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Business News/ Companies / Company Results/  Wipro Q4 earnings: Five things to watch out for
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Wipro Q4 earnings: Five things to watch out for

While Wipro has stopped calling out digital revenues separately, the company has been a key beneficiary of the digital transformation journey of its clients. So, investors will closely monitor commentary on uptick in its digital businesses

Thierry Delaporte, CEO and MD, Wipro. (Mint)Premium
Thierry Delaporte, CEO and MD, Wipro. (Mint)

BENGALURU: When Thierry Delaporte took charge as the chief executive of Wipro Ltd in July last year, his one clear mandate was to bring back the company to growth. As part of this, Delaporte has brought about significant changes to Wipro, such as simplification of its operating model and hiring many senior leadership roles to drive growth in different geographies. While investors are optimistic about these changes, execution holds the key.

After reasonably strong earnings from Tata Consultancy Services (TCS) Ltd and a robust FY22 guidance from Infosys Ltd, investors will closely monitor Wipro’s March quarter earnings. As per consensus estimates of a survey by Bloomberg, Wipro is expected to report a net profit of 2,873.70 crore and revenue of 15,986.80 crore for the fiscal fourth quarter (Q4).

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Mint highlights five things to watch out for in Wipro’s Q4 earnings that will be declared on 15 April, after market hours.

Revenue guidance and growth

Wipro which provides a quarterly revenue guidance is expected to guide for a 0.5-2.5% sequential revenue growth for the June quarter. “June is a seasonally weak quarter; yet we expect reasonable growth in the quarter. We expect focus on the long-term profitability target especially in light of the margin-dilutive Capco acquisition," Kotak Institutional Equities said. The brokerage firm expects Wipro to post a sequential revenue growth of 3.1% in constant currency primarily driven by ramp up of large deals won in the earlier quarter.

Deal pipeline

Last year, Wipro signed a deal with German retailer Metro AG with an estimated deal value of up to $1 billion for nine years. Deal pipeline and deal closure momentum will be a key parameter to monitor. “Wipro has been fairly active in large deals. We expect a solid quarter for deal wins, albeit lower than the previous quarter," Kotak Institutional Equities said.

Digital growth

Analysts expect the IT services sector to sustain double-digit topline growth in the medium term. “This will be driven by driven by large deals on a full-scale digital transformation, tail of projects steered by increased focus on workplace management, and higher spend on cloud migration by large corporates," Motilal Oswal said.

While Wipro has stopped calling out digital revenues separately, the company has been a key beneficiary of the digital transformation journey of its clients. So, investors will closely monitor commentary on uptick in its digital-led businesses.

Future of M&As

Wipro has been very active in mergers and acquisitions (M&As) ever since Thierry Delaporte took over as the chief executive of the company. In March, Wipro said it will acquire British consulting firm Capco for $1.45 billion in cash, in the company’s biggest bet since it was founded. Through 2020, it acquired leading Salesforce multi-cloud partner 4C; engineering services company Eximius Design; and Encore Theme Technologies, a specialist in providing cloud solutions in financial services. Investors will closely monitor Delaporte’s commentary on the company’s M&A strategy for FY22.

Management commentary on outlook

Investors will closely monitor the management’s commentary on demand outlook and market share gains. Under the leadership of Delaporte, Wipro has made some aggressive senior level local hires in the past two months. Effective January, Wipro has also created a new organisational structure as part of which it has created four strategic market units (SMUs), consisting of Americas 1, Americas 2, Europe, and Asia Pacific Middle East Africa (APMEA), and two global business lines (GBLs) focussed on digital and new-age businesses.

"Stabilisation of the new organisational structure and external hires will be an interesting dynamic of focus," Kotak Institutional Equities said.

While there is a lot of optimism on Delaporte’s turnaround strategy among investors, execution will be key.

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Published: 15 Apr 2021, 08:46 AM IST
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