Wipro suspends Q1FY21 revenue guidance as coronavirus crisis hits business

IT services major Wipro on Wednesday posted muted growth in its revenue and profit numbers for the fourth quarter of the last financial year, as the ongoing Covid-19 crisis created disruption in both the operation and demand fronts. Even growth in top line remained weak for the entire FY20.

The company joined some of its peers to flag the uncertainty arising out of the pandemic and refrained from giving any revenue guidance for the first quarter of FY21 — a practice it discontinued for the first time since its listing on the New York Stock Exchange (NYSE). 

However, the Bengaluru-headquartered company remained confident of emerging strongly from the crisis on the back of its strong balance sheet and service offerings.

For the fourth quarter ended March 2020, Wipro posted a 6.3 per cent year-on-year (YoY) decline in its net profit at Rs 2,326.1 crore. On a sequential basis, the numbers slipped 5.28 per cent. Gross revenue for the firm stood at Rs 15,711 crore, up 4.69 per cent as against the same period last year. 

IT services revenue, which accounts for more than 95 per cent of Wipro's gross revenue now, was at $2.073 billion, a decline of 1 per cent on a sequential basis. The actual revenue fell to the lower end of the company's earlier guidance. 

Operating margin for the fourth quarter was at 17.6 per cent, a decline of 0.8 per cent in the sequential term.

For FY20, net profit of the company was at Rs 9,720 crore, a rise of 8 per cent over the same period of last year. Revenue during the period was at Rs 61,020 crore, an increase of 4.2 per cent YoY.

Revenue from the IT segment grew only 1.7 per cent to $8.256 billion in the last financial year. Though most of Wipro's peers are yet to announce their annual results, revenue growth of the company is likely to be the slowest among its larger peers, given their guidance to the market. 

Operating margin for the whole year stood at 18.1 per cent, a rise of 20 basis points over the same period of last year.

Owing to the Covid-19 crisis, the Azim Premji-promoted firm said 0.7-0.8 per cent of its revenues translating into $14-16 million was affected during the fourth quarter. "In these unprecedented times, I am extremely proud of how the Wipro team has come together and worked 24X7 to serve our clients. We are confident that our broad portfolio of services and our ability to execute to our commitments make us well-positioned to gain market share," said Abidali Z Neemuchwala, CEO and managing director, Wipro. 

"Due to the uncertainty around the course of the Covid-19 pandemic, we do not have visibility into the extent to which it will disrupt our operations, and we have decided to not provide revenue guidance for the quarter ending June 30.  We anticipate that we will resume providing revenue guidance when we have increased certainty of both demand- and supply-side factors," he added.

Among verticals, technology, health business unit, and energy witnessed growth in the sequential term, while banking & financial services, communications, and consumer business unit showed a decline in growth during the fourth quarter. The company said the impact of the pandemic on the travel, energy, and manufacturing verticals would reflect in the first quarter of FY21.

"The quarters ahead seem challenging and require a tremendous response on costs. We also anticipate our working capital to increase, but our strong balance sheet provides us with the confidence that we will emerge stronger and better," said Jatin Dalal, chief financial officer. The company also said a delay in payment, deferment of projects, and price revisions are also likely in the near future.

By the end of March 2020, Wipro's total headcount stood at 182,886, which was down by 4,432 employees as compared to the third quarter of FY20. "We will definitely go slow in our hiring in the first quarter of FY21. But, we will honour all our commitments as far as our offer letters are concerned," said Saurabh Govil, head of human resources at Wipro.