BackWipro’s outlook, guidance make up for low volumes
Wipro’s outlook, guidance make up for low volumes
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Wipro’s results for the quarter ended 30 September, however, are weaker compared with TCS. Volumes of the global IT services business were flat quarter-on-quarter (q-o-q), if one were to include the benefit of higher billing days in the September quarter. TCS reported a volume increase of around 5% for its international operations q-o-q.
Wipro, however, reported a smart increase in price realizations, while its competitors reported a drop in pricing last quarter. Average billing rates for onsite projects increased by 1.8% in constant currency terms and those for offshore projects increased by 1.5%.
This is excluding the impact of higher billing days in the September quarter. These billing day adjustments are being made to make the numbers comparable with competitors.
For Wipro, the impact of higher or lower number of billing days is reflected in price realizations, while for its competitors, these are reflected in volumes. Wipro has managed to close its pricing gap with rivals considerably in the past few quarters.
Thanks to the increase in billing rates and due to cost containment measures such as employee rationalization, the company reported a 1.43 percentage points improvement in operating margin for its global IT business. The segment’s profit grew smartly by 10.2% sequentially.
Analysts point out that involuntary attrition is rather high and the company’s policy of having stringent performance standards in the past few quarters may affect its ability to hire talent in the future.
While the profit growth is impressive, flat volume growth was disappointing. So is the fact that revenues from the financial services sector were flat q-o-q. Both TCS and Infosys Technologies Ltd reported a bounce in revenues from this business segment.
But investors can take heart from the company’s revenue guidance for the December quarter, which implies a growth of 2.5-4.5% q-o-q. Note that the December quarter normally has a lower number of billing days because of winter holidays.
Thanks to the strong guidance and the impressive margin performance, the company’s shares gained 2% in a weak market. They now trade at around 20 times estimated earnings for the current fiscal to March and more than capture growth opportunities for the company.
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