Wipro's Q2 profit slips 9.2% amid high employee costs; revenue up 14.6%

Missing estimates, IT services major Wipro witnessed a 9.2 per cent decline in its net profit for the second quarter of FY23 on a year-on-year basis. The company gave a revenue growth guidance of 0.2-2 per cent for the third quarter, much lower than what the Street expected and also less than the Q1 guidance of 3-5 per cent.

It reported net profit at Rs 2,659 crore in the July-September quarter, against Rs 2,930.7 crore a year ago. Earnings were partly weighed down by rising staff expenses.

The revenue for the quarter came in at Rs 22,539.7 crore, up 14.6 per cent on a YoY basis; sequentially, the figure was up 4.69 per cent. In dollar terms, revenue grew 4.1 per cent sequentially.

Wipro’s Q2 performance was slightly below Bloomberg estimates, which suggested revenue at Rs 22,615 crore and net profit at Rs 2,844 crore.

Notwithstanding the less-than-expected results, Thierry Delaporte, CEO and managing director, said: “Our strong performance in the quarter is further proof that our strategy is yielding the intended results. There is certainly a level of uncertainty and we are being cautious and also acknowledge the fact that the market has changed from what it was a year back.”

He said the deal pipeline is one of the strongest for the company and it has signed 11 large deals with a total contract value of $725 million.

The margin for the quarter came in at 15.1 per cent, an increase of 16 basis point sequentially. Jatin Dalal, CFO, said: “We achieved a margin of 15.1 per cent in Q2 after absorbing the impact of salary increases and promotions. Our margin improvement was led by better price realisations and strong operational improvements in automation-led productivity. Our operating cash flows were robust and at 181 per cent of our net income for the year.”

The company said that it continues to invest in and upskill talent to stay ahead of clients’ evolving needs. “In the second quarter, we promoted more than 10,000 colleagues and increased salaries across bands. We are pleased to report that we recorded a third consecutive quarter of moderation in attrition,” said Delaporte.

Attrition for the quarter came in at 23 per cent, down from 23.3 per cent in Q1FY23. For the first half of the year, the company onboarded 14,000 freshers, which it claimed was 72 per cent higher than what the company did last year. The company also said that it rolled out quarterly promotions and salary increases effective September.

On the demand environment, the management remained confident. “We expect continued strong demand for a comprehensive portfolio of services. We know that technology -- in good times and in bad -- has become the underlying success factor for any business regardless of what the problem is. Increasingly, technology is the solution and I believe we're better positioned than ever before to help our clients tap the power of technology, whether that's to drive gross transformation, or manage cost or build a sustainable future,” added Delaporte.

The company reiterated its stand on moonlighting, and said it is an ethical issue. “We expect our employees to not only dedicate time for Wipro but also keep time for themselves and families. We are perfectly fine with someone having a little side job here and there. But if you're working for a company that is in our environment, it's not a legal question but of ethic. We don't believe that it's right to have two jobs having a conflict of interest,” it said.