Wipro, the country’s third-largest IT services company, is likely to achieve moderate growth for the July-September quarter (Q2) with revenue numbers remaining in line with its guidance.
The Bengaluru-headquartered company will announce its Q2 results
Wipro’s IT services revenue growth should largely remain within the band of 0.5-1.5 per cent in constant currency terms, said analysts. Four brokerage firms — ICICI Securities, Prabhudas Lilladher, Edelweiss, IDBI Capital — have forecast that the company’s growth in constant currency terms will vary between 0.5 to 1.5 per cent, while it might see a tad better numbers in US dollar terms due to cross-currency benefits.
The IT major had guided -0.5 per cent to 1.5 per cent growth in US dollar revenues for Q2.
would be second-biggest IT numbers for the July-September quarter after Tata Consultancy Services posted a little more than four per cent growth in top line for the period. TCS net profit dropped by 2.16 per cent to Rs 6,446 crore on revenues of Rs 30,541 crore, which grew 4.3 per cent over the year-ago period.
Wipro’s cross-town rival Infosys would announce results
on October 24.
Equity analysts expect better clarity on health care legislation in the US would be the determining factor for Wipro’s IT services growth this fiscal year. US President Donald Trump
signed an executive order last week to cut subsidies to insurance companies
for providing health care benefits for millions of low-income people. Wipro
earlier said that lack of clarity in Obamacare
or the Affordable Care Act legislation by the new government impacted overall health care services and business of HealthPlan Services.
Analysts will keenly watch Wipro
management’s commentary on narrowing the growth gap with peers’ expectations for the quarter ahead.
There would be five key points to watch out for.
Margin growth and impact of wage hike
Wipro’s operating margin is expected to have a slight impact on the back of full wage hike as increments were announced effective June, said two analysts. Two other analysts, however, said margin was expected to improve as wage hike pressure would have been offset by operational efficiencies and cross-currency benefit.
Narrowing growth gap
has largely posted average growth number for the past few quarters compared with peers and full impact of a key acquisition last year is yet to be seen.
Prospects/uncertainty from health care
One should watch the company’s expectations and commentary from the health care services business and prospects for HealthPlan Services, which was acquired last year.
Full impact of Appirio
Prabhudas Lilladher said Wipro’s US dollar would have a positive growth this year driven by Appirio’s full impact and the company’s commentary on this would be important. Appirio is expected improve Wipro’s cloud-based service delivery.
Client addition and digital growth
The company had a cautious forecast despite achieving good numbers during the first quarter. Therefore, the client metric in Q2 would be a determining factor to understand its opportunities for the whole financial year. Wipro
has been aggressive in acquiring firms to add digital skills unlike many Indian peers.