Wipro net dips 8%, Q3 forecast disappoints

Information technology services company Wipro cited market uncertainty as it forecast slower growth in the quarter ending December. Infosys, also headquartered in this city, had also cut its expectation (for the second time in three months). Tata Consultancy Services had also muted its expectation.

Wipro chief executive Abidali Neemuchwala said the savings its customers could achieve in their existing IT services were not being reflected in emerging areas such as digital where most clients are spending.

“The current demand for traditional services is driven by a focus on cost-saving on the run side. Investments in the change side have not picked up at the same pace as expected, perhaps due to caution in the context of US elections and Brexit,” he said. “We believe clarity will emerge and we expect an uptick in the change investments.”

Run indicates traditional IT services that Wipro delivers and changes for newer spending on emerging areas such as digital and automation. In the quarter to December, furloughs in the traditional markets of America and Europe, combined with less working days in both  India and developed markets, made Wipro lessen the expectation, said Neemuchwala.

Wipro's September quarter profit fell eight per cent to Rs 2,070 crore; revenue grew  9.1 per cent to Rs 14,407 crore. It had profit of Rs 2,241 crore on sales of Rs 13,198 crore in the same period last year.

The flagship IT services business reported revenue of Rs 13,137 crore, an increase of 0.2 per cent from the earlier quarter. In dollar terms, revenue at $1,916 million dipped 0.8 per cent.

What continues to disappoint is its growth forecast. For the financial year's third quarter, it said revenue would grow in the band of zero to two per cent. It has been growing in a single-digit band for four quarters; peers have done better.

Operating margin remained flat at 17.8 per cent. Jatin Dalal, chief financial officer, said: “We maintained margins in Q2 despite the impact of salary increase for an incremental two months, due to strong operational improvements in automation-led productivity, offshoring and utilisation. As we look forward, the demand environment is mixed in a seasonally weak quarter, affected by furloughs and lower number of working days.”