Wipro delivers on weak expectations

K. Venkatasubramanian | Updated on March 12, 2018

Lags peers on volumes, utilisation

Wipro delivered results that were in line with the lower end of its guidance in the December quarter.

Steady addition of large customers, balanced growth across most verticals and a revival in the growth of the key ‘Americas' region were key positives. Realisations too were higher.

But lower volume (person months billed) growth compared to peers may be a cause for concern.

During the quarter, Wipro's (IT services) revenues rose 11.4 per cent sequentially to Rs 7,608 crore, while the earnings before interest and taxes increased 16 per cent to Rs 1,583 crore. In dollar terms the revenue growth was 2.2 per cent, which is in line with what HCL Technologies and TCS delivered but lower than what Infosys reported.

Balanced growth

The volume growth, at 1.8 per cent, was the lowest among peers, raising fears of another bout of underperformance from the company. But a revenue growth guidance of 1-3 per cent had the markets cheering the stock as it was an outlook better than what Infosys portrayed for itself.

Wipro managed to add one client in the $100-million category and one each in the $50-million and $75-million buckets, giving it a reasonable pipeline of deals.

The company's top customer and top five clients grew at 7.8 per cent and 4.1 per cent respectively, which was better than that for peers such as Infosys and TCS, suggesting robust client-mining capabilities.

Most of the verticals such as BFSI, manufacturing, retail and healthcare grew faster than the company, at 2.5-4.2 per cent sequentially.

After a lull, revenues from Americas grew 3.8 per cent sequentially. Europe though had a muted quarter.

These numbers indicate balanced growth for Wipro across segments. But lower volumes along with a low utilisation level of 67.1 per cent may be a cause for concern. The company has attributed lower utilisation to increased campus hiring over the past couple of quarters.

Stakeholders would be keenly watching Wipro if it has truly embarked on a sound growth path or if there would be a fresh bout of underperformance.

The stock was up 2.4 per cent and closed at Rs 413.7 on the BSE in Fridays' trade.

Published on January 20, 2012

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