Wipro posts 35% q-o-q rise in net at Rs 2,544 crore; Operating margin improved by 5.6%

India’s third-largest software services exporter, Wipro, on Friday posted a 34.9% quarter-on-quarter rise in its consolidated net profit at Rs 2,544 crore during the October-December quarter. The company’s consolidated revenues stood at Rs 15,059 crore, a 3.5% increase over the last quarter.

The company improved its operating margin by 5.6% to 19.8%. However, it lowered its margin guidance for its IT services business in the range of $2,047 million to $2,088 million, which translates to a sequential growth of 0.0% to 2.0%.

Analysts explained the reasons for the higher margins are a lower base in the September quarter due to a one-time settlement with a key client and the depreciation of the rupee – around a fourth of the expanded margins was due to the currency. The company said in a filing that IT services operating margin for the quarter was at 19.8% and expanded by 480bps q-o-q and 496bps y-o-y.

The company’s flagship IT services revenues grew 2% to Rs 14,665 crore. In US dollar terms, the IT services revenues stood at $2,046.5 million, which was at the middle of the guidance on actual currency basis. CEO and board member Abidali Neemuchwala said: “The demand environment in the global markets is stable. We do not see any immediate impact of the macro headwinds that some of the large economies have cautioned, but we continue to remain watchful. The traction in US and Asia Pacific and other emerging markets remains healthy and the growth this quarter is across industry segments. India is likely to remain volatile.”

The company’s digital revenue increased 6.4% sequentially and 35.4% y-o-y in constant currency terms and increased its share of revenues by 1.8% to 33.2% of revenues with digital trained workforce stood at 132,704. In Service Line Mix, Cloud and Infrastructure Services and Modern Application Services, which contributed 70.6% of the company’s revenues, saw dips in their shares, with the former’s share in revenues falling by 0.6% sequentially and the latter falling by 0.3% in the same time period. But Digital operations and Platforms saw a 1.8% rise.

Wipro declared an interim dividend of Rs 1 ($0.011 ) per equity share/ADS. Wipro’s board of directors recommended issue of bonus shares to shareholders (including stock dividend to ADS holders) in the ratio of 1:3. Neemuchwala said the company’s localisation drive continued with US localisation rising to 62.6%, up 2.3% from the last quarter, with similar trends in western Europe.