Wipro: Catching on

While negative numbers come through prominently, investors should take note of some positive triggers.

Wipro reported a consolidated revenue of Rs 7,191 crore, implying an annual growth of 3.1 per cent against the sequential 3.2 per cent — lower than its other major peers. Profit after tax increased 9.2 per cent sequentially to Rs 1,325 crore, on the back of a lower than expected tax incidence.

While there is a tendency to have a negative perception about this result, there are other factors that should be taken into consideration, according to analysts. Indeed, the company's guidance of four-six per cent is lower than its peers' double-digit estimates. Its 4.7 per cent sequential volume growth was also lower than Infosys (6.9 per cent) and TCS (8.1 per cent).

Also, while price realisation increased 0.2 per cent sequentially, on-site pricing realisation declined five per cent in the same period. At the same time, offshore pricing realisation declined 1.4 per cent. The company as well as analysts attribute these reductions to a large system integration project, which is in a transition phase.

What has to be noted is that on-site volumes saw a strong growth of around 16 per cent sequentially. In addition, the management mentioned there was supposed to be a change in employee costs and this was expected to positively impact margins by a percentage point in the second quarter of the current financial year. The strong point for Wipro would be its growth in the manufacturing sector, along with the energy & utilities segment, even as the company loses some market share.

Regaining its presence in the healthcare sector could be a trigger.