Mumbai: The management change in Wipro seems to be paying off, at least in the eyes of investors. The stock has gained 22.79% in the past three months and has outperformed the IT index which hasdeclined 8.3% during the same period.
The Street is expecting the results of management change to become visible in the December quarter results. HDFC Securities in a research note said:We expect numbers to improve in the coming quarters post the management changes that have taken place at Wipro. We will be looking at a few metrics such as proportion of IT services revenues from the top customers, number of clients in the upper revenue bucket and reduction in the employee attrition.
JP Morgan India Pvt Ltd goes so far as to say: “Wipro could be the large Indian IT stock of 2012 on back of higher order pipeline, improving client metrics and rising customer satisfaction, amid other reasons.”
In February, Wipro replaced the joint CEOs of IT services – Girish Paranjpe and Suresh Vaswani with T. K. Kurien who had served the company at various levels. T.K. Kurien was appointed to marshal the company out of rough times. He cleaned the grease from the system by focusing on high growth momentum verticals such as BFSI, engineering and utilities. He also simplified the client delivery structure and also improved client mining, said an IT analyst who did not wished to be named.
In the second quarter, Wipro beat Infosys by reporting better-than-expected 18% jump in revenue along with 1.2% rise in net profit year on year stoking expectation that the third largest IT services exporter - Wipro may continue to deliver better revenues than Infosys. However, operating margins remain a concern after falling to20% in the second quarter from 22% in the previous quarter.
“In my top customers, we are reinvesting 1% of the top line back into the customer in terms of joint innovation projects. And standardization at the back end can reduce cost,” said T.K. Kurien in interview to Mint after the second quarter results.
The management has guided for 1-2% sequential revenue growth for the December quarter. However, an analyst who did not wished to be named said, “significant earnings improvement may not happen in the next quarter itself as organizational re-structuring is still an ongoing process at Wipro.”
Earlier this week Wipro consolidated three operations to form a new unit called the “Business Operations Unit,” to enhance delivery to the clients. Additionally, Wipro gets 28.8% of its IT services revenues from Europe.If the macro-environment worsens in that region, it may act as a dampener.