Wipro Q2 net profit jumps 35.1% to Rs 2,552 crore on back of large deals

Abidali Z Neemuchwala, CEO & MD, Wipro
IT services major Wipro on Tuesday reported better-than-expected second quarter Q2) numbers on the back of ramping up of large deals and sound growth in key business verticals. Improved business confidence also prompted the IT firm to increase its revenue guidance for the third quarter ending December.

For Q2, Wipro posted a 35.1 per cent rise in its net profit at Rs 2,552 crore. In sequential term, net profit grew 6.2 per cent. During the quarter, consolidated revenues of the Bengaluru-headquartered firm rose 4 per cent on year-on-year (YoY) basis at Rs 15,125 crore. In dollar terms, gross revenues of the company were at $2.1 billion.

The IT services segment, which contributes more than 95 per cent of Wipro’s gross revenues, recorded a 2.5 per cent rise at $2.05 billion in the second quarter on YoY basis in constant currency term, while sequentially, revenues grew by 1.1 per cent. 

Wipro’s constant currency growth numbers were also lower than its larger peers like Tata Consultancy Services (TCS) and Infosys. While TCS’ revenues grew 8.4 per cent YoY on constant currency term, Infosys reported 11.4 per cent growth during last quarter.

For the third quarter, Wipro has guided to post revenues of $2.065 billion to $2.106 billion, which is translating into sequential growth of 0.8-2.8 per cent. The revenue growth guidance was higher than projections of 0-2 per cent that the IT firm had given for Q2.

“We had a good in-quarter execution on both revenues and margins. The overall growth was broad based with six of seven industry verticals growing YoY,” said Wipro Chief Executive Officer and Managing Director Abidali Z Neemuchwala. “Despite current macro environment, we continue to see an improving quarterly growth trajectory which is reflected in Q2 performance and guidance of the third quarter.”

In Q2, Wipro's operating margin dropped by 30 basis points to 18.1 per cent owing to a wage hike and investment in increasing the bench strength. However, margins improved 310 basis points on YoY basis. “We delivered operating margins in tight range after absorbing the impact of two months of wage hike. Growth remains our priority,” said Jatin Dalal, chief financial officer at Wipro. 

Its largest vertical — banking, financial services, and insurance (BFSI) contributing 31.3 per cent revenues — grew 5.9 per cent YoY on constant currency basis. It fell 0.1 per cent sequentially. “We see softness in the spend by banking and capital market clients in some pockets and delay in completion of some digital transformation projects,” said Neemuchwala. 

Among other verticals, communication and energy, resources and utilities recorded YoY growth, while the company said it had started to see an uptick in manufacturing and health business units. 

Wipro, which doesn't provide the total contract value (TCV) of deals signed, said its pipeline of deals remained robust. “Our Middle East restructuring is on track and is reflected in some of the deals that we announced like ICICI,” Neemuchwala said. 

The IT firm has secured $300 million IT outsourcing deal from ICICI after it acquired the business from Vara Infotech in September this year.

In anticipation of demand, Wipro added 3,000 fresh graduates in the past quarter globally, while it added 6,603 new hires to take its total employee count to 181,453. The company's attrition rate dipped by 60 basis points on sequential term to 17 per cent during the last quarter. 

"In-line revenues, better than expected margins and decent guidance range for third quarter bodes well for the company," said ICICI Direct in a research note.