Wipro’s third quarter result wasn’t much to write home about. The company’s dollar revenue from IT services grew a modest 0.3 per cent sequentially, versus, TCS’ decline of 0.3 per cent.

Healthcare and life sciences that recorded a 6 per cent sequential growth and retail that grew at 4.6 per cent (in constant currency) were the main drivers in the last quarter. Finance solutions that account for 26 per cent of revenues, recorded a 0.7 per cent decline in revenue. The manufacturing business also faced slowdown.

India and West Asia business (that accounts for 9.7 per cent of revenues) recorded 5.4 per cent sequential growth. The US market, however, saw only a 0.3 per cent increase in revenue (in constant currency terms).

Margins were down by 50 basis points to 20.2 per cent. TCS too had reported a 50 basis points dip in margins in the quarter.

Waiting for the turnaround

It looks like Wipro’s investors have to wait longer for a turnaround in the company. Though its dollar revenue in the recent December quarter was within the guidance, client metrics are still weak. Revenues from top five clients have been falling constantly. In the recent December quarter, revenue from top five clients was at 11.5 per cent, lower than 12.7 per cent in December 2014 and 14.2 per cent in December 2013 quarter. This indicates a problem of concentration of top clients in the not-so healthy oil-and-energy vertical. The company would have to address this issue going ahead as problems for oil and gas seem to only exacerbating with every day.

Employee utilisation levels too are still below the average of peers such as TCS and Infosys. In the December quarter, employee utilisation levels dropped sharply to 66.4 per cent from 69.5 per cent in the September quarter and 71.3 per cent in the June quarter.

The recent acquisitions — Cellent (a European IT consulting company that could help Wipro cross-sell its services in Germany, Austria and Switzerland) and Viteos (a US-based company with good capabilities in BPaaS), should aid the acquisition of new deals for the company in the coming quarters.

But, how the company is going to address its poor client mining capabilities have also to be seen.

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