Wipro bounces back in Q1, net profit rises 2% to Rs 21 billion

Wipro, India’s third-largest IT services company, on Friday announced better-than-expected financial numbers for the first quarter ended June 2018. This was backed by a revival in the key BFSI (banking, financial services, and insurance) vertical, apart from strong growth in North America, which accounts for 55 per cent of the company’s revenues.

The firm met the upper end of its revenue guidance in the first quarter of FY19 while the management commentary reflected an uptick in the demand environment with sound deal flows in coming quarters.

The firm posted a net profit of Rs 21.2 billion in the first quarter, up 2.1 per cent over the same period in the previous financial year, while on a sequential basis it grew 17.5 per cent. Net profit for the period also got a boost from the sale of its hosted data centres business, which fetched it Rs 2.5 billion. The revenue of the company for the period (including product revenue) at Rs 139 billion grew 2.6 per cent year-on-year and 1.5 per cent quarter-on-quarter.

Excluding the revenue of the products business, the IT services segment grew 5.2 per cent to Rs 137 billion year-on-year, while on a sequential basis, it rose 2.2 per cent.

The IT services firm was able to beat Street estimates on revenue. Consensus estimates done by Bloomberg had pegged revenue for the quarter at Rs 134.2 billion for this quarter. Even though Wipro is yet to catch up with its larger peers TCS and Infosys, the company showed optimism in continuing the growth momentum for the rest of the year. Mumbai-headquartered TCS reported revenue growth of 15.8 and 6.8 per cent year-on-year and quarter-on-quarter, respectively.

Bengaluru-based Infosys showed higher revenue growth of 12 per cent year-on-year and 5.8 per cent quarter-on-quarter during the same quarter. “We have seen a pickup in spending in developed markets, particularly in North America, and in the BFSI vertical. We have had a good quarter of order bookings and I am confident we are moving in the right direction,” said Abidali Z Neemuchwala, chief executive officer of Wipro.

Wipro’s operating margin in the quarter stood at 17.2 per cent, a 35 basis point rise over the same period of the last financial year. Sequentially, the margin went up 280 basis points as the firm received some leg-up from its divestment of the hosted data centre business. Despite the better than expected numbers and optimism, Wipro guided its revenue from the IT services business to be in the range of $2-2.04 in the second quarter of FY19. This would translate into sequential growth 0.3 per cent to 2.3 per cent for this period.

Meanwhile, Wipro said it had signed a strategic alliance with Illinois-based Alight Solutions. Wipro said it would invest $117 million into Alight and acquire its India employee base.

Among key verticals, while BFSI grew 1.1 per cent sequentially, the consumer business unit rose 0.7 per cent over the last quarter. However, the rest of the verticals such as communications, energy, natural resources & utilities, health business units, manufacturing and technology witnessed de-growth sequentially.

However, the attrition level in the firm touched 17 per cent in the first quarter.

“Usually attrition levels are high in the first quarter owing to seasonal factors. Attrition levels will be brought down to lower levels,” said Saurabh Govil, chief human resources officer, Wipro.