Wipro delivers, but not enough to unseat peers

Wipro is still playing catch up with its frontline peers, even as it reported numbers that were in line with the market expectations for the September quarter.

The company reported its highest sequential revenue growth in the last six quarters, though it was still way behind what the likes of TCS, Infosys and HCL Technologies achieved.

The key positives for the company during the quarter were growth across all verticals, greater traction with its top clients and a rise in contribution from the US.

During the period, Wipro’s IT services revenues grew 12.7 per cent sequentially to Rs 10,068 crore (2.7 per cent growth in dollar terms), while the earnings before interest and tax(EBIT) was up over 26 per cent to Rs 2,264 crore.

The revenue growth, both in rupee and dollar terms was the lowest among peers. TCS, Infosys and HCL reported 3.5-5.4 per cent sequential revenue growth in dollar terms.

Reasonable performance

All the verticals grew for Wipro, though the largest segments – Finance Solutions and Manufacturing, grew at 2.1-2.3 per cent sequentially, slower than the overall company’s revenue rate. Interestingly, the troubled telecom segment and the healthcare vertical grew at an impressive 4.9-5.5 per cent.

TCS is the only other peer that witnessed a strong growth in its telecom segment.

But on the whole as with peers, multiple segments picking-up gives the indication of IT spends experiencing an upswing once again.

Wipro’s top 10 clients grew at faster than the pace of the overall company, indicating that it is mining its existing clients quite well.

Significant addition of clients was made in the relatively smaller categories of $10 million and $20 million. Its peers fared better as TCS and HCL had additions in the $100-million client size , while Infosys impressed with mid-size deals.

Revenues from the US have grown at a healthy 2.9 per cent, though Europe could not keep pace.

Wipro has given a guidance for revenue growth of 1.7-3.6 per cent for the December quarter, which may impress the markets. To achieve the top end of this guidance in a seasonally weak quarter may be quite challenging for the company though.

But for now, the company has to start delivering consistently even to catch up with Infosys and HCL. Nearing TCS is an altogether different proposition.

Wipro may still fall well short of trade body Nasscom’s projected growth rate for IT the industry of 12-14 per cent for the current fiscal.

Also, the company may be hard-pressed to justify the premium at which it trades over fast growing peer HCL.

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