Wipro has guided for a muted 2.1% q-o-q growth in Q2FY09. The growth guidance is amongst the lowest and factors ramp-up challenges in some large accounts. As per the management, the business environment in the near-term remains cautious.
Further, the company has a couple of the beleaguered US investment banking firms as its client. Quarter-till-date, rupee has depreciated against the US dollar by 4.5% on average-quarter-rate basis and 7.3% on end-of-period basis.
Typically, rupee depreciation is beneficial for IT companies both at the revenue and operating margin level. However, as Wipro holds a huge hedge position (~60% of FY08 revenues), it should reap relatively lower benefits from the rupee fall.
Wipro has always had attrition at the higher end of the industry band. Attrition at 18% (for Q1FY09) is starkly higher than TCS and Infosys. We recommend a SELL.