Infosys improved its PBIT efficiency,
Tax burden ratio, Asset turnover as well as leverage of the company.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Infosys.

Table 4: Tech Mahindra’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.210 0.170 0.190 0.155 0.204 0.186
Interest Burden 0.986 0.984 0.987 0.984 0.974 0.983
Tax Burden 0.815 0.786 0.821 0.770 0.829 0.804
Assets Turnover Ratio 0.883 0.976 1.015 1.126 1.106 1.021
Leverage or Equity Multiplier 1.371 1.405 1.524 1.512 1.716 1.506
Return on Equity by using DuPont 20.466 18.042 23.760 20.045 31.268 22.716

Return on Equity (Net Profit÷Shareholder's

20.466 18.042 23.760 20.045 31.268 22.716
Equity)

Interpretation
• According to DuPont Analysis, average ROE of Tech Mahindra is 22.716%.
• In 2014, ROE of Tech Mahindra is 31.268% & decreased to 20.045% in 2015, because
decreasing in its PBIT efficiency, Tax burden ratio, Asset Turnover & leverage.
• But in 2016, ROE of Tech Mahindra increased to 23.760%, because PBIT efficiency, Tax
burden ratio & leverage is increased.
 • In 2017, PBIT efficiency, Tax burden ratio, Asset turnover & leverage is decreased, so,
ROE of Tech Mahindra is also decreased to 18.042%.
• And in 2018, ROE increased to 20.466%, because of Tech Mahindra improved its PBIT
efficiency & Tax burden ratio.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Tech Mahindra.

Table 5: Wipro’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.233 0.244 0.246 0.265 0.258 0.249
Interest Burden 0.963 0.958 0.952 0.967 0.962 0.960
Tax Burden 0.770 0.764 0.773 0.776 0.769 0.770
Assets Turnover Ratio 0.762 0.723 0.755 0.772 0.848 0.772
Leverage or Equity Multiplier 1.388 1.352 1.447 1.543 1.558 1.458
Return on Equity by using DuPont 18.273 17.475 19.799 23.665 25.165 20.875

Return on Equity (Net Profit÷Shareholder's

18.273 17.475 19.799 23.665 25.165 20.875
Equity)

Interpretation
• According to DuPont Analysis, average ROE of Wipro is 20.875%.
• In 2014, ROE of Wipro is 25.165%, which decreased to 23.665% in 2015, because Wipro’s
Asset turnover & leverage is decreased.
• In 2016, ROE of Wipro, again decreased to 19.799%, because PBIT efficiency, Interest
burden ratio, Asset turnover and leverage is decreased.
• In 2017 also, asset turnover & leverage is decreased, so as a result, ROE of Wipro came
down to 17.475%.
• And in 2018, ROE increased to 18.273%, because of improvement in its Interest burden
ratio, Tax burden ratio, asset turnover as well as leverage.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Wipro.
 Table 6: Mindtree’s DuPont Analysis
Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.152 0.120 0.178 0.194 0.191 0.167
Interest Burden 0.979 0.968 1.000 1.000 0.999 0.989
Tax Burden 0.787 0.763 0.782 0.777 0.780 0.778
Assets Turnover Ratio 1.399 1.484 1.330 1.341 1.444 1.399
Leverage or Equity Multiplier 1.346 1.296 1.356 1.316 1.280 1.319
Return on Equity by using DuPont 22.096 17.022 25.033 26.572 27.497 23.644

Return on Equity (Net Profit÷Shareholder's

22.096 17.022 25.033 26.572 27.497 23.644
Equity)

Interpretation
• According to DuPont Analysis, average ROE of Mindtree is 23.644%.
• In 2014, ROE of Mindtree is 27.497%, that decreased to 26.572% in 2015, because
decreasing in Tax burden ratio & its efficiency of use its assets to generate sales.
• In 2016, ROE of Mindtree decreased again & came down to 25.033%, because PBIT
efficiency & Asset turnover is decreased.
• In 2017 also, PBIT efficiency, Interest burden ratio, Tax burden ratio, & leverage is
decreased, so, ROE decreased to 17.022%.
• And in 2018, ROE increased to 22.096%, because Mindtree improved its PBIT efficiency,
Interest burden ratio, Tax burden ratio as well as leverage.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Mindtree.

Table 7: Oracle Fin Serv’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.385 0.450 0.431 0.483 1.197 0.589
Interest Burden 1.000 1.000 1.000 1.000 1.000 1.000
Tax Burden 0.677 0.766 0.619 0.656 0.458 0.635
Assets Turnover Ratio 0.830 0.732 0.691 0.576 0.323 0.631
Leverage or Equity Multiplier 1.222 1.907 1.688 1.940 1.155 1.583
Return on Equity by using DuPont 26.424 48.137 31.075 35.377 20.471 32.297

Return on Equity (Net Profit÷Shareholder's

26.424 48.137 31.075 35.377 20.471 32.297
Equity)

Interpretation
• According to DuPont Analysis, average ROE of Oracle Fin Serv is 32.297%.
• In 2014, ROE of Oracle Fin Serv is 20.471%, that increased to 35.377% in 2015, because
of Oracle Fin Serv improved its Tax burden ratio, efficiency of use its assets to generate
sales as well as increases its leverage.
• But in 2016, ROE of Oracle Fin Serv came down to 31.075%, because PBIT efficiency,
Tax burden ratio and leverage is decreased.
• In 2017, PBIT efficiency, Tax burden ratio, Asset turnover & leverage is increased, so as
a result, ROE of Oracle Fin Serv is also increased to 48.137%.
• And in 2018, ROE decreased to 26.424%, because PBIT efficiency, Tax burden ratio as
well as leverage was decreased.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Oracle Fin Serv.

Table 8: TATA Elxsi’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.263 0.214 0.220 0.184 0.151 0.206
Interest Burden 1.000 1.000 1.000 1.000 0.984 0.997
Tax Burden 0.660 0.661 0.655 0.660 0.653 0.658
Assets Turnover Ratio 1.461 1.730 1.793 1.825 1.996 1.761
Leverage or Equity Multiplier 1.285 1.283 1.555 1.642 1.648 1.482
Return on Equity by using DuPont 32.510 31.342 40.138 36.315 31.986 34.458
Return on Equity (Net Profit÷Shareholder's
32.510 31.342 40.138 36.315 31.986 34.458
Equity)

Interpretation
• According to DuPont Analysis, average ROE of TATA Elxsi is 34.458%.
• In 2014, ROE of TATA Elxsi is 31.986%, which increased to 36.315% in 2015, because
of TATA Elxsi improved its PBIT efficiency & Interest burden ratio.
• In 2016, ROE of TATA Elxsi again increased & reach to 40.138%, because PBIT
efficiency is increased.
• But in 2017, PBIT efficiency, Asset turnover & leverage is decreased, so as a result, ROE
of TATA Elxsi is also decreased to 31.342%.
• And in 2018, ROE increased to 32.510%, because of TATA Elxsi improved its PBIT
efficiency.
• There is no significant difference between DuPont analysis & normal ROE analysis of
TATA Elxsi.

Table 9: Infibeam Avenue’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 Average
PBIT Efficiency 0.142 0.930 0.104 -0.276 0.225
Interest Burden 0.915 0.934 0.954 1.016 0.955
Tax Burden 0.338 0.004 0.998 1.000 0.585
Assets Turnover Ratio 0.107 0.055 0.058 0.102 0.081
Leverage or Equity Multiplier 1.107 1.200 1.053 1.051 1.102
Return on Equity by using DuPont 0.524 0.022 0.606 -3.016 -0.466

Return on Equity (Net Profit÷Shareholder's

0.524 0.022 0.606 -3.016 -0.466
Equity)

Interpretation
• According to DuPont Analysis, average ROE of Infibeam Avenue is -0.466%.
 • In 2015, ROE of Infibeam Avenue is -3.016%, which is loss, but it converted into profit,
& increased to 0.606% in 2016, because Infibeam Avenue improved its PBIT efficiency.
• But in 2017 ROE of Infibeam Avenue came down to 0.022%, which is near to loss, because
Tax burden ratio is decreased with very huge difference.
• And in 2018, ROE increases to 0.524%, because Infibeam Avenue controlled its Tax
burden ratio as well as improved its Asset turnover ratio.
• There is no significant difference between DuPont analysis & normal ROE analysis of
Infibeam Avenue.

Table 10: NIIT Technologies’s DuPont Analysis

Financial Ratios 2018 2017 2016 2015 2014 Average
PBIT Efficiency 0.172 0.126 0.155 0.128 0.209 0.158
Interest Burden 0.975 0.982 0.981 0.973 0.990 0.980
Tax Burden 0.819 0.838 0.867 0.879 0.770 0.835
Assets Turnover Ratio 0.922 0.989 0.959 0.925 1.071 0.973
Leverage or Equity Multiplier 1.211 1.205 1.333 1.426 1.316 1.298
Return on Equity by using DuPont 15.347 12.311 16.906 14.472 22.449 16.297

Return on Equity (Net Profit÷Shareholder's

15.347 12.311 16.906 14.472 22.449 16.297
Equity)

Interpretation
• According to DuPont Analysis, average ROE of NIIT Technologies is 16.297%.
• In 2014, ROE of NIIT Technologies is 22.449%, it decreased to 14.472% in 2015, because
of PBIT efficiency, Interest burden ratio & Asset turnover ratio are decreased.
• But in 2016, ROE increased to 16.906%, because PBIT efficiency, Interest burden ratio &
Asset turnover is increased.
• In 2017, PBIT efficiency, Tax burden ratio & leverage is decreased, so as a result, ROE of
NIIT Technologies is also decreased to 12.311%.
• And in 2018, ROE increases to 15.347%, because of NIIT Technologies improved its PBIT
efficiency.
 • There is no significant difference between DuPont analysis & normal ROE analysis of
NIIT Technologies.

Table 11: ROE Result of All Selected Companies

Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 33.271 30.316 38.872 42.401 41.939 37.360 10
HCL Technologies 26.710 26.462 22.008 32.701 38.008 29.178 7
Infosys 25.440 20.316 27.619 25.306 24.218 24.580 6
Tech Mahindra 20.466 18.042 23.760 20.045 31.268 22.716 4
Wipro 18.273 17.475 19.799 23.665 25.165 20.875 3
Mindtree 22.096 17.022 25.033 26.572 27.497 23.644 5
Oracle Fin Serv 26.424 48.137 31.075 35.377 20.471 32.297 8
TATA Elxsi 32.510 31.342 40.138 36.315 31.986 34.458 9
Infibeam Avenue 0.524 0.022 0.606 -3.016 0.000 -0.466 1
NIIT Technologies 15.347 12.311 16.906 14.472 22.449 16.297 2

Interpretation
• In terms of ROE, TCS is the best performer company among the all selected companies,
whereas TATA Elxsi & Oracle Fin Serv is second & third best performer companies among
all selected companies.
• Infibeam Avenue is weakest in terms of performance of ROE followed by Wipro & NIIT
Technologies.

Table 12: One Way ANOVA Test for Hypothesis 1 (ROE)

Source of
Variation SS df MS F P-value F crit
Between Groups 5243.24 9 582.582 21.5062 0.00 2.12403
Within Groups 1083.56 40 27.0891
 Total 6326.8 49

Interpretation
• Since the calculated value of P is 0.00, which is less than standard value 0.05. So, the null
hypothesis is rejected and the alternative hypothesis is accepted. Hence, it is concluded that
the ROE position of all selected companies differs significantly.

Table 13: PBIT Efficiency Result of All Selected Companies

Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 0.328 0.325 0.339 0.335 0.364 0.338 7
HCL Technologies 0.414 0.431 0.433 0.452 0.453 0.437 9
Infosys 0.321 0.319 0.383 0.355 0.316 0.339 8
Tech Mahindra 0.210 0.170 0.190 0.155 0.204 0.186 3
Wipro 0.233 0.244 0.246 0.265 0.258 0.249 6
Mindtree 0.152 0.120 0.178 0.194 0.191 0.167 2
Oracle Fin Serv 0.385 0.450 0.431 0.483 1.197 0.589 10
TATA Elxsi 0.263 0.214 0.220 0.184 0.151 0.206 4
Infibeam Avenue 0.142 0.930 0.104 -0.276 0.000 0.225 5
NIIT Technologies 0.172 0.126 0.155 0.128 0.209 0.158 1

Interpretation
• In terms of PBIT Efficiency, Oracle Fin Serv is the best performer company among the all
selected companies, whereas HCL Technologies & Infosys is second & third best
performer companies among all selected companies.
• NIIT Technologies is weakest in terms of performance of PBIT Efficiency followed by
Tech Mahindra & Mindtree.
 Table 14: One Way ANOVA Test for Hypothesis 2 (PBIT Efficiency)
Source of P-
Variation SS df MS F value F crit
Between Groups 0.90 9.00 0.10 3.07 0.01 2.12
Within Groups 1.30 40.00 0.03

Total 2.20 49.00

Interpretation
• Since the calculated value of P is 0.01, which is less than standard value 0.05. So, the null
hypothesis is rejected and the alternative hypothesis is accepted. Hence, it is concluded that
the PBIT Efficiency position of all selected companies differ significantly.

Table 15: Interest Burden Result of All Selected Companies

Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 0.999 0.999 1.000 0.997 0.999 0.999 8
HCL Technologies 0.997 0.993 0.992 0.992 0.989 0.993 6
Infosys 1.000 1.000 1.000 1.000 1.000 1.000 9.5
Tech Mahindra 0.986 0.984 0.987 0.984 0.974 0.983 4
Wipro 0.963 0.958 0.952 0.967 0.962 0.960 2
Mindtree 0.979 0.968 1.000 1.000 0.999 0.989 5
Oracle Fin Serv 1.000 1.000 1.000 1.000 1.000 1.000 9.5
TATA Elxsi 1.000 1.000 1.000 1.000 0.984 0.997 7
Infibeam Avenue 0.915 0.934 0.954 1.016 0.000 0.955 1
NIIT Technologies 0.975 0.982 0.981 0.973 0.990 0.980 3

Interpretation
 • In terms of Interest Burden, Infosys & Oracle Fin Serv, both are the best performer
company among the all selected companies, whereas TCS is third best performer
companies among all selected companies.
• Infibeam Avenue is weakest in terms of performance of Interest Burden followed by NIIT
Technologies & Wipro.

Table 16: One Way ANOVA Test for Hypothesis 3 (Interest Burden)
Source of P-
Variation SS df MS F value F crit
Between Groups 0.24 9.00 0.03 1.42 0.21 2.12
Within Groups 0.74 40.00 0.02

Total 0.97 49.00

Interpretation
• Since the calculated value of P is 0.21, which is greater than standard value 0.05. So, the
null hypothesis is accepted and the alternative hypothesis is rejected. Hence, it is concluded
that the Interest Burden position of all selected companies don’t differ significantly.

Table 17: Tax Burden Result of All Selected Companies

Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 0.790 0.787 0.786 0.784 0.785 0.786 7
HCL Technologies 0.807 0.830 0.821 0.824 0.809 0.818 9
Infosys 0.811 0.730 0.763 0.724 0.728 0.751 4
Tech Mahindra 0.815 0.786 0.821 0.770 0.829 0.804 8
Wipro 0.770 0.764 0.773 0.776 0.769 0.770 5
Mindtree 0.787 0.763 0.782 0.777 0.780 0.778 6
Oracle Fin Serv 0.677 0.766 0.619 0.656 0.458 0.635 2
 TATA Elxsi 0.660 0.661 0.655 0.660 0.653 0.658 3
Infibeam Avenue 0.338 0.004 0.998 1.000 0.000 0.585 1
NIIT Technologies 0.819 0.838 0.867 0.879 0.770 0.835 10

Interpretation
• In terms of Tax Burden, NIIT Technologies is the best performer company among the all
selected companies, whereas HCL Technologies & Tech Mahindra is second & third best
performer companies among all selected companies.
• Infibeam Avenue is weakest in terms of performance of Tax Burden followed by TATA
Elxsi & Oracle Fin Serv.

Table 18: One Way ANOVA Test for Hypothesis 4 (Tax Burden)
Source of P-
Variation SS df MS F value F crit
Between Groups 0.57 9.00 0.06 2.35 0.03 2.12
Within Groups 1.08 40.00 0.03

Total 1.66 49.00

Interpretation
• Since the calculated value of P is 0.03, which is less than standard value 0.05. So, the null
hypothesis is rejected and the alternative hypothesis is accepted. Hence, it is concluded that
the Tax Burden position of all selected companies differ significantly.

Table 19: Assets Turnover Ratio Result of All Selected Companies

Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 1.069 1.033 1.106 1.167 1.123 1.099 8
HCL Technologies 0.673 0.597 0.505 0.688 0.756 0.644 3
 Infosys 0.816 0.742 0.742 0.765 0.841 0.781 5
Tech Mahindra 0.883 0.976 1.015 1.126 1.106 1.021 7
Wipro 0.762 0.723 0.755 0.772 0.848 0.772 4
Mindtree 1.399 1.484 1.330 1.341 1.444 1.399 9
Oracle Fin Serv 0.830 0.732 0.691 0.576 0.323 0.631 2
TATA Elxsi 1.461 1.730 1.793 1.825 1.996 1.761 10
Infibeam Avenue 0.107 0.055 0.058 0.102 0.000 0.081 1
NIIT Technologies 0.922 0.989 0.959 0.925 1.071 0.973 6

Interpretation
• In terms of Assets Turnover Ratio, TATA Elxsi is the best performer company among the
all selected companies, whereas Mindtree & TCS is second & third best performer
companies among all selected companies.
• Infibeam Avenue is weakest in terms of performance of Assets Turnover Ratio followed
by HCL Technologies & Oracle Fin Serv.

Table 20: One Way ANOVA Test for Hypothesis 5 (Assets Turnover Ratio)
Source of P-
Variation SS df MS F value F crit
Between Groups 9.58 9.00 1.06 95.53 0.00 2.12
Within Groups 0.45 40.00 0.01

Total 10.02 49.00

Interpretation
• Since the calculated value of P is 0.00, which is less than standard value 0.05. So, the null
hypothesis is rejected and the alternative hypothesis is accepted. Hence, it is concluded that
the Assets Turnover Ratio position of all selected companies differ significantly.

Table 21: Leverage or Equity Multiplier Result of All Selected Companies

 Years
Companies Average Score
2018 2017 2016 2015 2014
TCS 1.200 1.150 1.319 1.389 1.308 1.273 4
HCL Technologies 1.191 1.246 1.237 1.284 1.385 1.269 3
Infosys 1.195 1.174 1.273 1.286 1.252 1.236 2
Tech Mahindra 1.371 1.405 1.524 1.512 1.716 1.506 9
Wipro 1.388 1.352 1.447 1.543 1.558 1.458 7
Mindtree 1.346 1.296 1.356 1.316 1.280 1.319 6
Oracle Fin Serv 1.222 1.907 1.688 1.940 1.155 1.583 10
TATA Elxsi 1.285 1.283 1.555 1.642 1.648 1.482 8
Infibeam Avenue 1.107 1.200 1.053 1.051 0.000 1.102 1
NIIT Technologies 1.211 1.205 1.333 1.426 1.316 1.298 5

Interpretation
• In terms of Leverage or Equity Multiplier, Oracle Fin Serv is the best performer company
among the all selected companies, whereas Tech Mahindra & TATA Elxsi is second &
third best performer companies among all selected companies.
• Infibeam Avenue is weakest in terms of performance of Leverage or Equity Multiplier
followed by HCL Technologies & Infosys.

Table 22: One Way ANOVA Test for Hypothesis 6 (Leverage or Equity Multiplier)
Source of P-
Variation SS df MS F value F crit
Between Groups 1.76 9.00 0.20 4.13 0.00 2.12
Within Groups 1.89 40.00 0.05

Total 3.65 49.00

Interpretation
• Since the calculated value of P is 0.00, which is less than standard value 0.05. So, the null
hypothesis is rejected and the alternative hypothesis is accepted. Hence, it is concluded that
the Leverage or Equity Multiplier position of all selected companies differ significantly.

8. FINDINGS
• In terms of ROE, TCS is the best performer & Infibeam Avenue is weakest company
among the all selected companies.
• In terms of PBIT Efficiency, Oracle Fin Serv is the best performer & NIIT Technologies
is weakest company among the all selected companies.
• In terms of Interest Burden, Infosys & Oracle Fin Serv, both are the best performer &
Infibeam Avenue is weakest company among the all selected companies.
• In terms of Tax Burden, NIIT Technologies is the best performer & Infibeam Avenue is
weakest company among the all selected companies.
• In terms of Assets Turnover Ratio, TATA Elxsi is the best performer & Infibeam Avenue
is weakest company among the all selected companies.
• In terms of Leverage or Equity Multiplier, Oracle Fin Serv is the best performer & Infibeam
Avenue is weakest company among the all selected companies.
• Based on ANOVA test/analysis, it can be concluded that the ROE, PBIT efficiency, Tax
burden ratio, Asset turnover ratio & Leverage or Equity multiplier position of all selected
companies differs significantly & the Interest Burden position of all selected companies
don’t differ significantly. This indicates that performance of companies varies from each
other on various parameters.
Table 23: Best Company
Position Company Overall Score
1st TCS 44
2nd Oracle Fin Serve 41.5
3rd TATA Elxsi 41
HCL
4th 37
Technologies
5th Tech Mahindra 35
 6th Infosys 34.5
7th Mindtree 33
8th Wipro 27
NIIT
9th 27
Technologies
10th Infibeam Avenue 10
• In terms of overall best performer company based on the score which they get, TCS is best
performer, whereas Oracle Fin Serv & TATA Elxsi is 2nd & 3rd best performer companies
among all selected companies.
• And in other hand, Infibeam Avenue is the least performing company followed by Wipro
& NIIT Technologies.

9. CONCLUSION
The main objective of this study is to determine the financial performance of IT companies through
the DuPont model. This study attempts to measure the performance of 10 Indian IT companies &
all companies selected from Nifty IT Index. The study had been undertaken for a five-year period
from 2014 to 2018. A detailed financial analysis of all ten companies using the DuPont model
shows that TCS has higher ROE among all selected companies whereas Oracle Fin Serv & TATA
Elxsi are at 2nd & 3rd position. And Infibeam Avenue is the least performing company followed by
Wipro & NIIT Technologies. Based on ANOVA test/analysis, it can be concluded that the ROE,
PBIT efficiency, Tax burden ratio, Asset turnover ratio & Leverage or Equity multiplier position
of all selected companies differs significantly & the Interest Burden position of all selected
companies don’t differ significantly.

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