Wipro hits 52-week low amid revenue growth worries; down 38% in one year

The growth could be a challenge in Q1FY24, too, not just because of the cautious customer behavior but also due to the added issue of productivity concessions kicking in, says Nirmal Bang in a note.

Shares of Wipro hit a 52-week low of Rs 370.10, down 1.5 per cent on the BSE in Thursday’s intra-day trade amid concerns of weak revenue growth in the current quarter, January-March (Q4FY23). The stock of information technology company fell below its previous low of Rs 372.40, touched on October 17, 2022.

In past one year, Wipro’s stock price has declined 38 per cent, as compared to 1.4 per cent fall in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 616 on March 21, 2022. It hit a record high of Rs 740 on October 14, 2021.

Wipro’s October-December quarter (Q3FY23) quarter-on-quarter (QoQ) constant currency (CC) IT Services revenue growth at 0.6 per cent was lower than our estimate of 1 per cent. Margin expansion of 120bps to 16.3 per cent (brokerage estimate 15.2 per cent) came as a positive surprise, analyst at Nirmal Bang Equities had said in its result update.

The company expects full-year revenue from its IT services to grow 11.5-12 per cent in CC terms. Guidance for Q4FY23 revenue growth is flattish to marginally negative in QoQ CC terms while margin is expected to improve QoQ.

Wipro has guided -0.6 per cent to 1% QoQ CC revenue growth in IT services for Q4, below our estimates, factoring in softness in discretionary spending and slower revenue conversion due to prevailing macro uncertainties, analysts at Emkay Global Financial Services had said.

Wipro management says that cut back in discretionary spend and slow ramp-up of deals won are the reasons for slower growth in Q3FY23 and likely slower growth in the near future. It is optimistic about revenue growth improving in the medium term without indicating when it sees it picking up.

Analyst at Nirmal Bang Equities believes that growth could be a challenge in April-June quarter (Q1FY24) too, not just because of the cautious customer behavior but also due to the added issue of productivity concessions kicking in for some large clients (as has been the case normally). “We believe that if customers are behaving in this cautious fashion when the US macro is reasonably resilient, we believe things will only get worse when we see a shallow recession (our base case) sometime in 2023,” the brokerage firm said in result update.

Despite robust order book of $4.3 billion in total contract value or TCV (up 26 per cent YoY), analysts at IDBI Capital believes conversion of TCV wins to revenues will lag due to longer transition in vendor consolidation, macro uncertainty, lower discretionary spend and delay in decision making. This coupled with slowdown in Europe will impact near term growth. Hence, the brokerage firm said it expect FY24E revenue growth to be subdued (6.2 per cent YoY) and then reviving in FY25E (up 8.3 per cent YoY).