Q2 COMMENT. Wipro results: Disappointment on all fronts

Wipro Ltd reported weak numbers for the September quarter. The company’s sequential revenue growth was 0.9 per cent in constant currency terms — the lowest among all its large-cap peers for the quarter (see table).

The finance solutions business segment saw a growth of just 0.7 per cent sequentially (in constant currency terms). The segment accounts for over a fourth of the company’s revenues.

The other large vertical — energy and utilities — saw sequential revenue growth of 1.3 per cent (over the same quarter last year, revenue is down 1.8 per cent).

The company has a large exposure to discretionary spends of clients in the energy space which is hitting it now. The European market saw just 0.3 per cent sequential growth in revenue (in constant currency terms).

The India and West Asia business saw revenue drop by 1.1 per cent sequentially. This may be explained by the company’s restructuring efforts in the space to close non-profitable accounts.

Client additions were the weakest in the last several quarters. The company added 47 new clients in the quarter, down from 50 in the June quarter and 67 in the same quarter last year.

The top 10 customers made up 17.5 per cent of revenue, declining from 19.8 per cent in the same quarter last year, indicating poor client mining.

The company’s operating profit margin stood at 17.8 per cent for the quarter, at the same level it was in the June quarter. However, compared to the same time last year, it is a drop of 2.9 percentage points. The attrition rate was at 16.6 per cent, marginally higher than the previous quarter and also the year-ago quarter.

The company has projected sedate revenue growth of 0-2 per cent (sequential) for the December quarter, voicing concerns about a demand slowdown.

The only attraction was the company’s acquisition of Appirio, a leader in the cloud applications segment. This acquisition can be the growth driver for the company if the integration is done well.

All along only the big fish — Accenture, IBM and Capgemini — have been actively developing their capabilities in the software as a service or SaaS segment.