Wipro’s weak revenue growth and tepid client addition in the June quarter has disappointed investors, who have been betting on a turnaround for over a year. It reported a lacklustre performance in the June quarter.
The sequential revenue growth of 2 per cent in constant currency terms was nothing to write home about, given that the quarterly revenues include those from its recent acquisition of HealthPlan Services.
The total number of new clients added in the quarter was 50, down from 119 in the March quarter. There were no new client additions in the $100 million plus bucket.
Revenue from large client accounts continued to drop. The top 10 clients made up 17.6 per cent of revenue, down from 18.2 per cent in the previous quarter and 20.1 per cent in the same quarter last year.
Among verticals, the manufacturing and technology segment that constitutes a fourth of revenues saw a drop of 0.9 per cent in revenue. The energy and utilities segment that contributes about 13 per cent of revenue saw a decline of 4 per cent in revenues. Only healthcare and life sciences vertical did well with a 17.7 per cent sequential growth in revenue, thanks to Wipro’s latest acquisition.
The attrition rate was disappointing. It increased to 17.9 per cent, from 14.9 per cent in the March quarter and 16.4 per cent in the same quarter last year.
Cut in discretionary spends by clients in the energy and utilities space and problems in other verticals including consumer business and manufacturing are weighing on revenue growth. Despite efforts of CEO Abidali Neemuchwala to mine top clients, revenues from large existing businesses are continuing to decline. Further, the company has guided for a sequential revenue growth of just 0-1 per cent for the July-September quarter. While digital revenue is now 17.9 per cent of overall revenue, the company has not been able to counter the loss from lower revenues in the traditional services due to slowing spends by clients.
Wipro is taking lot of efforts to bring back growth, but, it will yield results only over the long run. Its endeavour to focus on non-linear revenues, saw it add 43 new IPs in the quarter.
Drop in marginsThe operating margins dropped by a sharp 1.9 percentage points to 17.8 per cent in the June quarter. The company attributed this to wage hikes, cost of new investments and some restructuring activity in the Middle East business. With a margin drop (despite improvement in utilisation) that is sharper than what Infosys (1.4 percentage points sequentially) and TCS (1 percentage point) saw in the June quarter, worries are that the company is facing pricing pressure.