Digital deal sizes are now getting bigger, says Wipro CEO

Wipro, India’s third largest IT services exporter, reported a 11.6% sequential decline in net profit for the third quarter of the current fiscal due to a one-time financial impact caused by the insolvency of a client from its energy, natural resources and utilities vertical. According to Wipro, the impact from the insolvency was Rs 317.50 crore ($49.7 million). The net profit at the end of three-month period ended December 2017 stood at Rs 1,936 crore against Rs 2,190 crore in the comparable period three months ago. The one-off insolvency measure also impacted the operating profit margins of Wipro by 3.6%, declining to 14.8% at the end of the third quarter from 17.3% in the second quarter. According to Wipro, adjusted for the insolvency event, the OPM for the quarter would have been 17.2%. The IT services revenues, excluding the hardware segment, and which is Wipro’s mainstay business, for the quarter remained flattish and came in at Rs 13,325 crore. The performance of Wipro came below the market expectations. Wipro CEO Abidali Neemuchwala attributed this subdued performance in the third quarter due to the seasonality of the period, which traditionally has longer holidays and slow business momentum.

However, Neemuchwala expressed confidence on the outlook for 2018 calendar year saying the demand environment is robust. “We continued to improve our growth trajectory driven by strong momentum in BFSI and uptick in healthcare. This is also reflected in our outlook for the next quarter,” he said. Wipro, which provides revenue guidance for the IT services business, has projected a growth in the range of 1-3% in US dollar terms for the fourth quarter of FY18. In dollars, Wipro’s IT services revenues at $2.01 billion for the third quarter recorded a flattish sequential growth while in constant currency, it saw a rise of 0.9%. The net profit for the period was $303 million which indicated a sequential decline of 10%. Wipro’s financial results were announced post the close of trading. The stock ended at Rs 328.45, with a gain of 0.74%. The performance of Wipro in the third quarter was almost in line with its other peers like Tata Consultancy Services (TCS) and Infosys. TCS and Infosys registered a 1% sequential rise in US dollar revenues.

During the third quarter, North America — the largest market for Wipro —recorded a 1.1% sequential decline of growth. However, Neemuchwala said, Wipro has a robust pipeline from the US market with strong order book.The European geography remained strong for Wipro recording a sequential growth of 3.3% while the India and West Asia market grew by 1.2%. Energy, natural resources and utility verticals recorded a sequential decline of 7.9%, while the communications segment dipped by 2.1%. The standout vertical for Wipro during the quarter was financial services, which recorded a sequential growth of 3.3%. The employee headcount of Wipro at the end of third quarter declined by 1,206 to 1,62,553, when compared to the second quarter. Wipro HR head Saurabh Govil said the company continues to make robust hiring across all geographies and there is no cause for worry.