After strong performance by larger rivals Infosys and Tata Consultancy Services, expectations are running high on Wipro, India’s third largest IT services company which is gearing up to transform itself as a new age technology services player. Despite its relatively more dependence on some of the troubled segments like energy vertical, Wipro is expected to deliver decent financial numbers in its fourth quarter ended March 31 and FY16, though there may not be too much fireworks like the larger rivals.
Here are the five things to watch out for today when the company announces its financial numbers today.
1) Success of strategy:
Earlier this month, CEO Abidali Neemuchwala completed one year in the company though he took over the helm as the CEO from February this year. Ever since he joined, the company has introduced number of initiatives to improve its performance, to which he was also expected to be party to. Given that, the March quarter would also show how many of those changes have actually helped the company in improving its efficiency in terms of financial numbers.
Even though Wipro does not give full year revenue guidance like Infosys, the company’s revenue guidance for June quarter would indicate its optimism for coming quarters and full year. Given that the volatility still exists in some of the sectors like energy, financial services and insurance and healthcare, the company’s guidance range for June quarter is expected to be wide.
3) Deal pipeline:
One of the of the first things Neemuchwala has done after taking charge, is to set an aspirational target to cross $15 billion in revenues in four years with operating margin of 23 per cent. While order booking by Infosys has been steady past couple of quarters and it has indicated to strive to sign contracts with total contract value (TCV) of $1 billion every year, it is worth seeing how Wipro is faring in order booking. Company’s commentary on large deal wins and ramp ups would be watched out for.
4) Margin outlook:
For large Indian players so far, March has been a mix quarter in terms of operating margin. While Infosys, supported by a favourable currency, lower spending in sub-contracting staff and improved utilization has helped in showing a 60 basis points in operating margin, TCS has shown a decline. Wipro is one of the few companies which have been pushing increasing use of automation tools and technologies for productivity improvement. However, it’s worth seeing how it fares in this segment after accounting into the integration of the some of the newly acquired companies with itself which have typically lower margin profile.
Q4 was the period when Infosys saw one of the lowest (net) addition in employee numbers while TCS has also indicated that it is expecting its hiring to come down in FY17 due to automation. Wipro is expected to give a similar hiring outlook for FY17 as well.