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Most analysts expect India’s third largest information technology (IT) firm Wipro to post a revenue growth closer to the higher end of its guidance of 2-4% for July-September, 2013, as deal closure seems to have panned out in-line with expectations.
While the depreciation of Rupee is also likely to provide support to Wipro’s July-September earnings, the gains will be lower as against peers due to hedging losses and as full impact of the wage hike given by the company in June 2013 will be felt.
“On average, the Rupee has depreciated by 11-12% quarter on quarter against US dollar. We expect TCS and mid-cap vendors (Mindtree and Infotech) to report 250-300 basis points quarter-on-quarter improvement in margins. Wipro, HCL Technologies and Tech Mahindra should show 50-150 basis points improvement q-o-q despite reinvestments, the impact of wage hikes, and transition cost on large deals,” Morgan Stanley said in a pre-earnings note.
Despite expectations of the company meeting its guidance, analysts believe that it may be too early to say that Wipro’s turnaround strategy has started showing results. Many said that the company will continue to be a laggard among the large-size IT pack.
Observers will remain watchful of the management’s comments on the outlook for coming quarters before firming belief in its turnaround story. Analysts expect Wipro to
share a sequential revenue growth guidance in the 1-4% range for October-December, 2013.
“Recent deal closures may aid strong guidance for the Dec 2013 quarter; our base case is 1.5-3.5% quarter-on-quarter growth guidance from Wipro. Absolute growth acceleration notwithstanding, Wipro will likely lag peers again in 2QFY14,” Kotak Institutional Equities said in a note.
While brokerage firm Morgan Stanley believes that Wipro will guide for a 2-4% revenue growth, ICICI Securities expects the guidance to be 1-3%.
ICICI Securities also expects Wipro to post 40 basis points improvement in margins for July-September, 2013, on the back of rupee depreciation, utilisation improvement, lower visa costs and some productivity benefits.
Investors will keep a close eye on any comments by the management on its recent organisational restructuring that was announced on Thursday, to understand how the company believes this overhaul would help it going forward.
On Thursday, Wipro announced that its global infrastructure business head Anand Sankaran has quit, and the company has done a top level reshuffle by allocating new portfolios to some senior officials.
