Wipro Ltd’s performance continues to be the weakest among top-tier companies. Volumes in the company’s information technology services business grew by just 1.5% last quarter, compared with 5.7% for Tata Consultancy Services Ltd and 3.1% for Infosys Technologies Ltd.
In constant currency terms, revenue grew 4.1% to $1,325 million (Rs6,055.25 crore) last quarter, well below the higher end of its guidance.
The bigger disappointment was in margins. Although Wipro reported flat margins in line with the September quarter, its margins had fallen by around 250 basis points (bps) then owing to salary hikes and the issue of stock options below market price. One basis point is one-hundredth of a percentage point.
Infosys’s performance, too, was below expectations, with volume growth at a mere 3.1%. The top performer in terms of volume growth and margins was TCS, which has widened the gap with peers in terms of absolute profit. HCL Technologies Ltd’s volumes grew at a slightly higher rate, but its margins were flat last quarter, after having fallen considerably earlier.
As a result, HCL’s year-on-year profit growth continues to be subdued. TCS did well in terms of manpower management as well, and is now reaping the benefits in terms of relatively lower attrition and margin pressures.
The performance is reflected in TCS’s shares, which have risen at the highest rate of 6.7% among top-tier IT firms since the beginning of the current results season.
Coming back to Wipro, according to an analyst with a foreign brokerage, the stock is now likely to move sideways in the short term because of the change in top management. The upside, therefore, should be limited.
At the same time, downside, too, may be limited since valuations aren’t high and given the underperformance vis-à-vis peers.