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Wipro, India’s third-largest information technology (IT) services company, improved its performance in FY15 compared to the previous financial year. However, currency volatility and softening of demand in the key oil & gas segment took a toll on its performance in the quarter ended March this year.
At Rs 2,272 crore, the company, whose clients include Citigroup and BP, reported two per cent growth in net profit for the March quarter compared to the year-ago period. Revenue stood at Rs 12,142 crore, up four per cent annually. The revenue and profit were higher than the Bloomberg consensus estimates of Rs 12,053 crore and Rs 2,166 crore, respectively.
In dollar terms, Wipro managed to meet the lower end of its forecast for the quarter. For the quarter ending June this year, Wipro said it expected its IT services revenue to be $1,765-1,793 million (a decline of 0.53 per cent to growth of about one per cent).
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“The company’s IT services segment posted revenue of $1,775 million, against the expected $1,804 million, a fall of 1.2 per cent sequentially, primarily due to cross currency. On constant currency terms, the company posted sequential growth of 1.2 per cent, the lower end of the estimate of $1,771-1,806 million, on current currency realisation,” Sarabjit Kour Nangra, vice-president of research (IT) at Angel Broking, said.
T K Kurien, Wipro’s chief executive officer, said while overall demand was stable, uncertainty in the energy, natural resources and utilities segments had hit revenue of about $100 million in 2014-15. This segment accounts for 16 per cent of overall revenue.
Kurien said the company was seeing some slowness in the banking, financial services and insurance segment, primarily because of client-specific issues, which were taking longer than expected to be resolved.
For the March quarter, Wipro’s IT services revenue, which accounts for the major chunk of its overall revenue, grew six per cent, while operating profit declined five per cent to Rs 2,477.7 crore year-on-year. The company said the decline in operating profit was mainly because business had shown healthy margin growth in the fourth quarter of 2013-14.
“We have achieved improved customer satisfaction through better articulated solutions and improved delivery. We are well positioned to take advantage of opportunities in the market, while tackling headwinds in certain areas,” Kurien said. On a sequential basis, the operating margin in the IT services business rose by 23 basis points (a basis point is a hundredth of a percentage point) to 22 per cent.
“We maintain our focus on operational improvements and productivity enhancements. This has resulted in margin expansion despite adverse cross-currency movements,” said Chief Financial Officer Jatin Dalal.
During the March quarter, the company’s employee utilisation rate improved by 70 basis points to 80.5 per cent. For 2014-15, Wipro’s revenue was eight per cent higher at Rs 46,954.5 crore, while net profit grew 11 per cent to Rs 8,652.8 crore.
IT services revenue grew 10 per cent in 2014-15, and the operating profit of the business rose eight per cent.
Wipro does not disclose the net profit for its IT services business, which now accounts for about 90 per cent of its revenue.
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The company’s growth in the March quarter was primarily driven by the banking, financial services and insurance segment, which grew two per cent in the reported currency, while the retail, consumer goods and transportation business grew 1.4 per cent quarter-on-quarter. As expected, the energy, natural resources and utilities vertical posted a 6.6 per cent decline on a sequential basis.
The company saw strong recovery in India and West Asia, where business grew a healthy 10 per cent sequentially and 26.5 per cent year-on-year. In Europe, its business declined 5.7 per cent sequentially and 9.6 per cent year-on-year, primarily because some large clients in the energy and utilities segments are based in that region.
During 2014-15, the company added 65 new clients and increased the number of clients contributing annual revenue of at least $100 million each by one to 11.
On Tuesday, the company's stocks on BSE closed 0.7% higher at Rs 579 apiece.
