News Analysis

Q2 earnings: Wipro holds its ground in difficult times

BL Research Bureau Vivek Ananth | Updated on October 15, 2019 Published on October 15, 2019
Wipro

 

Wipro managed to grow its revenues and meet its quarterly guidance thanks to its US business that helped mitigate the deceleration in Europe and other regions.

Wipro, the third among India’s top tier IT services companies, posted a 6.6 per cent rise in consolidated net profit to Rs 2,561 crore compared to the June quarter despite a hike in salaries during the quarter. The company’s IT services earnings before interest and tax (EBIT) margins came in at 18.1 per cent (down 30 bps) during the quarter ended September.

In dollar terms, the company posted revenues of $ 2.05 billion, rising 0.5 per cent QoQ. This is despite slowing growth in revenues from Europe. Wipro’s dollar revenues were within its guidance for the quarter ($2.04 billion – $2.08 billion). In constant currency terms though, revenues grew 1 per cent sequentially. The management guided revenues for October-December quarter in the range of $2.07 billion – $2.11 billion, which builds in sequential growth in the range of 0.8 - 2.8 per cent.

Slowing attrition

The company has managed to arrest the rise in attrition, which is down to 16 per cent in annualized terms during the quarter. This would help it arrest any spike in sub-contracting costs, which have been flat for three consecutive quarters. It added net 6,603 employees during the quarter.

Segmental performance

Revenues grew 2.8 per cent QoQ to Rs 15,126 crore helped by manufacturing, technology, consumer and energy natural resources & utilities business units. Revenue from the company’s mainstay--banking, financial services and insurance--business unit fell nearly 1 per cent during the quarter. This business unit makes up for nearly one-third of Wipro’s consolidated revenues.

Revenue from communications segment fell 2.6 per cent compared to the September quarter while the health segment fell 0.7 per cent sequentially.

The management indicated that some large projects did not come on stream, which crimped revenue growth during the quarter a little bit. It has been a decent pipeline of projects and has signed a large seven-year deal with ICICI Bank during the quarter worth $300 million.

Geographical performance

Growth in Europe seems to have been stymied by the larger macro-economic weakness in the continent. Revenues from European clients fell 4 per cent sequentially during the quarter. Growth in US revenues helped the company make up for negative revenue growth in Europe. Revenues from US rose 2 per cent sequentially. Revenues from other geographies, which includes emerging markets, saw a deceleration of nearly 31 per cent.

 

This is a free report from Portfolio. Click here to subscribe for more insightful and analytical reports like this.

Published on October 15, 2019
This article is closed for comments.
Please Email the Editor