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Wipro’s weakness continues, volumes drop

Wipro’s drop in volumes proves that all companies will not benefit from the expected recovery in the IT sector
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First Published: Fri, Jan 18 2013. 10 17 AM IST
Wipro’s guidance of a 0.5-3% revenue growth in the March quarter is hardly exciting. Photo: Hemant Mishra/Mint
Wipro’s guidance of a 0.5-3% revenue growth in the March quarter is hardly exciting. Photo: Hemant Mishra/Mint
Updated: Sat, Jan 19 2013. 12 06 AM IST
Mumbai: Wipro Ltd’s December quarter results are a disappointment even though the company has announced in-line revenue and profit. Revenues of the company’s information technology (IT) services business rose 2.4% to $1.57 billion (around Rs.8,462 crore today), in line with estimates. Reported profit of both the IT services division and the company was slightly ahead of analysts’ estimates.
Even so, Wipro is the only IT company to have reported a decline in volumes last quarter. Volumes fell 1% sequentially and revenue rose only because of a 3.8% increase in blended price realization. The increase in pricing is the result of an increase in employee productivity in fixed price projects. The drop in volumes, however, proves once again that the company is still to get back to normal growth. On a year-on-year (y-o-y) basis, growth in revenue is still less than 5%, and y-o-y volume growth was less than 1%. This compared poorly even with the company’s 3.8% y-o-y volume growth in the September quarter.
So while the results of Tata Consultancy Services Ltd and Infosys Ltd pointed to an inflection point with y-o-y growth rates picking up a tad, Wipro’s results don’t hold out the same hope for investors. The company’s guidance of 0.5-3% revenue growth in the March quarter is hardly exciting either. Based on the company’s recent track record, it’s likely to meet the midpoint of its guidance, which means growth of less than 2% sequentially and less than 5% on a y-o-y basis. Also, the guidance range is wider than normal, which, according to analysts, reflects the uncertainty about the future.
Little wonder then that Wipro’s shares fell by nearly 9% on Friday morning after the results announcement. The company’s shares had risen around 9% since Infosys’s results announcement. The company’s weaker-than-expected results just go to prove that it doesn’t make sense to assume that all firms will benefit from the expected recovery in the IT services industry.
Do the December-quarter results of TCS, Infosys and HCL indicate an uptick for India’s IT services sector? Take a Mint poll here, and tell us what you think.
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First Published: Fri, Jan 18 2013. 10 17 AM IST
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