Wipro Q4 misses estimates on lower revenue, posts Rs 18 bn net profit

Wipro, India's third-largest IT services company, posted slower revenue growth in 2017-18. The weak revenue growth guidance for the April-June quarter of 2018-19 raised concerns if the company would be able to maintain its growth in this financial year.

The company posted a drop in its net profit with a marginal slide in its revenue growth for the fourth quarter of 2017-18, as slowdown in communication vertical coupled with insolvency of two of its clients dragged its performance.

Missing Street estimates, the firm posted a drop of 20.35 per cent in its net profit to Rs 18 billion against the corresponding period of last year. It posted a 6.69 per cent drop compared with the previous quarter. Gross revenues at Rs 137.7 billion declined 1.57 per cent on a year-on-year basis; sequentially, it was almost flat, with a growth of 0.7 per cent.

Analysts on average expected a profit of Rs 21.32 billion, according to Thomson Reuters.

For the full year, the net income declined 5.7 per cent at Rs 80.1 billion, while the revenue at Rs 544.9 billion declined 1 per cent.

During Q4, margin from IT services dropped by 40 basis points quarter-on-quarter to 14.4 per cent. However, excluding these two factors, the margins stood at 16 per cent.

In FY18, while IT services revenue growth in dollar terms slid to 4.6 per cent as compared with 4.9 per cent it reported in FY17, for Q1 of FY19, the company said it was expecting it to be $2,015-2,065 million. This, however, did not factor the impact from the divestment of its data centre services business to Ensono, which will be done by June 30.

In February 2016, the company bought US-based HealthPlan Services for $460 million. The US firm was majorly servicing public health exchanges under Obama Care, which were scrapped after President Donald Trump assumed charge. This led to a major revenue loss for the unit that, at its peak, was generating $230 million in revenues on an annualised basis. This has come down to $130-140 million, said Chief Financial Officer Jatin Dalal.   

“The two major headwinds that have gone into our guidance are the impact from HPS and the allocations due to the bankruptcies faced by two of our clients, which will be largely reflected in Q1 of FY19,” Chief Executive Officer Abidali Z Neemuchwala said. He expressed a strong optimism for the rest of the quarters of FY19. “The momentum for the next year is definitely good. We just have to absorb the impact of the two surprises that we had in Q1.” 

Among geographies, all business units, except those in India and West Asia, saw negative growth in the March quarter. With rising focus on digital revenue among Indian IT firms, Wipro said that its digital revenue grew 9 per cent sequentially and 27.6 per cent on a year-on-year basis. 

“Digital revenue now constitutes 26.7 per cent of the total revenues. In Q4, we closed our highest bookings till date on digital deals and in the last one year, have won close to 70 deals over $5 million,” Neemuchwala said.