At a time when Infosys CEO Vishal Sikka has almost turned around Infosys and restored its bellwether status, Wipro’s newly appointed CEO Abidali Z. Neemuchwala has a mammoth task ahead of him if Wipro has to stay put in the race.
Wipro’s net profit for the fourth quarter (January-Mar) dipped 1.6 per cent on year and grew just 0.04 per cent sequentially to Rs 2,235 crore. Infosys on the other hand beat analyst estimates and announced a 3.81 per cent sequential rise in net profit to Rs 3,597 crore. Larger rival Tata Consultancy Services (TCS) also beat estimates as net profit shot up 5.42 per cent on quarter to Rs 6,413 crore.
For the full year ended March 31, 2016, Wipro added incremental revenue of just $264.7 million, lower than $463 million in the previous year and notably lower than that of TCS and Infosys.
Wipro’s dollar revenue guidance, closely watched by investors and analysts, has also been disappointing. It has forecast a topline growth guidance of 1-3 per cent for the IT services business during the first quarter (Apr-Jun) of this fiscal. “The revenue guidance for 1Q indicates marginal growth on an organic basis, which in disappointing,” said Dipen Shah, Senior Vice-President & Head of Private Client Group Research, Kotak Securities.
Infosys on the other hand projected an optimistic dollar revenue growth guidance 11.8-13.8 per cent for FY17. This is above IT industry body NASSCOM’s projected growth of 10-12 per cent for the year. TCS has ceased giving guidance since past few years.
Typically, March is a seasonally weak quarter for IT companies as clients are in the process of deciding their IT budgets for the year. In that context, Wipro seems to have fared modestly compared to its peers as far as revenue growth on a sequential basis is concerned. For instance, in dollar terms, Wipro’s IT services revenue touched $1.88 billion, recording a sequential growth of 2.4 per cent in Q4. In contrast, TCS reported a dollar revenue growth of 1.5 per cent sequentially to $4.21 billion while Infosys reported a revenue growth of 1.6 per cent sequentially to $2.44 billion.
“Wipro’s revenues matched up with expectations but margins were below our expectations. Client – specific challenges in BFSI impacted growth while Energy vertical continued to witness headwinds… Wipro continues to be impacted by the lack of scale up in large accounts, apart from the continuing challenges in the Energy / Telecom segments. Consistent revenue growth in future will make us more positive on the stock,” said Shah of Kotak Securities.
Wipro’s Finance Solutions declined 0.9 per cent on quarter while Global Media & Telecom shrunk 0.2 per cent. The energy business declined 0.6 per cent sequentially.
Despite challenges in sectors such as BFSI and Energy & Utilities, Neemuchwala is optimistic Wipro will be able to capitalise on the changing trends in client spending from the traditional run-side of the business to the change-side of the business. He said during the Q4 earnings that Wipro is focusing on key themes such as – digital, client mining, geography (high localisation), non-linearity, hyper automation, and building & leveraging the partner ecosystem.
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Ayushman is an award-winning business and tech journalist based in Bangalore, with diverse experience in journalism across newspaper, magazine and news wire. He is the recipient of the 15th annual Polestar Award in Jury's category for excellence in journalism in 2013. He is also an NSE-certified capital market professional (NCCMP) and driven by his interest, he has also attended hands-on workshops on cloud computing to stay on top of technology journalism