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Better margins, but no major deal wins for Wipro: Key Q2 takeaways

Here are key takeaways from the Wipro’s financial report card.

, ETMarkets.com|
Updated: Oct 15, 2019, 08.23 PM IST
The company has guided for IT services revenue of $2,065 million to $2,106 million for the December quarter.
IT services major Wipro beat Street estimates to report 36 per cent profit growth in September quarter at Rs 2,561.3 crore. On a sequential basis, the bottom line was up 6.2 per cent.

BFSI and consumer business unit were major growth drivers while the company also managed to report better operating margin for the quarter.

Here are key takeaways from the Wipro’s financial report card:

Not many large deal wins
There were not many large deal wins during the quarter as the company lost one $10+ million customer, and gained none. However, it added two $5+ million customers and one $3+ million customer. It also added five new $1+ million customers during the quarter. In total, the company added 16 new customers. The total number of active clients stood at 1,027, down 33 from 1,060 at the end of June quarter.

Operating margin improves
Wipro’s operating margin increased 3.1 per cent YoY to 18.1 per cent. “We delivered operating margins in a tight range after absorbing the impact of two months of wage hike. Growth remains our priority and we remain invested for future,” said Jatin Dalal, Chief Financial Officer.

Consumer business top growth driver
The consumer business and banking, financial services and insurance (BFSI) units were top growth drivers for the company during the quarter, as they outpaced other segments. The consumer business unit grew 5.3 per cent and the BFSI segment 4.3 per cent in reported currency terms. Energy and natural resources verticals recorded decent gains at 3.1 per cent.

Tech revenue down
Revenue from the technology segment was down on a year-on-year basis to Rs 1,914 crore in September quarter from Rs 1,958 crore reported for the corresponding quarter last year. This segment was the only one out of seven that contracted. “We had a good in-quarter execution on both revenues and margins. The overall growth was broad based with 6 out of 7 industry verticals growing on a YoY basis and we signed a large deal in India aligned to our strategy of taking global offerings to India customers,” said Abidali Z Neemuchwala, CEO and Managing Director.

Growth guidance
The company has guided for IT services revenue of $2,065 million to $2,106 million for the December quarter. This translates into a sequential growth of 0.8 per cent to 2.8 per cent.

Dependence on US market increases
Wipro’s dependence on US and Canada markets is increasing gradually at the cost of its European business. For IT services, the share of the European region in Wipro’s revenue came down to 23.5 per cent from a high of 26.1 per cent in Q1FY19. On the other hand, the revenue share of Americas increased from 56 per cent to 59.6 per cent in the same period. The share of all other regions combined came down to 16.9 per cent from 17.9 per cent.

Effective tax rate drops
The company’s effective tax rate for the quarter slipped 18.3 per cent from 21.8 per cent in June quarter and 22.1 per cent in the same quarter last year.

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