The IT sector kicked off the earnings season on April 12 with TCS’s announcement. So far, TCS, Infosys, and HCL have reported underwhelming results. Next in line is Bengaluru-based Wipro, which is set to announce its results on April 27. Ahead of the results, here are five key things to watch out for.
Revenue growth
Brokerages estimate Wipro to record a revenue decline of 0.5 per cent QoQ in CC terms against the minus 0.6 to plus 1 per cent cc growth guidance given by the company. Revenue is expected to be impacted by exposure to hi-tech, retail, and CPG verticals. Weakness in the consulting business and worsening macro environment would also be adding to the woes.
Also read: Wipro’s new Global Business Line model to aid growth
Margin and guidance
Margins for Wipro are expected to remain flattish this quarter with headroom for improvement of 20-40 bps. Higher utilisation, lower sub-con costs, and pyramid benefits would help in the improvement. Philip Capital has noted, “IT services margins are expected to be flat - impacted by lack of growth leverage offset by an easing of supply-side pressures.” The company is expected to provide revenue growth guidance in the range of -0.5 to 2 per cent.
Attrition and hiring
In Q3, Wipro’s attrition dropped to 21.2 per cent and the total headcount was down by 435 employees to 258,744. The company had said that it will hire 3,000 freshers in Q4. For the fourth quarter, attrition is expected to be moderate by the brokerages. Onboarding delay of freshers by the company has been an issue for over a quarter now, management commentary on the same is to be watched out for.
Also read: Wipro mandates freshers to clear new test or get terminated, says NITES
Management commentary
Management commentary on the conversion of TCV to revenue, impact, and outlook for the consulting business (Capco and Rizing), positioning in cost take-out and vendor consolidation deals, outlook for tech spending in BFS, and impact of exposure to impacted companies- SVB, Silvergate, Signature Bank, and Credit Suisse, is to be watched out for according to brokerages. Wipro’s take on senior-level exits - Angan Guha and Ranjan Kohli - is also to be waited for.
Share buyback
The company recently announced that it will consider a share buyback. The last buyback was in 2020, when it launched ₹9,500-crore buyback and bought back 23.75 crore shares at ₹400 a share. This time, analysts expect the buyback to be larger than the previous one at around ₹12,000-13,000 crore. Wipro might utilise 2-5 per cent of equity for the buyback and take the tender offer route. Analysts also anticipate that shareholders could get a premium in the range of 10-20 per cent on the market price.