Wipro Q3 net profit rises 21%, profitability at 22-quarter high

Dollar revenue growth highest in 36 quarters; firm has given an bullish outlook on revenue growth of 1.5-3.5 per cent for the March quarter

Reporting one of its strongest quarters in recent years, Bengaluru-based information technology (IT) firm Wipro on Wednesday posted 20.9-per cent year-on-year (YoY) growth in consolidated net profit at Rs 2,968 crore for the December quarter. It had reported a profit of Rs 2,456 crore in the corresponding quarter last year. The company said its dollar revenue growth was the highest in 36 quarters.

It clocked a consolidated revenue of Rs 15,670 crore, marginally up 1.3 per cent, from Rs 15,471 crore logged in the third quarter (Q3) of 2019-20. On a quarterly basis, income improved 3.67 per cent. The operating margin was also at a 22-quarter high for the Bengaluru-based company at 21.7 per cent, led by improved revenue growth trajectory and excellence in operations, with several metrics at an all-time high. Showing sequential growth of 3.9 per cent, the consolidated IT services revenue was at $2,071 million.

The performance was also ahead of Street expectation on a majority of parameters. According to a Bloomberg poll of analysts, the revenue was estimated at Rs 15,499 crore, earnings before interest, tax, depreciation, and amortisation Rs 3,513 crore (actual Rs 4,128 crore), and net profit Rs 2,567 crore.

“Last year, we witnessed unprecedented times. Now with improved vaccine prospects, we are hopeful 2021 will be a better year for society, businesses, and for us,” said Thierry Delaporte, chief executive officer and managing director, Wipro.

The company, which has gone live with its new organisational structure this month, has given a bullish outlook. Wipro expects its IT services revenue to grow between 1.5 per cent and 3.5 per cent for the March quarter, compared to the October-December 2020 period.

Under the new model, the IT services firm will replace the current structure of its various strategic business units, service lines, and geographies with four strategic market units (SMUs) and two global business lines.

The four SMUs will be Americas 1, Americas 2, Europe, and Asia Pacific Middle East Africa (APMEA). While Americas 1 and Americas 2 will be organised into sectors, Europe and APMEA will be organised into countries.

“While the US will continue to be the No. 1 market for us, we are re-energising our focus on European, Asia Pacific and Middle East markets under the new organisation structure, which will start producing results rapidly,” said Delaporte.

The deal pipeline remains healthy. In total, the company signed 12 large and small deals during the quarter, with total contract value (TCV) of over $30 million each; the combined TCV of these deals was over $1.2 billion.

One of the biggest deals it inked was a $700-million digital and IT partnership deal with Metro AG, that would see over 1,300 employees of the German wholesaler move to the Indian IT major. As clients move from traditional IT to digital business solutions, Delaporte said the company would help clients link digital initiatives directly with business goals to meet positive outcomes.

For example, at Metro AG, Wipro would deliver 360-degree technology and engineering solutions to the company in their cash-and-carry, hospitality, restaurant, and catering food segments.

While the Cloud segment grew 23 per cent for the company YoY, cybersecurity was up 30 per cent, indicating wide adoption of digital across markets, including the US and Europe. In fact, five of the seven sectors for the company grew over 4 per cent sequentially, including Cloud, oil and gas, health care, and life science.

The company completed the promotion cycle for 80 per cent employees, with salary increases effective from January 1. It had also announced 100 per cent variable payouts for Q3 and the fourth quarter (Q4). “This could lead to headwinds in margins in Q4, but the company would still remain elevated,” said Delaporte.

The company declared an interim dividend of Rs 1 per share. The Rs 9,500-crore buyback it had announced in December would be completed by January-end, said Jatin Dalal, president and chief financial officer at Wipro.

The company had an employee attrition of 11 per cent in the period. It hired 14,000 employees, including onboarding of more than 2,900 freshers.

The results were announced after market hours on Wednesday. Wipro’s stock closed the day at Rs 458.75 on the BSE — up 0.23 per cent.