Expects muted Sept qtr as deal ramp-ups, client decision-making slow down
Bengaluru, NFAPost: Bengaluru-based Information Technology (IT) services major Wipro posted a net profit of Rs 2,870 crore in the first quarter ended June, up nearly 12 per cent from a year ago but down 6.6% quarter-on-quarter (QoQ), and below the consensus Bloomberg estimates of Rs 2,989 crore.
Revenues for the quarter grew 6 per cent from the year-ago period to Rs 22,831 crore, slightly below the consensus Bloomberg estimates of Rs 22,992 crore.
On a sequential basis, revenues declined 1.5 per cent because key verticals like banking, financial services and insurance (BFSI) and technology witnessed softer discretionary spend.
Wipro, which guides for the quarter ahead, expects sequential revenue growth of minus 2.0% to 1.0% in constant currency terms for the second quarter ended September because deal ramp-ups and client decision making are slowing. Margins for the second quarter are likely to be in a similar range as in the last few quarters, the management said during the media briefing.
IT services revenues in dollar terms grew 1.1 per cent YoY but declined 2.8% sequentially in constant currency terms to $2.78 billion on the back of large deal wins of over $1.2 billion in total contract value (TCV). This was the highest bookings in eight quarters.
Wipro Chief executive Officer and Managing Director Thierry Delaporte said Wipro’s first-quarter results come with a strong backbone of large deal bookings, robust client additions, and resilient margins.
“Despite a gradual reduction in clients’ discretionary spending, we maintained new business momentum. We earned our clients’ trust with strong delivery, innovation, and expanded services that strengthen our long-term businesses, and help capture market share,” said Wipro Chief executive Officer and Managing Director Thierry Delaporte.
The operating margin expanded to 16% in the first quarter from 14.9% a year ago but marginally declined on a sequential basis from 16.3 per cent in the preceding three months. “Our ongoing focus on operational improvement has ensured that margin remains steady even in a softening revenue environment,” said Jatin Dalal, chief financial officer, Wipro.
The voluntary attrition rate on the last 12-month basis for the June quarter reduced to 17.3% from 19.2% in the March quarter, indicating that it is gradually coming down. As part of his efforts to turn around the company, Delaporte has been executing a five-point strategy he laid out soon after joining the company.
The strategy involves accelerating growth through prioritising sectors and markets, strengthening relations with strategic clients and partners, enhancing the company’s portfolio of business solutions, building talent at scale, and simplifying the operating model.
Stoxbox Research Analyst Dhruv Mudaraddi said declining attrition and robust growth in deal bookings augur well for Wipro but current macro headwinds and degrowth in revenue is cause for worry.
“We expect the management to work further on improving operational efficiencies against the backdrop of near-term uncertainties. Effective January 2021, Wipro reorganised its IT services segment into four strategic market units. On an annual basis, Americas 1 grew 1.5% while Americas 2 declined 2.7% YoY in constant currency terms,” said Stoxbox Research Analyst Dhruv Mudaraddi.
He also said Europe grew 4.1% and the Asia Pacific Middle East Africa (APMEA) region grew 3.1% YoY in constant currency terms. “Americas 1 and Americas 2 are primarily organised by the industry sector, while Europe and APMEA are organised by countries,” said Stoxbox Research Analyst Dhruv Mudaraddi.
