Wipro disappoints with negative to flat revenue guidance for Q1

Wipro, the country’s third largest IT services exporter, has reported a consolidated net profit of ₹2,267 crore during the fourth quarter, an increase of 7.5 per cent on sequential basis and grew 1 per cent on year-on-year basis.

The company also reported better than expected revenues for the fourth quarter (January – March) FY2017 on the back of sequential growth in BFSI, recovery in energy & utilities and growing demand for digital services.

However, the company’s negative 2 per cent to flat dollar revenue guidance of $1.915 billion to $1.955 billion for Q1 of FY18 missed the estimates.

Wipro announced the issue of bonus shares in the ratio of 1:1 and said it will consider a proposal for buyback of equity shares around July 2017. The move comes as larger peers such as TCS and Infosys have already announced mega share buybacks to rich returns to shareholders. The company also reappointed Azim Premji as its chairman for two years.

The company delivered revenue of $1.95 billion, an increase of 2.7 per cent sequentially with a 1.7 per cent QoQ growth in constant currency, towards the upper end of the guidance range of 1-2 per cent.

For the full FY17, the company delivered 7 per cent revenue growth in constant currency terms and 4.9 per cent in USD terms. In rupee terms, revenues grew by 2.6 per cent QoQ to ₹13,987 crore.

“We delivered revenues within the guidance range in Q4 and are confident that the recovery in Energy & Utilities and our demonstrated strength in digital will help us improve our growth trajectory during the course of the current financial year,” said Abidali Z Neemuchwala, CEO.

On the disappointing Q1FY 2018 guidance, he said, Q1 is not a reflection of the growth potential for the rest of the year. “We expect growth momentum to return in Q2 and be at industry growth rate by Q4 of FY18. This confidence stems from expectation of our HPS acquisition to handle Obamacare to clinch new contracts, India business recovering, BFSI accelerating and Energy & Utilities picking up.”

An analyst with HDFC said overall organic growth engine for Wipro remains challenged and recovery is taking longer than expected. “However, Wipro has been aggressive in acquiring companies with digital capabilities but it’s not enough to backfill the loss from legacy.”

While Nasscom has pegged the growth rate of the IT services industry at 8-10 per cent for FY 2017, it is yet to announce growth rates for FY 2018.

In FY 2017, Digital contributed to 22.1 per cent of revenues in Q4 compared to 17.5 per cent in Q1. Consulting grew from 4.9 per cent in Q1 to 5.6 per cent of IT revenues in Q4.

Neemuchwala said client mining and investments in IP in the form of products, platforms, frameworks and solutions are a key part of Wipro’s strategy. The number of customers in over 75mn, 50mn, 20 mn buckets increased by one each, with list top 10 client bucket growing 2.9 per cent in Q4, above company average.

The company ended the year with a headcount of 1,65,481 with a net addition of 1305 employees in Q4. Gross utilization increased 150 basis points to 73.1 per cent and attrition reduced to 14.8 per cent in Q4 down from 15.4 in Q3.

On the company laying off 600 employees Saurabh Govil, President and Chief HRO at Wipro Global HR said, its part of the annual performance appraisal and business as usual.

On the impact of rupee appreciation to the dollar over the last three months to margins, Dalal, CFO, Wipro said it had no impact on the flat 18.3 per cent margin for Q4 but going forward it would have an increment over the next four quarters.