Wipro Ltd, India’s third-largest information technology (IT) services firm, on Wednesday joined larger rival Infosys in forecasting higher growth in the second half of the current financial year than the first. The company, however, cautioned that lower productivity for clients during the holiday season in the US and Europe could hit business in the October-December quarter.
The firm reported seven per cent net profit growth in the September quarter to Rs 2,235 crore. With a revenue of Rs 12,513 crore, it met the lower end of its guidance. Margins, at 20.7 per cent, were slightly lower than the 21 per cent reported in the previous quarter. The impact of wage increases given in June also showed in the results for the September quarter.
Wipro’s 3.1 per cent revenue growth for the quarter was lower than those of larger rivals TCS (3.9 per cent) and Infosys (5.9 per cent). While HCL Technologies’ dollar revenue had grown a mere 0.5 per cent on a sequential basis, TCS, Infosys and Wipro reported growth rates of three per cent, six per cent and 2.1 per cent, respectively.
Wipro forecast its revenue in the December quarter to be in the range of $1.84 billion to $1.88 billion — year-on-year growth of 0.5 per cent to 2.5 per cent — as it anticipated unprecedented closure at its clients in the manufacturing, retail and banking sectors during the holiday season. The Street had been expecting a growth guidance of 2-4 per cent.
Analysts say Wipro might meet the upper end of its guidance due to stability in the energy vertical, which had been down due to low oil prices and reduced global demand, and client additions.
“It seems the company was hinting that the financial year (2016-17) will be a better one. The commentary remains similar to those of other players. Wipro, too, is saying that the second half will be better. TCS, Infosys and HCL Tech have maintained that their order books are much stronger,” said Sarabjit Kour Nangra, IT research head, Angel Broking.
Wipro added 67 customers in the September quarter to take its total tally to 1,100.
Infosys expects its full-year growth to be between 10 per cent and 12 per cent. Its CEO Vishal Sikka had said on October 12 after announcement of the September quarter results: “Even if we are flat (in July-September) we will end up at the higher end of the 10-12 per cent guidance… the second half traditionally has seasonal dips in growth, so we are going to work very hard to make sure we buck the trend.”
TCS, which does not provide revenue forecast, was cautious. On October 13, its CEO N Chandrasekaran said: “In terms of our outlook for the rest of the year, we expect a tapering of sequential revenue growth in the second half, like in earlier years.”
Indian IT services firms are faring better than their global peers, even as their biggest market, the US, is showing higher economic growth. On Tuesday, IBM, the world’s largest computer company, saw its third-quarter revenue declining 14 per cent to $19.3 billion, a 14th straight quarter of shrinking sales. IBM’s services revenues, which Indian IT firms benchmark with, were also down. Its global technology services fell 10 per cent to $7.94 billion. IBM Chief Financial Officer Martin Schroeter said the strategy shift towards cloud computing and data analytics had an impact on existing business, but the future seemed bright.
Wipro CEO T K Kurien said in an interview on Wednesday: “We see that the US market is clearly on the upswing for us. If you see the share of the US as part of the overall business, it has grown to 52 per cent from around 48 per cent a year and half ago.”
Wipro said it was witnessing faster growth in businesses using digital technologies, with more transactions from customers in lower value deals, but there was an opportunity to mine those for increased business. This was also due to a reduction in larger deals from customers who traditionally rolled out tenders of hundreds of millions of dollars to IT vendors.
“We continue to see strong competition around large deals and there is pressure on pricing with respect to new deals. The deal sizes are getting smaller and the number of multi-hundred-million-dollar deals has reduced in the market place,” said Kurien.
Like peers TCS and Infosys, Wipro also said its digital business was doing well. Wipro HOLMES, its cognitive intelligence platform, is engaged in 12 projects in business-critical areas for marquee customers. “There is no large outsourcing deal in the digital business. It is a series of small deals that drive business,” Kurien said.
What continue to be pulling down the company are its energy and utilities verticals (constant currency growth of 0.3 per cent) and the Europe geography. The company, however, said the verticals like health care and life sciences had bounced back with 4.2 per cent sequential growth. Global media and telecom grew by 4.4 per cent sequentially, though the company did see some pressure going ahead. The US grew 3.6 per cent and Europe was soft at 1.4 per cent.
During the September quarter, the company’s headcount increased by 6,607 to 168,396.
Ahead of the announcement of the quarterly results, the Wipro shares on Wednesday closed at Rs 577.9 apiece, 1.04 per cent higher than their previous close. The BSE IT Index rose 47.8 points, or 0.43 per cent, to close at 11,284.36.