Wipro disappoints with below-par earnings
Wipro’s revenue outlook for current quarter dashes hopes it will turn the corner soon
Bengaluru: Wipro Ltd on Wednesday reported fiscal-fourth quarter revenue growth that was in line with analysts estimates but the company said it does not expect any revenue growth in the current quarter, dashing hopes that India’s third largest information technology outsourcing company will turn the corner soon.
Wipro managed a 2.9% growth in constant-currency terms in 2017-18, implying that for the second straight year, India’s three largest services firms, including Tata Consultancy Services Ltd (TCS) and Infosys Ltd, grew slower than industry body Nasscom’s estimates.
Tata Consultancy Services reported a 6.7% growth, while Infosys managed a 5.8% expansion in constant-currency terms, which was lower than Nasscom’s 7.8% growth estimate for the country’s $167 billion information technology (IT) outsourcing industry in 2017-18.
Tata Consultancy Services , Infosys and Wipro grew slower than the Nasscom’s 8.6% growth estimate in 2016-17.
Significantly, Bengaluru-based Wipro became the first large information technology outsourcing company to end the year with fewer employees than it started with, its headcount falling by 1,654 employees in 2017-18.
The company added 8,650 employees in 2016-17, underlining the challenges faced by the sector, which employed 3.7 million people.
Wipro’s dollar revenue improved 2.4% sequentially to $2.06 billion in the three months to March (1.1% rise in constant currency terms), after it had earlier outlined quarterly growth of at-best 3% in constant currency terms in the fourth quarter.
Net profit declined 8.6% to $277 million from $303 million in the preceding quarter, on account of the company making a one-time provision for two clients, including British contractor Carillion Plc and telecom operator Aircel, going bankrupt.
A Bloomberg survey of 28 analysts had estimated Wipro to report revenue of $2.1 billion, or Rs13,924.2 crore, in the quarter. The analysts estimated the company to report a net profit of $321.47 million, or Rs2,127.5 crore, in the period.
“I’m disappointed,” said Abidali Neemuchwala, chief executive officer, Wipro. “But then, this is on account of surprises and the pain in HPS (HealthPlan Services business) and you cannot really predict these surprises.”
At the heart of Wipro’s under-performance was the $200 million impact on company’s revenue, including getting $150 million less business from Healthplan Services that it bought in 2016, and the $50 million hit on account of two clients going bust.
Wipro, which only gives a quarterly outlook, does not expect any growth in the current quarter, as the management has guided its revenue to be between a decline of 2% and at-best 0.2% growth in constant currency terms in the April-June period from the preceding quarter.
Infosys expects revenue to grow 6-8% in constant currency terms (7-9% dollar revenue growth).
While Tata Consultancy Services does not give quarterly or yearly forecasts, the management has said it expects to clock a double digit growth in the current financial year.
“Wipro has delivered an in-line revenue performance for the quarter, however, there was a significant miss on the EBIT (earnings before interest and taxes) margins,” said Sanjeev Hota, an analyst at brokerage Sharekhan Ltd.
“Guidance for Q1FY19 was quite disappointing, with expectations of muted to negative sequential growth. Wipro has been struggling to report consistent growth due to ramping down of its accounts, challenges in industry pockets and continuing slippage in its traditional business,” Hota added.
For 2017-18, Wipro reported 4.6% dollar revenue growth, lower than the 4.9% growth in 2016-17, to end with $8.06 billion in revenue.
Significantly, Tata Consultancy Services added $1.51 billion in incremental revenue in 2017-18, about twice the $731 million in new business done by Infosys, and more than four times the $355.7 million in new revenue added by Wipro.
Wipro shares were little changed at Rs287.20 on BSE at the close of trading on Wednesday, a day when the benchmark index, the Sensex, fell 0.33% to end at 34,501.27 points. Wipro announced its earnings after market hours.
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