Wipro unlikely to see impact of coronavirus outbreak in March quarter

IT services firm Wipro is unlikely to witness any major impact of the coronavirus pandemic in its March quarter performance. 

According to a report by brokerage firm ICICI Securities, the company’s top line growth in the Q4FY20 is expected to be within its guided range of 0-2 per cent, as its existing book of business is expected to remain unaffected.

The growth, however, is likely to taper off in the Q1 of FY21, partly as an anticipated slower spending by the clients is expected to affect the new businesses that would have added incremental revenues. “However, we expect revenue guidance for Q1FY21 to potentially be in the range of -2 per cent to 0 per cent as the impacts of Covid-19 exacerbate what is typically the seasonally slowest quarter for the company …,” the report said. 

Discretionary spend by the clients take a hit during slowdowns or uncertain business environment, as such spends are largely under the discretion of the clients. However, such spending usually drives large transformational projects. 

Despite posting slowest growth among the peer group, some of Wipro’s key business verticals, including manufacturing and communication have shown some promises of growth. Especially, the growth in the communication vertical is seen to be better as the drags from the domestic business have become smaller, the report said. 

Manufacturing is the other vertical, which is expected to hold up better in the near term. In Q3 of FY20, the vertical witnessed a sequential revenue growth of 4.4 per cent in constant currency. However, in banking and financial services (BFS), the company’s focus to win new deals gets challenged temporarily because of travel restrictions imposed due to the virus outbreak. 

“BFS revenues, after being sluggish through first nine months of the current financial year, were in better shape finally, especially in the US, even as Europe continues to reel from pressure.” BFS accounts for almost a third of Wipro’s overall revenues.