Wipro Q2 profit up 5.6% to Rs 2,189 crore, beats estimates

The company saw revenue dip by 2.5 % to Rs 13,423 crore as income from customers in the US rose marginally

Wipro, India’s third largest software exporter, said second quarter profits grew 5.6 per cent to Rs 2,189.5 crore, beating street estimates on the back of improved efficiency and growing business from customers for its digital offerings. 

However, it saw revenue dip by 2.5 per cent to Rs 13,423 crore as income from customers in the US, which contributes over half its revenue, saw a marginal increase as it saw weakness in health care and communication business segments. 

The US business grew 0.5 per cent over the previous quarter, while revenue from Europe grew 5.8 per cent and Asia Pacific at 7.4 per cent. India and West Asia, which it saw restructuring in the last few quarters, dipped by 3.2 per cent. 

Wipro, the Bengaluru-based IT major, had reported profits of Rs 2,073.9 crore on revenues of Rs 13,765.7 crore in the June to September period last year. 

The second quarter was also the first time that Wipro had reported quarterly revenue of $2 billion. Operating margins stood at 17.3 per cent on the back of improved employee utilisation of 72.9 per cent, increase in once percentage point, while it saw headcount reduce by 3,031 to 163,759 people. Using its artificial intelligence platform Holmes, it has also been able to see productivity savings of 2,500 people in second-level maintenance.

“Three IT companies Tata Consultancy Services (TCS), Persistent, Wipro has shown growth in margin and headcount reduction. Lot of the companies are seeing net headcount reduction,” said Madhu Babu, IT analyst with brokerage Prabhudas Lilladher said.

Last week, Tata Consultancy Services, India’s largest IT services exporter, beat street estimates on improved efficiency and increased digital wins. The firm also said clients were increasing spending, indicating a confidence in business revival in the coming quarters. 

“For Wipro, 0.3 per cent in constant currency (CC) growth is not great, said Babu. “ Organically the company has not grown.  Even if you see full year growth, Wipro will do, say, 3.5 per cent growth in dollar terms but there is cross-currency benefits, its acquisitions are helping in growth. The 2.8 per cent YoY growth in Q2 is driven  by acquisitions,” he said.

A Bloomberg estimate had projected Wipro to post profits of Rs 2,061.4 crore on revenues of Rs  13,841.9 crore. 

“We are making visible progress in each of our strategic themes. Overall, I am confident that we are moving in the right direction and seeing the velocity pick-up,” said Abidali Neemuchwala, chief executive officer at Wipro.

Wipro says it generates 24.1 per cent of its revenue from digital business that generates higher margins than the traditional services. The cloud business is at a run rate to achieve $1 billion revenue a year. 

The firm expects two verticals — health care and communications that saw business slow in the second quarter — to revive in the coming months.

The firm has projected to grow by 0-2 per cent its revenue in the range of $2.014 billion to $2.054 billion, which analysts termed it as a disappointment.

“Wipro’s Q3FY18E guidance of 0-2 per cent QoQ revenue growth is a disappointment. The return to growth in BFSI (banking, financial services, and insurance) and ENU, which together account for more than 40 per cent of revenue, is among the positive factors. The buyback price could also protect major stock downside,” said Harit Shah, analyst (IT), Reliance Securities in a note.