On a high after restructuring and with several large deals in hand, Wipro, India’s third-largest IT services company, on Tuesday reported a consolidated net profit of Rs 1,942 crore for the quarter ended September, up 19% over the previous quarter and 28.6% on-year.
Consolidated revenue, at Rs 10,991 crore, was up 13% on-quarter and 19% on-year.
Earnings before interest and tax, or Ebit, margin also grew around 250 basis points on-quarter to 22.5%, as rupee-depreciation benefits and improved execution offset the impact of wage hikes given out in June and September.
“IT services revenue came in at $1,631 million, up 2.8% on-quarter in dollar terms versus expectation of around 3% growth, though in constant currency terms, revenues grew 3.2% – the highest in the last seven quarters,” said Ankita Somani of Angel Broking. The result was broadly in line with estimates in terms of revenue, though it exceeded expectations on both operational and bottomline fronts, she said.
The performance, however, came up short in comparison with its top three peers, TCS, Infosys and HCL Technologies, which logged dollar-revenue growth of 5.4%, 3.8% and 3.6%, respectively.
The company gave a dollar-revenue guidance for its mainstay IT services business during October-December – a seasonally weak quarter – to 1.8-3.6%, a notch above analyst expectations of 1.5-3.5% growth.
Wipro said revenues from its 10 biggest customers rose 4.1% over the previous quarter, faster than its overall IT services sales growth of 2.7%.
During the quarter, Wipro added 45 new clients, but the active clients decreased to 942 from 946 in the last quarter.
“Wipro’s margins were higher than expectations despite wage hikes, partly due to a marginal reduction in employee strength, and improved utilisation levels during the quarter. The company’s focus on mining existing clients and winning large deals seems to be yielding results,” said Dipen Shah, head of private client group research, Kotak Securities.
Hiring during the quarter declined marginally to 147,216 from 147,281 in the last, while attrition stood at 15.4%, compared with 13% the previous quarter.
Utilisation increased 140 bps to 66.1% from a historic low of 64.7% in the last quarter. However, this number is still much lower than Wipro’s peers, whose utilisation ranges between 75-85% currently.
“We see modest changes to our FY14/15 estimated earnings of ~Rs 30/35,” said Dhananjay Sinha of Emkay Global Services, pointing out that the results were better than expected and there were “better margin assumptions ahead.”
In terms of geography, APAC and emerging markets led the growth for Wipro at 6.3%, while the US grew 2.9% on-quarter, and Europe grew 2.3% in the quarter. Surprisingly, despite several large deal wins in the Middle East, Wipro’s revenues from India and the Middle East grew the slowest at 2.2%. Vertical-wise, healthcare continued to lead revenue growth at 5.5%, followed closely by retail, BFSI and manufacturing, while telecom continued to decline at 1.1%.
“Consistent growth in line with industry peers, in the future, can lead to better valuations for the company,” said Shah.
Consolidated revenue, at Rs 10,991 crore, was up 13% on-quarter and 19% on-year.
Earnings before interest and tax, or Ebit, margin also grew around 250 basis points on-quarter to 22.5%, as rupee-depreciation benefits and improved execution offset the impact of wage hikes given out in June and September.
“IT services revenue came in at $1,631 million, up 2.8% on-quarter in dollar terms versus expectation of around 3% growth, though in constant currency terms, revenues grew 3.2% – the highest in the last seven quarters,” said Ankita Somani of Angel Broking. The result was broadly in line with estimates in terms of revenue, though it exceeded expectations on both operational and bottomline fronts, she said.
The performance, however, came up short in comparison with its top three peers, TCS, Infosys and HCL Technologies, which logged dollar-revenue growth of 5.4%, 3.8% and 3.6%, respectively.
The company gave a dollar-revenue guidance for its mainstay IT services business during October-December – a seasonally weak quarter – to 1.8-3.6%, a notch above analyst expectations of 1.5-3.5% growth.
Wipro said revenues from its 10 biggest customers rose 4.1% over the previous quarter, faster than its overall IT services sales growth of 2.7%.
During the quarter, Wipro added 45 new clients, but the active clients decreased to 942 from 946 in the last quarter.
“Wipro’s margins were higher than expectations despite wage hikes, partly due to a marginal reduction in employee strength, and improved utilisation levels during the quarter. The company’s focus on mining existing clients and winning large deals seems to be yielding results,” said Dipen Shah, head of private client group research, Kotak Securities.
Hiring during the quarter declined marginally to 147,216 from 147,281 in the last, while attrition stood at 15.4%, compared with 13% the previous quarter.
Utilisation increased 140 bps to 66.1% from a historic low of 64.7% in the last quarter. However, this number is still much lower than Wipro’s peers, whose utilisation ranges between 75-85% currently.
“We see modest changes to our FY14/15 estimated earnings of ~Rs 30/35,” said Dhananjay Sinha of Emkay Global Services, pointing out that the results were better than expected and there were “better margin assumptions ahead.”
In terms of geography, APAC and emerging markets led the growth for Wipro at 6.3%, while the US grew 2.9% on-quarter, and Europe grew 2.3% in the quarter. Surprisingly, despite several large deal wins in the Middle East, Wipro’s revenues from India and the Middle East grew the slowest at 2.2%. Vertical-wise, healthcare continued to lead revenue growth at 5.5%, followed closely by retail, BFSI and manufacturing, while telecom continued to decline at 1.1%.
“Consistent growth in line with industry peers, in the future, can lead to better valuations for the company,” said Shah.
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