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Wipro has posted a modest increase in net profit as it faced headwinds from clients hesitant in investing in new technology areas, coupled with restructuring efforts in India and West Asia East businesses, but said it plans to finish the restructuring by the end-June.
The company also issued a muted revenue guidance for the fourth quarter, as it believes it will take more time for the restructuring. The Bengaluru-based IT firm expects fourth quarter IT services dollar revenue in the range of $1,922-1,941 million, a growth of 1-2 per cent over third quarter, far lower than analysts’ expectations. Wipro posted net profit of ₹2,109 crore, for the quarter ended December 31 – a 1 per cent increase on the ₹2,070 crore it posted in the September quarter. However, net profit was down almost 6 per cent on a y-o-y basis.
Revenue downRevenues came in at ₹13,764 crore, almost 9 per cent down from ₹13,896 crore in the September-ended quarter. However, revenues were up almost 6 per cent, or ₹12,951 crore, on a y-o-y basis.
IT services revenue in dollar terms also declined 0.7 per cent quarter-on-quarter to $1,902.8 million but grew by 0.6 per cent in constant currency basis. Revenue was slightly below our expectations, said Sarabjit Kour Nangra, V-P Research (IT), Angel Broking.
The company gave an interim dividend of ₹2 per share.
CEO Abidali Z Neemuchwala issued a cautionary note in two specific areas of its business due to political changes in developed economies – notably Brexit and the US elections. “The healthcare business is going through a transition phase and spending is soft till clarity emerges. Also, the restructuring of India and Middle East business will cause some headwinds,” he said.
The company continued on its acquisition spree and announced that it has acquired Brazil-based InfoSERVER.
In the third quarter, Wipro added one customer in the $100 million bucket and said it sees a better deal pipeline going forward.
Another bright spot was operational efficiency, which resulted in operating margins for IT services business expanding 50 basis points to 18.3 per cent, on account of usage of automation, better off-shoring of business and a higher proportion of fixed price projects.
CFO Jatin Dalal said: “We expanded operating margins by 50 basis points in a seasonally weak quarter and generated strong operating cash flows by disciplined execution.”
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