 "Wipro")
Bengaluru-based Information Technology (IT) services major Wipro posted a net profit of Rs 2,870 crore in the first quarter ended June, up nearly 12 per cent from a year ago but down 6.6 per cent quarter-on-quarter (QoQ), and below the consensus Bloomberg estimates of Rs 2,989 crore.
Revenues for the quarter grew 6 per cent from the year-ago period to Rs 22,831 crore, slightly below the consensus Bloomberg estimates of Rs 22,992 crore.
On a sequential basis, revenues declined 1.5 per cent because key verticals like banking, financial services and insurance (BFSI) and technology witnessed softer discretionary spend.
Wipro, which guides for the quarter ahead, expects sequential revenue growth of minus 2.0 per cent to 1.0 per cent in constant currency terms for the second quarter ended September because deal ramp-ups and client decision making are slowing. Margins for the second quarter are likely to be in a similar range as in the last few quarters, the management said during the media briefing.
IT services revenues in dollar terms grew 1.1 per cent YoY but declined 2.8 per cent sequentially in constant currency terms to $2.78 billion on the back of large deal wins of over $1.2 billion in total contract value (TCV). This was the highest bookings in eight quarters.
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“Wipro’s first-quarter results come with a strong backbone of large deal bookings, robust client additions, and resilient margins,” said Thierry Delaporte, chief executive officer and managing director.
“Despite a gradual reduction in clients’ discretionary spending, we maintained new business momentum. We earned our clients’ trust with strong delivery, innovation, and expanded services that strengthen our long-term businesses, and help capture market share.”
The operating margin expanded to 16 per cent in the first quarter from 14.9 per cent a year ago but marginally declined on a sequential basis from 16.3 per cent in the preceding three months. “Our ongoing focus on operational improvement has ensured that margin remains steady even in a softening revenue environment,” said Jatin Dalal, chief financial officer, Wipro.
The voluntary attrition rate on the last 12-month basis for the June quarter reduced to 17.3 per cent from 19.2 per cent in the March quarter, indicating that it is gradually coming down. As part of his efforts to turn around the company, Delaporte has been executing a five-point strategy he laid out soon after joining the company. The strategy involves accelerating growth through prioritising sectors and markets, strengthening relations with strategic clients and partners, enhancing the company’s portfolio of business solutions, building talent at scale, and simplifying the operating model.
“Declining attrition and robust growth in deal bookings augur well for Wipro but current macro headwinds and degrowth in revenue is cause for worry. We expect the management to work further on improving operational efficiencies against the backdrop of near-term uncertainties,” said Dhruv Mudaraddi, Research Analyst, Stoxbox. Effective January 2021, Wipro reorganised its IT services segment into four strategic market units. On an annual basis, Americas 1 grew 1.5 per cent while Americas 2 declined 2.7 per cent YoY in constant currency terms. Europe grew 4.1 per cent and the Asia Pacific Middle East Africa (APMEA) region grew 3.1 per cent YoY in constant currency terms. Americas 1 and Americas 2 are primarily organised by the industry sector, while Europe and APMEA are organised by countries.
Wipro announced its earnings after market hours on Thursday. Ahead of its earnings, Wipro shares closed up 0.7 per cent at Rs 394.35 on the BSE.
