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Wipro’s performance in Q2 pales in comparison to larger rivals TCS and Infosys, both of which reported a 3.2% sequential growth in dollar revenue. Graphic: Mint
Wipro’s performance in Q2 pales in comparison to larger rivals TCS and Infosys, both of which reported a 3.2% sequential growth in dollar revenue. Graphic: Mint

Q2 results: Wipro revenue rises 1.37% to $2.04 billion

Wipro’s revenue growth in the September quarter beats estimates even as past divestments take sheen off Q2 results

New Delhi: Wipro Ltd on Wednesday posted second-quarter revenue growth that beat analyst estimates even as the company’s divestment of some businesses in the past to make itself future-ready has taken some sheen off the financial performance in the first half of this financial year.

Bengaluru-based Wipro’s dollar revenue improved 0.72% sequentially to $2.04 billion in the quarter ended 30 September. Revenue grew 1.37% on a year-over-year basis. In constant currency terms, revenue rose 1.6% on a sequential basis. Since the earlier quarters had business from data centre operations, which Wipro did not have in the July-September quarter, its sequential growth in revenue both in constant and in dollar terms was higher at 2.8% and 1.9% respectively. Wipro has outlined an at-best 1.3% growth in constant currency terms in the October-December period from the preceding quarter. The lower growth is primarily because the company has decided to carve out some business from its India geography.

Adjusting for this business, the company’s growth outlook is at-best 3% this quarter.

A Bloomberg survey of 25 analysts had forecast Wipro to post revenue of $1.96 billion, or 14,483.5 crore, in the September quarter. They estimated the company to post a profit of $288.91 million, or 2,130.1 crore, in the period. Wipro posted a net profit of 1,889 crore during the quarter, missing estimates.

“I’m very happy with our performance in this quarter," Wipro chief executive Abidali Neemuchwala told Mint. “Four of our SBUs (strategic business units) reported a more than 4% growth (in constant currency terms). So, overall, we are focused on execution to do better in the second half of the year".

Wipro’s revenue from clients in the banking and financial services industry, which comprises 30.7% of its overall revenue, improved 4.4% sequentially in constant currency terms.

US and Latin America, which bring about 55% of business, grew 3.7%.

Still, Wipro’s performance in the second quarter pales in comparison to its larger rival Tata Consultancy Services Ltd (TCS) and Infosys Ltd, both of which reported a 3.2% sequential dollar revenue growth. India’s third largest IT services firm, HCL Technologies Ltd, reported a 2.1% dollar revenue growth on Tuesday.

Infosys expects revenue to grow 6-8% in constant currency terms this financial year. At TCS, which does not give quarterly or yearly forecasts, the management has said it expects to clock double-digit growth in this financial year.

HCL Technologies too expects to clock in at-least a 10.5% revenue growth this year. Wipro’s revenue growth, for now, appears will not be significantly higher than last year’s 2.9% rise.“It has been a good quarter from Wipro. The company has been divesting and restructuring its business, and so it is eating into the revenue for the year. But like the management has said, the company is on a transformational journey and this will help them in long-term," said a Mumbai-based analyst at a foreign brokerage, on the condition of anonymity.

“The company needs to deliver at least three consecutive quarters of good growth before a firm call on turning the corner can be taken".

Wipro’s operating margin was 14.6% in the September quarter but this was due to a one-time payment to a customer. Excluding the payment, operating margin was 18.1% last quarter.

“I feel very good with the kind of progress we have made as I have repeatedly said in the past that we are making the company future-ready by divesting businesses like data centre, investing in digital and making acquisitions. The only area where we have an issue is our healthcare business but we have put in a team to lead the business and we remain confident that we are progressing well," said Neemuchwala.

Wipro shares were unchanged at 309.15 on the BSE at the close of trading on a day when the benchmark Sensex gained 0.55% to end at 34,033.96 The results were issued after market hours.

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