Wipro Q1 profit rises about 12% on deal wins

IT major Wipro witnessed some softening in its revenue growth though its operating margin and deal pipeline remained strong during the first quarter of the current financial year. It posted a 12 per cent rise in consolidated net profit at Rs 2,870 crore, while its consolidated revenue for the quarter increased 6 per cent year-on-year (YoY) to Rs 22,831 crore.

IT services segment revenue, which constitutes more than 95 per cent of the company’s consolidated revenues, stood at $2.78 billion. In constant currency term, IT services revenue increased 1.1 per cent over the same period last fiscal, while it declined 2.8 per cent from the preceding quarter.

“Despite a gradual reduction in clients’ discretionary spending, we maintained new business momentum. Our deal bookings remained strong and we booked large deals worth $1.2 billion during the first quarter,” Thierry Delaporte, CEO of Wipro told the media pursuant to the company’s result declaration.

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“After accelerated technology spending, we see a growth moderation. Clients are increasingly looking at faster returns from their investments and focussing on optimising cost. Among the verticals, we see demand slowdown in BFSI, hi-tech and communications verticals, while demand in healthcare and energy verticals remains strong,” he added.

For the second quarter, Wipro projected its IT services revenue to be in the range of $2.72 billion-$2.8 billion, translating into a -2 per cent to 1 per cent growth from the first quarter.

The company’s operating margins remained steady at 16 per cent, 112 basis points (bps) higher than the same period last year, though marking a marginal decline of 3 bps, sequentially. Wipro’s margin performance, notably, was far better than its peers Tata Consultancy Services and HCL Tech, which witnessed a sharp drop owing to high wage costs amidst tepid revenue growth.

“Our ongoing focus on operational improvement has ensured that margin remains steady even in a softening revenue environment. Levers like improvement in utilisation levels and employee pyramid rationalisation helped us to improve margin. We expect employee utilisation levels to further improve in coming quarters and margins will remain steady at the current range going forward,” Jatin Dalal, Chief Financial Officer at Wipro said.

During the quarter, the company had a total deal booking worth $3.7 billion, out of which $1.2 billion came from large deals. “We have more large deals in our pipeline now than before,” Delaporte said.

Among verticals, while BFSI saw a decline in growth rate by 3.8 per cent YoY, health grew 8.4 per cent YoY. Energy vertical also saw a sound growth in the quarter, as compared to the same period a year ago. Officials informed that while the company is witnessing a slowdown in the US, Europe is holding up well.

The Bengaluru-headquartered firm saw a sharp fall in its attrition level to 17.3 per cent, a fall of 2.1 per cent over the previous quarter, marking a drop in headcount of 8,812 (from the previous quarter) to touch 2,49,758 at the close of the June quarter.