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Business News/ Market / Mark-to-market/  Wait for Wipro’s turnaround continues
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Wait for Wipro’s turnaround continues

Some investors may well lose patience with what seems to be a never-ending wait for the company's turnaround

Wipro’s recent deal win announcements may cause some investors to continue holding on; but, they should note that some large deal wins may come at the cost of lower margins. Photo: Aniruddha Chowdhury/ MintPremium
Wipro’s recent deal win announcements may cause some investors to continue holding on; but, they should note that some large deal wins may come at the cost of lower margins. Photo: Aniruddha Chowdhury/ Mint

Wipro Ltd disappointed again with lacklustre revenue growth and an unexciting outlook about the future. Revenue grew by only 0.3% in constant-currency terms in the June quarter, far lower than even Infosys Ltd’s 1.5% growth in constant currency.

Also, the company said it expects revenue in the September quarter to grow between 1.7% and 4%. This is a tad disappointing, considering that it has won some large deals in recent days. Even in the year-ago September quarter, the company had guided for roughly 2-4% growth in what is seasonally a strong quarter. On the back of large deal wins, one would have imagined that growth expectations would be higher.

The company conceded on a call that in the case of a few large clients, from within its top ten, while some projects were completed, new projects haven’t started at a strong enough pace. As a result, growth was hit in the June quarter and this factor will continue to drag overall growth in the September quarter. Revenue from its top 10 clients declined by more than 3% in constant-currency terms.

Three months ago, while announcing the March quarter results, the company had said its guidance for the June quarter was muted because of sluggishness in the India business. As it turns out, business from the Middle East more than made up for that, and the region as a whole grew revenues by an impressive 3.4% sequentially in constant currency. Growth in the mainstay North American market was weak and revenues in Europe fell marginally.

In this backdrop, some investors may well lose patience with what seems to be a never-ending wait for the company’s turnaround. Since Wipro shares have outperformed the CNX IT index in the past year on the back of hopes of a turnaround, a correction will be healthy. Of course, the company’s recent deal win announcements may cause some others to continue holding on; but again, investors should note that some large deal wins may well come at the cost of lower margins.

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Published: 24 Jul 2014, 08:29 PM IST
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