• • Companies with higher inventory turnover seem to achieve better operating margins, suggesting efficiency in managing inventory translates to profitability.
  • TCS.NS appears to be the most efficient in this group, with the highest turnover and margin.
  • HCL-TECH.NS is an interesting outlier, achieving a high margin despite very low turnover, which might indicate a unique business model or product mix.
  • The relationship isn't perfectly linear, as seen with HCL-TECH.NS, indicating other factors also influence operating margins.
  • Industry Implications: In the IT sector, efficient inventory management (higher turnover) generally correlates with better profitability (higher operating margins). However, exceptions exist, suggesting diverse business models within the sector.

• Interpretation:
  • Companies with higher inventory turnover tend to have higher market capitalization.
  • TCS.NS appears to be the largest and most efficient company in this group.
  • HCL-TECH.NS is an outlier, with a high market cap despite very low inventory turnover.
  • The R-squared value of 0.79 indicates a strong fit, suggesting inventory turnover explains about 79% of the variation in market cap for these companies.
• Industry Implications: In the IT sector, efficient inventory management (higher turnover) generally correlates with higher market valuation. However, exceptions exist, suggesting other factors also influence market capitalization.
• Limitations:
  • The sample size is small, with only four companies explicitly labeled.
  • There might be other factors not shown in this graph that influence market capitalization.
  • The relationship, while strong, is not perfect, as seen with the HCL-TECH.NS outlier.
• Potential Insights:
  • Investors seem to value companies with higher inventory turnover, possibly seeing it as a sign of operational efficiency.
  • However, the HCL-TECH.NS outlier suggests that companies can achieve high market value through other means, possibly through differentiated products or services that don't rely on high inventory turnover.

1. Interpretation:
   • Companies with higher inventory turnover tend to have higher net income.
   • TCS.NS appears to be the most profitable and efficient company in this group.
   • HCL-TECH.NS is an outlier, achieving high net income despite very low inventory turnover.
   • The R-squared value of 0.78 indicates a strong fit, suggesting inventory turnover explains about 78% of the variation in net income for these companies.
2. Industry Implications: In the IT sector, efficient inventory management (higher turnover) generally correlates with higher profitability. However, exceptions exist, suggesting other factors also influence net income.
3. Limitations:
   • The sample size is small, with only five companies represented.
   • There might be other factors not shown in this graph that influence net income.
   • The relationship, while strong, is not perfect, as seen with the HCL-TECH.NS outlier.
4. Potential Insights:
   • Higher inventory turnover seems to be associated with higher profitability in this sector.
   • However, the HCL-TECH.NS outlier suggests that companies can achieve high net income through other means, possibly through differentiated products or services that don't rely on high inventory turnover.
   • The slope of the trend line (0.96) suggests that for every unit increase in inventory turnover, net income tends to increase by about 0.96 million USD, on average.

This data suggests that for most IT companies, improving inventory turnover could be a strategy to enhance profitability, but it's not the only path to achieving high net income in this sector. Companies should consider their specific business models and other factors that might influence profitability.

• TCS maintains its position as a leader in efficient inventory management, with very low Inventory Days.
• There's a discrepancy in HCL's position, which might indicate that while they hold inventory for a moderate time, they don't turn it over as frequently as others.
• Wipro and Tech Mahindra both show efficient inventory management with low Inventory Days, though not as low as TCS.
• The rankings here provide a different perspective from the turnover ratios we saw earlier, especially for HCL Technologies.

The series of line charts compare four companies — Wipro Limited, Tata Consultancy Services Limited (TCS), Tech Mahindra Limited, and HCL Technologies Limited — over the period from 2017 to 2023, across four key metrics: Inventory Days, Cash Conversion Cycle, Labor Productivity, and Payable Days/Receivable Days.

1. Inventory Days (Top-Left)

• Wipro (blue) starts at 3.65 days in 2017 and significantly decreases to 1.45 days in 2023.
• TCS (green) shows a relatively stable trend, starting at 1.42 days and decreasing to 0.67 days by 2023.
• Tech Mahindra (red) consistently has the lowest Inventory Days, close to zero throughout the timeline, showing excellent inventory management.
• HCL Technologies (orange) follows a declining trend, from 2.38 days in 2018 down to 0.09 days in 2023, indicating improved efficiency in handling inventory.

Interpretation: Across all companies, inventory days have decreased over time, suggesting better efficiency in managing stock and moving toward a lean inventory model.

2. Cash Conversion Cycle (Top-Right)

• Wipro (blue) shows fluctuations, starting at 38.59 days in 2017, dropping to 31.06 in 2018, but rising again to 39.70 by 2023.
• TCS (green) has a downward trend, moving from 43.61 days in 2017 to 14.3 days in 2022 before slightly increasing to 15.3 in 2023.
• Tech Mahindra (red) consistently maintains the highest Cash Conversion Cycle, peaking at 58.03 days in 2019 and stabilizing around 55.77 days in 2023.
• HCL Technologies (orange) shows a fluctuating trend with a gradual increase, reaching 55.77 days in 2023.

Interpretation: TCS exhibits the most efficient cash management with a dramatic decrease in its cash conversion cycle, while Tech Mahindra and HCL show higher values, indicating slower processes for turning assets into cash.

The radar chart provided compares three companies: Tata Consultancy Services Limited (TCS), Tech Mahindra Limited, and Wipro Limited, across various financial and operational key performance indicators (KPIs). These KPIs include Gross Profit, Operating Income or Loss, Total Revenue, and specific inventory management metrics like Inventory Days and Cash Conversion Cycle.

Interpretation by KPI:

1. Net Income & Operating Income or Loss:

   • TCS (blue) shows the strongest performance, significantly exceeding Tech Mahindra (red) and Wipro (green). This indicates that TCS has better profitability and income management.

2. Gross Profit:

   • TCS again outperforms the others, while Tech Mahindra and Wipro show weaker results, with Wipro having the lowest performance.

3. Sales General Admin Cost / Total Revenue:

   • Wipro (green) shows lower ratios, suggesting better efficiency in controlling administrative costs relative to revenue, compared to Tech Mahindra and TCS.

4. Payable Days / Receivable Days:

   • Tech Mahindra (red) has the largest ratio here, which could indicate a longer payment cycle compared to Wipro and TCS. This may imply slower cash inflows from receivables, potentially impacting liquidity.

5. Inventory Days:

   • TCS shows the lowest inventory days, suggesting better efficiency in managing stock turnover. Wipro and Tech Mahindra have higher inventory days, indicating slower inventory movement.

6. Cash Conversion Cycle:

   • TCS exhibits the best cash conversion cycle, implying more efficient working capital management compared to Tech Mahindra and Wipro.

7. Asset Turnover:

   • TCS has the highest asset turnover, showing it is better at utilizing its assets to generate revenue than the other two companies. Tech Mahindra and Wipro lag in this regard.

Conclusion:

Tata Consultancy Services (TCS) clearly leads in almost all financial KPIs, indicating stronger financial health and operational efficiency. Wipro and Tech Mahindra trail behind, with Wipro showing more efficiency in cost management and Tech Mahindra showing some liquidity challenges based on Payable/Receivable Days. TCS’s superior performance in asset turnover and cash conversion also highlights its efficient inventory management.

1. HCL Technologies Limited:

   • The entire inventory (100%) is classified as "Work in Process" (orange). This suggests that HCL focuses on in-progress work, reflecting the nature of service-based industries where work-in-progress tasks dominate the inventory.

2. Tech Mahindra Limited:

   • Similarly to HCL, 100% of Tech Mahindra’s inventory falls under "Finished Goods & Merchandise" (green). This may reflect that Tech Mahindra deals largely in completed services and software products.

3. Tata Consultancy Services (TCS):

   • A majority of TCS’s inventory (82.14%) is categorized under "Raw Materials, Consumables & Supplies" (blue), and 17.86% is in "Finished Goods & Merchandise" (green). This indicates a balanced approach where the company holds significant stock in both materials and completed services, potentially due to the diversity of its business offerings.

4. Wipro Limited:

   • Wipro has 97.47% of its inventory in "Finished Goods & Merchandise" (green) and a small fraction (2.53%) in "Raw Materials, Consumables & Supplies" (blue). This shows that Wipro mostly maintains finished products, with very little held as raw materials.

5. Software & Services (India):

   • This category shows a diverse inventory mix:
     • 53.57% in "Other Inventories" (orange),
     • 33.56% in "Finished Goods & Merchandise" (green),
     • 10.23% in "Raw Materials, Consumables & Supplies" (blue),
     • 2.64% in "Work in Process" (red).

   This spread suggests that the Software & Services sector in India holds a broad variety of inventories, with significant emphasis on "Other Inventories" and finished goods, possibly indicating different business models and service offerings.

Conclusion:

Service-based companies like HCL and Tech Mahindra focus entirely on in-process or finished services, while companies like TCS and Wipro exhibit more diversity in their inventory composition. TCS holds significant raw materials alongside finished goods, potentially because of its broader operational scope.

• Inventory / Total Assets (0%, Percentile Rank 0.2):

  • TCS operates with virtually no inventory as a proportion of total assets, which is typical for a consultancy firm.
  • The percentile rank of 0.2 signifies that this is nearly the lowest among comparable firms, reinforcing a highly service-driven model with minimal asset dependency on physical goods or stock.

• Inventory Days (0.085 days, Percentile Rank 0.1):

  • The near-zero value indicates that any inventory (if present) is turned over rapidly, consistent with a non-product-based industry where holding inventory is not essential.
  • A very low percentile rank (0.1) suggests this is uncommon even among peers, meaning that most firms in the benchmark may hold inventory for longer periods.

• Inventory Turnover (4277.107, Percentile Rank 0.9):

  • An exceptionally high turnover rate reflects extreme efficiency in the usage or sale of any minimal inventory.
  • Ranking in the 90th percentile means TCS outperforms nearly all other firms in inventory efficiency, indicating superior operational processes related to managing resources without holding physical stock.

• Efficiency Conclusion:

  • TCS’s inventory metrics reflect an ultra-lean operational model. High turnover coupled with minimal inventory days implies the firm optimizes resource use and minimizes any form of waste related to inventory.