Wipro shares tank 2.5% as client’s insolvency weighs on profitability of India’s 3rd largest IT company

Shares of the Bengaluru-headquartered IT giant Wipro tanked over 2.5% to the lowest level since 28 March 2018 after the company said that client’s insolvency weighs on the profitability and revenue of India’s third-largest IT company Wipro. The stock of Wipro marked the lowest level since 28 March 2018 and the biggest intraday drop since 26 March 2018. Earlier yesterday, Wipro said that the revenue and profitability will be impacted due to an insolvency petition filed by an Indian telecom client. In the morning trades on Tuesday, shares of Wipro dropped as much as 2.56% to a day’s low of Rs 277.75 on NSE while the stock plunged 2.07% to a day’s low of Rs 278.7 on BSE.

“It is estimated that this development will have an impact on both revenue and profitability. The company is likely to see an impact on profitability at the net income level in the range of 65-75 basis points of the consolidated revenues for the quarter ended March 31, 2018. The impact of this client insolvency petition will reflect in the financial results of the company for the quarter and year ended March 31, 2018,” Wipro said in an exchange filing on Monday.

A little high trading volume was observed in the shares of Wipro, as at 12:10 pm, more than 27.1 lakh shares exchanged hands on both NSE and BSE with about 26 lakh on NSE alone. “In the year 2008, the Company signed a multi-year Outsourcing Services Agreement with a Telecom Services Provider (client) in India, which was subsequently renewed in the year 2013,” Wipro said further.

“On February 28, 2018, the client filed a petition to initiate its Corporate Insolvency Resolution Process (CIRP) with the National Company Law Tribunal (NCLT). The Company subsequently submitted its claim on March 28, 2018. Since then, the Company has been engaged with the Insolvency Resolution Professional (IRP) to discuss the potential outcome of the process,” Wipro added. Shares of Wipro have returned about 12% over the course of last one year but have dropped nearly 10% in the calendar year 2018.

Earlier on Monday this week, Wipro informed that the company will announce the results for the fourth quarter and year ended 31 March 2018 on Wednesday, 25 April 2018 after stock market trading hours in India.

Wipro Technologies (Wipro Ltd)