IT major Wipro beat market estimates to record a 6.9 per cent increase in net profit during the second quarter on a sequential basis to ₹2,550 crore aided by an increase in revenue growth, lower taxes and higher other income.
Wipro’s IT services business grew at a mere 0.5 per cent to $2.04 billion on a sequential basis. The company’s net profit on a year-on-year (YoY) shot up by 35 per cent largely because of a one-time impact of a specific expense during the Q2 of the previous year because of which the operating margin was at 15 per cent. On a quarter on quarter (QoQ) basis, revenues grew 2.3 per cent to ₹15,130 crore while on a YoY, it grew 4 per cent. IT services’ operating margin for the quarter grew 3.1 per cent YoY to 18.1 per cent.
The revenue guidance for December quarter was at $2.06 billion - $2.1 billion, which translates to a sequential growth of 0.8-2.8 per cent on a constant currency basis, beating analyst expectations. “We had good in-quarter execution on both revenues and margins considering the slow start to the fiscal,” said Abidali Z Neemuchwala, the CEO and MD of the company. He said the operating margin of 18.1 per cent in Q2 compared with 18.4 per cent during the previous quarter was due to the absorption of the incremental impact of wage hike for two months and investing in bench for growth.
The top executive at Wipro said that in digital, revenues grow 7 per cent QoQ on a constant currency and 29 per cent YoY and now contributes 39.6 per cent of its revenues.
US market grew at 9.4 per cent YoY in constant currency while Europe is weak because of the capital market and banking sector. “We continue to see a robust pipeline and the momentum of the order book in Q2 has been better than Q1. India and the Middle East restructuring is on track and is reflected in some of the deals that we announced like ICICI,” said Neemuchwala.
He said that the overall growth was broad-based with 6 out of 7 industry verticals growing on a YoY basis. The company signed a large deal in India aligned to its strategy of taking global offerings to India customers.
Slowing attrition
The company’s voluntary quarterly annualised attrition rate dropped from 17.9 per cent to 16 per cent. “We continue to drive localisation in the US where our local workforce is 67.8 per cent of the total US employee strength.”
Jatin Dalal, Chief Financial Officer, said: “We delivered operating margins in a tight range after absorbing the impact of two months of the wage hike. Growth remains our priority,” he said.
EPS for the quarter was ₹4.3 per share and grew 36.7 per cent YoY. Wipro’s shares ended the day nearly flat at ₹243.70 on the BSE.