Wipro Q2 Net Profit Almost Flat At Rs 2,667 Crore; Expects IT Services Revenue To Dip In Q3

IT services company Wipro on Wednesday reported almost flat consolidated net profit at Rs 2,667.3 crore for the September quarter, trailing street expectations, and projected up to 3.5 per cent fall in revenue in the current quarter on weak global economic outlook and uncertain business environment.

The company had posted a profit after tax of Rs 2,649.1 crore a year ago.

The IT services business revenue is expected to contract 3.5 per cent to 1.5 per cent in constant currency terms, the company said, outlining its sequential guidance as Wipro CEO Thierry Delaporte flagged the prevailing uncertainty in business environment, lower discretionary spends, and acknowledged that conversion of order books has indeed become slower.

For the last three quarters, the company "is in a different market and that is a fact", Delaporte said, asserting that Wipro is keen that when the market rebounds, it is ready and agile.

Delaporte expressed hope that there will be rebound in the next few quarters.

Wipro said it expects revenue from IT Services business segment to be in the range of USD 2,617-2,672 million, which essentially translates to sequential guidance of -3.5 per cent to -1.5 per cent in constant currency terms.

The consolidated revenue from operations declined marginally to Rs 22,515.9 crore during the reported quarter from Rs 22,539.7 crore in the year-ago period.

The large deal bookings reached USD 1.3 billion, an increase of 79 per cent on-year and 6 per cent on-quarter.

"The business environment has been uncertain, inflation and interest rates have stayed high. Clients are continuing to take a much more rigorous look at their investments, they are hyper-focused on efficiency, on optimisation of existing investment and faster return on new ones," Delaporte said during Q2 earnings briefing.

The lower discretionary spend is a reality today, the Wipro top honcho said, adding that conversion of order books has become slower.

"Transformation programmes that are nearing their project terms are being replaced by new ones but at a slower place... all of it has impacted topline growth as well... But even though there is some softness in topline growth, we are holding margins steady," he observed.

The IT services revenue declined to Rs 22,395.8 crore in the September quarter from Rs 22,520.5 crore in the year-ago period.

Wipro business from top contributing verticals, including banking, financial services and insurance, manufacturing, and consumer declined.

The company conceded that the market continues to be difficult for consulting business.

While attrition at the company declined to the lowest level of 15.5 per cent in the last six quarters, the total headcount fell by about 7 per cent to 2,44,707.

On campus hiring plans, Wipro made it clear that it would prioritise honouring offers that have already been made.

"Our first priority is honour every offer made... we will do that before we go to campuses," Wipro Chief Human Resources Officer Saurabh Govil said.

Despite the global slowdown, Wipro will continue to invest in people through training opportunities, leadership development and salary hikes to reward them, Delaporte said.

Europe, which has been a growth engine for Wipro over the last two years, saw slowing demand and re-prioritisation of client spends resulting in revenue decline of 5 per cent on a sequential basis.

"But we are seeing strong traction on the order side... which in total contract value terms increased 10 per cent in the second quarter on a year-on year basis. Given our strong bookings in this market we are confident of a swift rebound," Delaporte said.

Ongoing transformation efforts have enabled the company to sustain margins despite softer revenues, he said, adding that these include several programmes around operational efficiency.

The company is pivoting business to reduce loss-making accounts and is working on faster bench deployments, he said, asserting that profitable and sustainable growth was a top priority at Wipro.

The Wipro board also approved restructuring proposals of the company to consolidate business operations, optimise legal entity structure, reduce multiplicity of legal and regulatory compliances.

Under the restructuring plan, five firms -- Wipro HR Services, Wipro Overseas IT Services, Wipro Technology Product Services Pvt Ltd, Wipro Trademarks Holding and Wipro VLSI Design Services India Private with Wipro Ltd.