Wipro Q3 net profit declines 8% to ₹1,931 crore on higher costs

Our Bureau Bengaluru | Updated on January 19, 2018 Published on January 19, 2018

Abidali Z Neemuchwala (left), CEO, Wipro, and Saurabh Govil, Senior Vice-President and global head, HR, at a press conference in Bengaluru on Friday SOMASHEKAR GRN   -  SomashekarGRN

Abidali Z Neemuchwala, CEO, Wipro (file photo)

Company expects $2.07-billion revenue from IT services in fourth quarter

The country’s third largest IT services company Wipro posted an 8.4 per cent decline in net profit for the third quarter year on year due to higher costs even as it sees certain customer-specific uncertainties in the near future.

Consolidated net profits came in at ₹1,931.3 crore, a decline of 8.4 per cent when compared to ₹2,109.6 crore in the same period last year. On a sequential basis, there was a dip of 11.6 per cent. Revenue from IT services came in at ₹13,669 crore, which was higher by nearly 2 per cent year on year. EBIT was reported at ₹1,959 crore, a decrease of 14 per cent on a year-on-year basis. The EBIT margin was also under pressure as it went down to 14.58 per cent from 17.3 per cent year-on-year. This was due to a provision of ₹317 crore made because of a client going insolvent.

Wipro said it expected revenue from the IT services’ business to be in the range of $2.03-2.07 billion (in constant currency) or 1-3 per cent for the quarter ending March 31, disappointing some analysts who expected a slightly higher range while Urmil Shah, analyst with IDBI Capital, said the guidance is in line with their expectations.

Abidali Z Neemuchwala, CEO and Member of the Board, said: “We continued to improve our growth trajectory driven by strong momentum in BFSI and uptick in healthcare verticals. This is also reflected in our outlook.”

Part of Wipro’s problems were due to higher costs accrued in its business as one of its clients in the energy and utilities vertical filed for bankruptcy. This, CFO Jatin Dalal attributed, was to the tune of ₹317.5 crore. However, he asserted that this is a one-off incident and that energy and utilities vertical is on a rebound.

Wipro announced its results after market hours and its shares closed at ₹328.45, marginally up from previous day’s close.

The company also pointed out that its investments in digital has started to pay off with 25 per cent of its revenues coming from this vertical while the pipeline in digital was also increasing. In the second quarter, Wipro had reported that digital contributed to 24.1 per cent of its revenues. Further, it has trained 90,000 in this area.

Wipro also said that clients in its $50 million bucket increasing from 33 to 41 in the last four quarters, a reflection of the way it has been able to mine clients.

In the third quarter, growth was mainly driven by Europe at 4.7 per cent while India & Middle East grew by 1.4 per cent on a sequential basis. In terms of verticals, the growth was driven by BFSI, which contributed to 4.4 per cent, and healthcare grew by 2.5 per cent. Energy, Natural Resources and Utilities degrew by 6.1 per cent.

Interim dividend

Wipro also doled out an interim dividend of ₹1 per share, in addition to the ₹11,000-crore buyback, which it concluded recently.

Dalal said that Wipro has improved its cash flow by 14.2 per cent in the first three quarters of this fiscal year and has gross cash of ₹28,935 crore on its books.

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Published on January 19, 2018
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