Wipro Q2 net profit jumps 35.1% YoY to Rs 2,552.6 crore

Abidali Neemuchwala, CEO of Wipro. Photo: PTI
Wipro on Tuesday posted a 35.1 per cent year-on-year (YoY) jump in its net profit at Rs 2,552.6 crore for the second quarter of the financial year 2019-20 (FY20). On sequential basis, the figures grew 6.9 per cent.

"Revenue growth in constant currency (CC) terms is 1.1 per cent while the YoY growth on Constant Currency basis (after adjusting Q2’19 revenues for the impact of divestment of our Workday & Cornerstone business) is 3.8 per cent," the press release said. 

 
Gross revenue for the period came in at Rs 15,130 crore, up 4 per cent YoY. Earnings per share (EPS) for the quarter was Rs 4.3 per share and grew 36.7 per cent YoY, the company said in its statement. 

The effective tax rate for Q2'20 was 18.3 per cent vs 21.8 per cent in Q1’20 and 22.1 per cent in Q2’19. 

“We had a good in-quarter execution on both revenues and margins. The overall growth was broad based with 6 out of 7 industry verticals growing on a YoY basis and we signed a large deal in India aligned to our strategy of taking global offerings to India customers," said Abidali Z Neemuchwala, CEO and Managing Director.

The IT Services operating margin grew 3.1 per cent YoY to 18.1 per cent. On quarter-on-quarter (QoQ) basis, the numbers slipped 0.3 per cent. Operating profit for the company came in at Rs 2,673.5 crore, up 29.7 per cent YoY. Sequentially, it grew 5.4 per cent. 

As regards the outlook for the quarter ending December 31, 2019, the company said it expects revenue from IT Services business to be in the range of $2,065 million to $2,106 million. This translates to a sequential growth of 0.8 per cent to 2.8 per cent.   

Further, during the quarter, Wipro concluded the buyback of 323.1 million equity shares as approved earlier by the Board of Directors at their meeting held on April 16, 2019. This has resulted in a total cash outflow of Rs 10,500 crore ($1.49 billion).

IT Products Segment Revenue for the quarter was Rs 320 crore while IT Products Operating Margin for the quarter was 4.6 per cent.

Among other highlights, attrition on LTM (last twelve months) basis has reduced to 17 per cent and localisation in US now stands at 67.8 per cent. FPP (Full-packaged product) mix at an all time high of 61.9 per cent. Digital business grew 29 per cent YoY, now stands at 39.6 per cent. Wipro hired over 3,200 freshers during the quarter. 

"Growth in BFSI is expected to be partially impacted by weak IT spendings by European banks. We expect Wipro to guide for 1-3 per cent QoQ CC growth for 3QFY20. We expect IT Services EBIT margin to be at 18.7 per cent, up 30bp QoQ; cost optimisation measures will be partially offset by two months of wage hike in 2QFY20. Our PAT estimate for the quarter is Rs 2,240 crore, -4 per cent QoQ and -2.1 per cent YoY, due to lower other income," analysts at Motilal Oswal Financial Services (MOFSL) had written in a results preview note.