Financial Performance: Listed vs Unlisted IT Firms

A Comparison of Listed and Unlisted IT Firms' Financial Performance in India

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Published: 06th Mar 2023

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Background of the study

India is dominant in this IT sector, accounting for 55% of the overall market share. India supplied other nations with IT services worth $200 billion in 2017–18. India's GDP (Gross Domestic Product) has been 5.6%, impacted by the IT and IT-enabled services sector, and generated $177 billion in income, of which $136 billion came from exporting services (Malik, 2020).

In contrast, Indian software companies continue to operate under outdated infrastructure and onerous restrictions (Kadivar, 2019). In addition, non-listed software companies at the BSE or NSE stock exchanges receive benefits for raising money abroad via depositary receipts. But because of the rigorous requirements enforced by SEBI (Securities and Exchange Board of India), listed IT businesses in India have difficulties converting shares into depository receipts and vice versa (Burugula, 2019).

Kumara and Abhilasha (2020) opted for five different NSE-listed Indian software companies (Infosys Ltd, Tech Mahindra Ltd, Wipro Ltd, HCL Technologies Ltd, and Tata Consultancy Service Ltd.). Using quantitative research, the authors looked at the lack of a significant correlation between financial and operating leverage (Kumara, M. & Abhilasha, 2020). Economic reforms and changes in policy resulting from globalization, liberalism, or privatization have significantly impacted India's economy.

Aim and Objectives

The research study's goal is to evaluate the financial standing of the Indian information technology sector. It demonstrates the connections and differences between the Indian and global IT markets.

The following are the research's goals:

To examine the impact of business size on financial performance as shown by a company's return on equity (ROE) and return on assets (ROA).

To research how asset usage affects public and unlisted IT and ITes firms' financial performance.

To research how to leverage tactics that affect public and unlisted IT and ITes firms' financial performance.

To investigate how liquidity positions affect listed and unlisted IT and ITes firms' financial performance.

To research and evaluate the Indian IT industry's risk-return analysis compared to other Indian businesses.

Research Methodology

The methodology of quantitative research is used in this study. To examine the effects of financial factors like CFM (Cash Flow Measure), ROA (Return on Asset), ROCE (Return on Capital Employed), and RONW (Return on Net Worth) on the profitability of the IT firm, 40 large and medium-sized Indian listed and non-listed IT enterprises were chosen. Based on regression analysis, correlation analysis, and unit root test analysis, this quantitative methodology. The economic success of this industry is assessed in this article using several factors. These parameters include shareholders' value, accounting profitability, capital ratio, profitability ratio, financial leverage, and risk assessment for those chosen organizations. Secondary data are considered in this study. The secondary data are from those companies' annual reports for the last seven years, from 2015 to 2021.

In India, there are more than 40,000 IT companies; however, this study focuses only on 40 of them. Also not examined in this study are financial variables like growth rate, firm size, financial leverage, etc. Only businesses having an average market value of more than 500 crores between 2015 and 2021 are considered when choosing the sample data. The findings of this study will significantly help Indian IT companies improve their financial analysis and decision-making, ultimately improving their financial performance.