While bigger rivals Tata Consultancy Services and Infosys posted strong financial numbers for the last quarter of FY16 and gave a rosy outlook for FY17, the growth of Wipro, India’s third-largest information technology (IT) services firm, was mostly in line with its own expectations but without any fireworks.
For the quarter ended March, Wipro posted dollar revenue (for the IT services business) of $1,882 million, which was within its guidance range of $1,875-1,912 million.
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In the fourth quarter of FY16, the Bengaluru-based company said the operating profit of its flagship IT services rose four per cent to Rs 2,570 crore, while the revenues grew 14 per cent to Rs 12,800 crore, compared to the year-ago period.
However, the gross income (including its product business) declined two per cent to Rs 2,240 crore during the quarter under review, primarily due to higher tax outgo and lower other income. Gross revenues went up 12 per cent, year-on-year (y-o-y), to Rs 13,630 crore. For the full year (FY16), overall net profit at Rs 8,892 crore grew three per cent on a y-o-y basis, while revenues at Rs 51,244 crore grew nine per cent.
This, the firm said, was because of the integration of the acquisitions it made in the past year as the margin profiles of these companies were different.
During the past year, Wipro has made four acquisitions including Florida-based healthcare technology solutions provider HealthPlan Services, which it acquired in February this year for $460 million (Rs 3,144 crore), making it the second largest acquisition in its history so far.
Despite the potential revenue contribution from the acquired entities, Wipro gave a relatively weaker revenue guidance for its IT services business. The company is expecting its IT services revenues to be $1,901-1,939 million for the April-June 2016 quarter, reflecting a growth of one to three per cent.
“Wipro’s revenues matched up with expectations but margins were below our expectations,” said Dipen Shah, senior vice-president and head of private client group research at Kotak Securities, in a note. “The revenue guidance for 1Q (first quarter of FY17) indicates marginal growth on an organic basis, which is disappointing.”
Going forward, the company’s management sounded caution in certain segments such as energy & utility, which is passing through a tough time, as well as banking, financial services and insurance especially in Europe, where at least two of its clients are going through financial turmoil.
Abidali Neemuchwala, CEO of Wipro, exuded confidence on the ability of the company to achieve revenue milestone of $15 billion, with an operating margin of 23 per cent for which it had earlier set an aspirational target. “The core leadership team has laid out the ambition and we have done a tremendous amount of detailing in terms of how to get there. We have also broken down key themes, which we will drive to meet our ambition,” he said during a press conference.
In key business parameters, Wipro had a mixed show with healthcare and life sciences leading with a sequential growth of 13.4 per cent (in reported currency) followed by manufacturing & hitech (4.8 per cent).
The key financial solutions business, which accounts for 16 per cent of the company’s overall revenues, showed a sequential decline of 0.9 per cent, while energy, natural resources & utilities declined 0.6 per cent on a quarter-on-quarter basis. In terms of geographies, the growth was led by Europe, which grew 5.8 per cent sequentially, followed by Americas with 1.7 per cent growth.