Wipro says Chennai flood to impact revenues, margins for December quarter

After Tata Consultancy Services (TCS), Wipro too has issued a warning saying that disruption at its Chennai facilities due to recent floods and the costs associated with subsequent invocation of business continuity plans would have a material impact on the performance of the company in the October-December quarter of FY16.

Wipro’s warning comes on the heels of a similar announcement by India’s largest IT services firm Tata Consultancy Services.

The Bengaluru-based Wipro, India’s third largest IT services company which has over 22,000 employees in Chennai across multiple centres, said it would incur a “higher one-time cost” towards deployment of business continuity plan which would not only adversely impact its revenue performance during the quarter, but also its operating margins.

“For the quarter ending December 31, 2015, the incident is expected to have a material impact on the revenues and will result in higher one-time cost incurred towards deployment of our business continuity plan. Both these factors will impact our operating margins for the quarter,” Wipro said in a statutory filing to stock exchanges on Wednesday.

For the quarter ended September 30, 2015, operating margins for Wipro’s IT services business stood at 20.7%.

The company also said that it expects its revenues to be in the lower half of its guidance range. For the December quarter, Wipro had said it was expecting IT services revenues to be in the range of $1,841 mn -$1,878 mn.

Last week, TCS had also issued a similar warning saying that the company was expecting material impact on its revenues in the seasonally weak December quarter due to Chennai rains.

Meanwhile, Wipro said its Chennai operations has largely been restored to normal. The company is in touch with insurance companies to assess the damage. Wipro’s share price was down 0.51% at Rs 555.75 on the BSE in early trade.

Wipro Technologies (Wipro Ltd)

TATA Consultancy Services ( TCS )