4 min read.Updated: 22 Jan 2018, 08:35 AM ISTVarun Sood
Just a matter of time before we start reporting industry-matching growth, says Wipro CEO Abidali Neemuchwala
Bengaluru: Wipro Ltd’s chief executive officer (CEO) Abidali Neemuchwala says his nearly two-year effort to bring about a turnaround at India’s third largest information technology (IT) company is almost complete and it is just a matter of time before the Bengaluru-based firm starts reporting industry-matching growth.
Significantly, Neemuchwala maintains fiscal year 2018-19 will be better than the current financial year, mirroring the optimism shared by Wipro’s larger rivals Tata Consultancy Services Ltd (TCS) and Infosys Ltd. Mumbai-based TCS, which does not give out a quarterly or yearly growth target, expects to clock double-digit growth and Infosys CEO Salil Parekh said calendar year 2018 will be better than 2017.
“I feel pretty good with the step-by-step transformation we have undertaken… We are very confident (of starting to report sequential industry-matching growth from next fiscal). It’s just a matter of time because we have addressed all company-specific challenges," Neemuchwala said in an interview on Friday.
“Every company will have some pockets which are soft. So do we… So communications vertical is one which is soft but it is because of macro issues or the environment. But I believe these soft pockets will not impact the overall growth of the company. So our guidance of 1-3% in constant currency terms (for January-March period) is our highest on organic basis in a long time, and this reflects the momentum we need," said Neemuchwala.
Wipro did not report any sequential dollar revenue growth in October-December although revenue inched up 0.9% in constant currency terms, which eliminate the effect of currency movements. However, Wipro added $248.3 million in incremental revenue in April-December, according to the management, reflecting initiatives leading to improved organic growth.
Since joining Wipro as chief operating officer in April 2015, and then taking over as CEO on 1 February 2016, Neemuchwala, formerly with TCS, has taken a string of measures to improve Wipro’s ability to complete a project (delivery side of business) and also better its ability to sell solutions to newer customers (sales side).
Neemuchwala has embarked upon what he describes as a six-pillar strategy, which includes focus on using automation tools, improving its ability to generate more revenue from existing clients, investing in newer technologies like cloud computing platforms and blockchain, and cutting reliance on sending Indians to other countries by hiring more locals in US and Europe.
From undertaking an organizational change to restructuring the company’s business in India and West Asia, Neemuchwala has ensured stability among senior management ranks with only one senior executive departure in the past 23 months.
The firm has been the most aggressive among homegrown IT firms in acquisitions (spending $1.15 billion in buying six firms since April 2015) and making minority investments in start-ups (infusing more than $32 million in 13 start-ups and corporate venture firms) to make itself future-ready and offer newer solutions which help its clients run their business better.
Still, one fallout of the aggressive acquisition approach has been on the company’s profitability, which fell to 17.2% at the end of December quarter from 20.1% at the end of March 2016. For the December quarter, it fell to 14.8% as the company made a one-time provision related to its investments and billed work done for Carillion Plc., the British firm which went bust.
Under Neemuchwala’s watch over the last seven full quarters as CEO, Wipro has managed to increase its quarterly revenue by 6.9% to $2.01 billion from $1.89 billion at the end of March 2016. Revenue from digital offerings or newer technologies recorded 46.1% growth to $505 million in the December quarter against $345.61 million in the June quarter of 2016, when the management first disclosed digital revenue.
Using more automation tools and profitability-related measures means Wipro’s headcount totalled 162,553 at December end against 156,831 at the end of March 2016. About 3,300 employees joined Wipro from the four acquisitions. So Wipro saw its workforce increase by 2,422 in 21 months.
All these measures are now getting reflected, albeit in small ways. Wipro has increased the number of clients which bring more than $50 million in revenue every year by eight to 41 from 33 at the end of March 2016. The company now gets more business from banks: BFSI (banking, financial services and insurance) accounted for $573.7 million of the company’s total revenue in December quarter, a 20% jump from $478 million at the end of March 2016. One example is more business from Citigroup Inc., which brings at least $65 million in revenue every quarter as against $40 million at the end of March 2016, according to two company executives.
Some analysts, understandably, are happy with the measures.
“Abid is quietly creating a formidable machine to take on the industry—very aggressively pursuing some strategic clients in targeted verticals, with a strong focus on leveraging Holmes (artificial intelligence platform), its Designit acquisition and Topcoder (via Appirio). While the whole industry has been flat, Wipro has used this time strategically to focus very aggressively on digital, automation and crowdsourcing," said Phil Fersht, chief executive officer (CEO) of US-based HfS Research, an outsourcing research firm.
“Things are quietly bubbling at the firm. While its financial results of late have been flat along with most of the industry, I believe it is well positioned for a strong rebound as the industry picks up new momentum."
Investors too, appear to have faith in Wipro’s story. The stock jumped 32.24% in the last calendar year, higher than the 28% return delivered by the BSE’s benchmark Sensex and the 10.83% increase in the BSE IT index.