Wipro Q3 profit drops 3.2% to Rs 2,463 crore on low interest income

IT firm Wipro on Tuesday largely met Street’s Q3 FY20 estimates with the firm posting growth in revenues and operating margin. However, net profit at Rs 2,463 crore came below the analysts’ expectations, a decline of 3.2 per cent when compared with the  year-ago quarter. On a quarter-on-quarter basis, net profit declined 2.33 per cent. The firm attributed this to lesser interest income owing to cash outgo as part of its buyback programme.  

During October-December period, consolidated revenues of the company rose 2.7 per cent on a year-on-year (YoY) basis at Rs 15,470 crore. In dollar terms, gross revenues of the company were at $2.2 billion.

In the IT services segment, which accounts for more than 95 per cent of Wipro's gross revenues, the company reported 3.3 per cent rise in revenue at $2.094 billion on YoY basis in constant currency terms. Sequentially (compared with the trailing quarter), the IT services’ revenue growth was 1.8 per cent.

Despite tepid growth in banking, financial services and insurance (BFSI) and technology verticals, deal wins from ICICI Bank along with acquisition of US-based computer design firm ITI supported the top line in the third quarter.

Deal win worth around $300 million from ICICI Bank during the quarter supplemented 0.3 per cent to the overall revenue growth in IT services segment. Wipro's constant currency revenue growth numbers were also higher than its larger peer Infosys, which recorded one per cent rise in sequential basis.

During the fourth quarter, the firm expects its revenue from IT services business to be in the range of $2.095 billion to $2.137 billion. which translates to a sequential growth of 0-2 per cent.

"We have a delivered a good quarter with good growth. Though growth in the BFSI segment remained subdued in Q3 due to higher number of furloughs, we see an uptick in the coming quarter," said Abidali Neemuchwala, CEO & MD at Wipro Ltd. "The overall demand environment has neither  improved nor deteriorated, but we see some level of uncertainty due to various geo-political risks at play."

In the quarter ended December, Wipro's operating margin improved 30 basis points to 18.4 per cent owing to favourable cross currency movement, especially that of rupee. However, margin was 140 basis points lower on year-on-year basis. "We generated strong operating cash flows led by disciplined execution at 124 per cent of our net Income," said Jatin Dalal, Chief Financial Officer at Wipro.

The IT services firm's digital revenues grew 22.8 per cent on YoY basis in Q3 of FY20, constituting close to 40 per cent of total revenues.

Among business verticals, banking, financial services and insurance (BFSI) which accounted 31 per cent revenues, grew one per cent YoY on constant currency basis. Sequentially, the growth was 0.4 per cent. The management however exuded confidence of growth recovery in this segment during the fourth quarter.

Among other verticals, technology declined 1.7 per cent in Q3 owing to higher number of furloughs and decreased spend by semiconductor clients. During the third quarter, consumer business unit grew 12 per cent YoY basis, while healthcare business unit grew 4.2 per cent.

Wipro, which don't provide the total contract value (TCV) of deals signed, said that its pipeline of deals remained robust. "We have added four $100 million plus client in this financial year. Our deal pipeline remains strong," Neemuchwala said.

Wipro added 5,865 employees in the third quarter to take its total employee count to 187,318. Company's voluntary attrition rate dipped by 130 basis points on sequential term to 15.7 per cent during the last quarter.