Wipro Q2 revenue up, operational metrics lag

IT services revenue came in line with analyst estimates registering 15.4% growth to ₹22,363 crore from ₹19,379 crore in the year earlier. Its dollar revenue was up 8.4% to $2,797 million from $2,580 million a year ago.

The company estimates IT services dollar revenue at $2,811-2,853 million for the quarter ending December, to register 0.5-2% sequential growth. IT services earnings before interest and taxes (Ebit) fell 1.8% to ₹3,380.1 crore from ₹3,441.3 crore in the year ago. Ebit margin saw a fall of 270 basis points to 15.1% compared to 17.8% in the corresponding quarter of the previous year.

“Most of the growth in Wipro’s IT services revenues seem to be coming off the back of previous order completions. Their new order bookings for September quarter are not particularly strong on IT services, and other sectors such as healthcare and pharma in markets such as the European Union and North America seem to be the key drivers this quarter,” said Akshara Bassi, research analyst, global cloud market, Counterpoint Research.

“A weakening profit after tax is also a concern of weakness in the overall core business, since it shows that IT service bookings in the present quarter may not be particularly strong,” she added.

Shares of Wipro ended 0.85% higher at ₹407.75 apiece on the BSE on Wednesday. The stock has declined by 7.4% so far in 2022. Wipro witnessed 24% year-on-year rise in orderbook, in total contract value terms, for the quarter. Large deal bookings were up 42% in the first half of the fiscal year, the company said.

“Our performance in the quarter is further proof that our strategy is yielding intended results. The solid growth in our bookings, large deal signings and revenues underscore improved market competitiveness and enhanced value proposition,” said Thierry Delaporte, managing director and chief executive, Wipro.

“Overall, even though Wipro bagged a couple of significant contracts in India, the domestic market accounts for 1-2% of its overall IT services revenue. This means the dynamics of the Indian market are not likely to have a major impact on its overall performance going forward,” Bassi said.

However, a section of analysts said the Indian market is poised to grow.

“For IT services the domestic market will improve further. In terms of products and platforms, software as a service offerings can suffer a bit, since even the big firms are struggling as discretionary spends have been put on hold. However, for homegrown IT services companies only 5% of their business is in SaaS, while 95% is in the technology services space. This should see the sector continue to be resilient,” Sandip Agarwal, executive director, institutional equities, Nuvama Group (formerly Edelweiss Securities), said.

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