Wipro’s third quarter result wasn’t much to write home about.
Dollar revenue grew a modest 0.3 per cent sequentially, versus, Infosys’ 0.6 per cent growth in the December quarter. The US market saw a 0.3 per cent increase in revenue in constant currency terms. India and West Asia business (that accounts for 11 per cent of revenues) recorded 5.4 per cent sequential growth.
Healthcare and life sciences that recorded a 6 per cent sequential growth and retail that grew at 4.6 per cent (in constant currency) were the main drivers in the last quarter. Finance solutions that account for 26 per cent of revenues, recorded a 0.7 per cent decline in revenue. The manufacturing business also faced slowdown.
Employee utilisation levels dropped sharply to 66.4 per cent from 69.5 per cent in the September quarter and 71.3 per cent in the June quarter.
The company added 39 new clients, lower relative to both the September 2015 quarter and December 2014 quarter.
Waiting for the turnaround
For more than four years now, the market is waiting for a turnaround in Wipro.
A lacklustre growth in top-line, lower than expected contribution to revenues from the acquisitions in IMS and energy space, poor growth in earnings vis-à-vis peers with lower utilisation levels and the frequent management churn, have been weighing on market sentiments.
Increased exposure to India and the West Asian market (11 per cent vs. 9.6 per cent last year) compared to peers has also been weighing on profitability as these are high cost-low margin businesses. However, the company has painted a better picture for the March 2016 quarter.
The recent acquisitions - Cellent (a European IT consulting company that could help Wipro cross-sell its services in Germany, Austria and Switzerland) and Viteos (a US based company with good capabilities in BPaaS), should aid the acquisition of new deals. But, how the company is going to address its poor client mining capabilities have also to be seen.
Revenues from top five clients have been falling constantly. In the recent December quarter, revenue from top five clients was at 11.5 per cent, lower than 12.7 per cent in December 2014 and 14.2 per cent in December 2013 quarter. The company has to broad-base its verticals and decrease its dependence on financials and energy.