Companies
Wipro to rebound as market recovers; top exits no worry, says CEO
Summary
- The statement from Thierry Delaporte, who took over as Wipro boss in July 2020, comes at a time when at least half a dozen brokerages expect Wipro’s full-year revenue to decline this fiscal
GURUGRAM : Wipro Ltd will return to a “great level of growth" when market conditions improve, chief executive officer Delaporte said in an interview where he defended his leadership style and dismissed worries about senior-level exits.
The statement from Delaporte, who took over as Wipro boss in July 2020, comes at a time when at least half a dozen brokerages expect Wipro’s full-year revenue to decline this fiscal year.
“There is nothing inside the company that would make us grow less now than two years ago. So, there is no doubt that when the market is going back, we’ll get back to a great level of growth," Delaporte said at the Wipro office in Gurugram.
Delaporte said he is not worried about a series of senior management exits because he is trying to transform the company, and some people who are not aligned with these objectives would leave.
“If you want to change an organization, you have to bring new talent into the organization. There’s no way applying the same recipe to the same people will deliver different results. The fact that people leave is okay. We are retaining the talent we need to retain," said Delaporte, who is based out of Paris.
Wipro, which clocked $11.2 billion in revenue last year, offers quarterly revenue forecasts but not that for the full year. In the June quarter, its quarterly dollar revenue fell 2.1% from the March quarter, and it expects September-quarter revenue to fall up to another 2% in constant currency terms. Wipro will declare its second-quarter earnings in October.
Fears of a recession in the US and Europe have made Fortune 1000 companies wary of starting new IT projects, hurting Indian technology services firms, including Tata Consultancy Services Ltd, Infosys Ltd and Wipro. Revenue growth for Indian IT firms is expected to be the lowest this year since the global financial crisis brought the business world to its knees in 2008.
Even in the backdrop of weakening growth, Wipro is expected to trail its larger rivals, with many analysts expecting a decline in full-year revenue.
“Wipro is struggling in its turnaround effort, has a weak mega-deal pipeline, and is vulnerable to vendor consolidation," Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S. and Vamshi Krishna wrote in a note on 18 September. Kotak estimates full-year revenue to slip 0.3%, while Goldman Sachs, in a note dated 22 August, said revenue from IT services business could fall up to 1.9%. Nomura expects Wipro’s revenue to slip 0.8%.
Such a decline will be a reversal in fortunes for the Bengaluru-based company, which saw dollar revenue growth of 27.3% and 7.8% in FY22 and FY23, respectively.
Under Delaporte, Wipro’s profitability has fallen the most as well: Operating margin narrowed from 19% at the end of June 2020 to 16% at the end of June 2023.
In response, investors have dumped Wipro. Its shares, which touched a record ₹715.35 in December 2021, closed at ₹418.5 on Friday at National Stock Exchange. However, its shares are up 6.5% year to date, better than Infosys, which is down 1.9% between 2 January and 22 September. Shares of HCL Technologies Ltd and TCS have done better during the period, gaining 22.6% and 10.5%, respectively.
Still, some analysts advise patience.
“Without a doubt, Thierry is undertaking a massive transformation. And the good bit is that there is some earnestness in his commentary," said a Singapore-based analyst at a foreign brokerage, on the condition of anonymity. “We need to wait to see how the company does when the market conditions improve to know if his strategy has really worked."
