New CEO’s strong credentials rekindle revival hope for Wipro’s investors2 min read . Updated: 01 Jun 2020, 10:16 PM IST
- Outgoing CEO Abidali Neemuchwala had told analysts in April that the management change will be an opportunity for Wipro to bring in fresh ideas
- Delaporte’s being based in Europe should help the company gain a foothold in the continent, where Wipro is seen to be lagging local peers
Shares of Wipro Ltd gained about 8% in the last two trading sessions, after it announced the appointment of a new chief executive officer (CEO). The strong credentials of Thierry Delaporte, who will assume charge as CEO and managing director on 6 July and is a veteran from Europe-based Capgemini Group, have impressed investors.
Outgoing CEO Abidali Neemuchwala had told analysts in April that the management change will be an opportunity for Wipro to bring in fresh ideas and thinking in a new world. Delaporte had led several transformational programmes at Capgemini.
Notably, Delaporte’s being based in Europe should help the company gain a foothold in the continent, where Wipro is seen to be lagging local peers.
“The new CEO could help Wipro do better in Europe (a geography where Wipro has failed to even benefit from the increased acceptance for offshoring) and financial services (where Wipro has made some progress under the outgoing CEO, but has since seen growth once again fall in FY20) given his prior roles at Capgemini in these segments," Emkay Global Financial Services Ltd said in a note.
But as analysts warned, the task will not be easy for the new CEO. He is assuming charge when the industry is hit by the covid-19 pandemic. Most front-line IT companies are estimated to clock a fall in revenues in 2020-21.
Besides industry headwinds, Delaporte will have to sharpen Wipro’s focus and make strategic investments in services offerings and sales.
Compared to competitors, large or mega deal wins have been sporadic at Wipro. Consequently, the company’s revenue growth steadily lagged industry peers.
Quick project or business wins can help the new CEO establish his credentials and, at the same time, energize the existing team and infuse confidence in stakeholders, said Kotak Institutional Equities analysts.
A case in point is Salil Parekh, the current CEO and managing director of Infosys Ltd. Parekh improved order win and revenue growth rates to gain investor confidence. Incidentally, before Infosys, Parekh had a stint at Capgemini.
Also helping Wipro stock is its undemanding valuation of 12 times FY22 earnings estimates, which is a sizeable discount to other large IT sector stocks. While the low valuations and impressive credentials of incoming CEO spawns optimism, Wipro’s long struggle with growth revival warrants caution.
“We note that investors/analysts have had similar hopes around the leadership transition in 2011 and 2015-16, but have been disappointed over the medium term subsequently. Thereby, we would wait to pass a verdict on this count," said Emkay Global Financial Services analysts.