Wipro Q1 consolidated net drops 8% to Rs 2,052 cr

Operating margin drops 190 bps to 17.8%; Q2 revenue guidance disappoints

The country's third-largest IT firm, Wipro Ltd, today reported an 8% decline in consolidated net profit at Rs 2,052 for the quarter ended June 2016 as compared to Rs 2,238 crore in the previous quarter ending March 2016. On annual basis, the net profit declined 6%.

The consolidated revenue declined marginally by 0.3% to Rs 13,698 crore as against Rs 13,742 crore in March 2016. On annual basis, the revenue increased 11%.

The flagship IT services business reported a 3% decline in profit at Rs 2,330 crore y-o-y and an increase of 13% in revenue at Rs 13,100 y-o-y. The operating margin of the IT services business declined by around 190 basis points to 17.8% as compared with the previous quarter.

For the quarter ending September 30, 2016, the Bengaluru-based company said it was expecting the revenues to be in the range of $1,931 million to $1,950 million, indicating a flat 1% growth.

"We have delivered revenues in line with our guidance. Our early investments in areas such as our Digital practice and cognitive intelligence, notably Wipro HOLMES is positioning as the partner of choice for customers in the change side of the business," said Wipro CEO Abidali Neemuchwala. "We expect the trajectory of growth to build gradually over the course of the year as we drive execution on our strategic themes and make progress towards achieving a sustainable growth trajectory."

The firm's IT services revenues, which account for a substantial chunk of the pie for the city-based firm, saw a sequential growth of 2.6 per cent to $1,931 million in the said quarter, meeting its revenue guidance of $1,901 million to $1,939 million.

The IT services segment had a headcount of 1.73 lakh as of June 30, 2016. Revenues from IT products stood at Rs 590 crore.

Chief Financial Officer Jatin Dalal said the IT services margin, at 17.8% in the said quarter as against 19.7% in January-March 2016, reflected the investments in rewarding employees as well as impact of consolidation of acquisitions for the full quarter.

"We continue to expand the reach of our automation programmes to harness efficiency gains," he added.

Wipro said it has decided not to proceed with the buyout of Viteos Group due to "inordinate delays in completion of closing conditions that exceeded the target closing date".

In December last year, Wipro had announced the signing of a definitive agreement to acquire US-based Viteos Group for $130 million.

On Tuesday, the company's stock on BSE closed 0.47% lower at Rs 549.40.