Press "Enter" to skip to content

Wipro IT services revenue up 1.1%, meets expectations

BENGALURU: Wipro reported in-line revenue growth in the second quarter, helped by its consumer and manufacturing verticals, even as the Bengaluru-based IT services provider’s third-quarter growth forecast beat market expectations.

Wipro reported IT services revenue of $2.04 billion, up 1.1% sequentially, after stripping out currency volatility. It had forecast revenue growth of 0-2% in the quarter.

In rupee terms, revenue grew 4% to Rs 15,130 crore, while profit grew 35.1% to Rs 2,550 crore over the corresponding period. Its growth has been the slowest compared to larger rivals Tata Consultancy Services, which grew 1.6%, and Infosys, which pulled in 3.3%, aided by its acquisition of Stater from ABN Amro.

Wipro, one of the top five software services companies, however, forecast third quarter revenue to grow 0.8-2.8% in constant currency terms, beating analyst expectations.

“There has been a softness in banking and capital markets in Europe. Our Q2 order book was strong as we have got certain deals in the first quarter which were deferred. And the Q3 guidance reflects the execution of those deals,” CEO Abidali Neemuchwala said at a post-earnings press conference.

Commentary from TCS and Infosys, which reported their second quarter results last week, have made analysts cautious about Indian IT’s growth prospects in the second-half of the fiscal year.

Banking and financial services, Indian IT’s largest customer segment, has been a weak spot for most companies. Wipro saw revenue from its top clients reduce by 13% after the bank cut its discretionary spending, with BFSI revenue contracting 0.9% in the quarter. Top 10 clients grew by 7.4% against double digits in the last few quarters. The economic uncertainty due to the US-China trade war and a delay in Britain’s final decision to exit Europe have been weighing on Wipro’s customers.

“The environment is very uncertain. Let’s go quarter by quarter. I can tell you that I see Q3 to be better than the second quarter,” Neemuchwala told ET. “Our clients remain careful about the macroeconomic uncertainty.” Analysts say the company beat expectations in margins.

“Wipro reported broadly in-line constant CC growth, while EBIT remained marginally ahead of our estimates despite wage revision. Q3 revenue growth guidance is above our expectations, includes revenue from inorganic initiatives i.e Vara Infotech and ITI acquisition,” Sanjeev Hota, head of research at Sharekhan by BNP Paribas, said.

“On an organic basis, we believe the growth guidance would be slightly better than our expectations,” Hota added.

Wipro’s IT services operating margin stood at 18.1% despite wage hikes and a reduction in sales and marketing costs. Its tax rate for the second quarter stood at 18.2%, one of the lowest for a large IT services firm. The company said it had hired over 9,000 people in the first six months of the year. The firm also plans to offer 5,000 promotions in the quarter to December, in an attempt to retain digital talent. Attrition reduced to 16% in the second quarter from 17.9% in the quarter to June.

Wipro stock closed 0.1% up on the Bombay Stock Exchange on Tuesday, in a broader market that closed 0.8% higher.

Source: Economic Times