Q1 COMMENT. Wipro meets expectations; lags peers

Wipro’s revenue growth from its IT services fell within its guidance of a negative 0.5 per cent to 1 per cent sequential growth in dollar terms.

The company’s revenues grew 1.1 per cent, way ahead of the market’s expectation of 0.5 per cent.

While this is a positive, its performance has, however, lagged peers. TCS and Infosys recorded a revenue growth of 3.5 per cent and 4.5 per cent respectively in the June quarter.

After sporting a decent show in the previous quarter in relation to some of its peers, Wipro’s June quarter performance is disappointing.

Healthcare and life sciences, a strong vertical for the company, witnessed a tepid performance during the June quarter. Revenues fell by a sharp 3.2 per cent sequentially. The energy and utilities segment continued to show a dismal performance, reporting a decline of 1.1 per cent in revenues.

However, growth in the retail and manufacturing verticals was healthy.

The retail and consumer goods segment showed a revenue growth of five per cent (against 1.4 per cent in the March quarter) while the manufacturing segment posted a 2.6 per cent growth (against negative 1 per cent).

Revenues from emerging markets and India, that had seen a strong traction in the last four quarters, skid to a modest 0.5 per cent growth in the June quarter.

While revenues from Europe showed a marginal uptick for both Infosys and TCS, Wipro’s revenues from the region continued to slip.

Margins fell by 1 percentage point to 21 per cent during the quarter on wage hikes.

The company added 36 new customers during the quarter-two additions in the $75-million-plus bucket, but none in the $100-million-plus bucket.

In contrast, Infosys added one client in the $300-million-plus and two clients in the $200-million-plus category in the June quarter.

TCS also added one client in the $100-million-plus bucket. Wipro’s utilisation rate improved marginally to 71.3 per cent (from 70.5 per cent in the March quarter). Attrition rate remained almost stable at 16.4 per cent.

While the June quarter numbers were tepid, Wipro’s guidance for the September quarter is heartening.

The management has guided for a dollar revenue growth of 1.5 per cent to 3.5 per cent sequentially.