Large Deal Wins Lift Wipro IT Services Revenue In Oct-Dec

The double-digit revenue rise is in line with that of peers, including Tata Consultancy Services, Infosys, and HCL Tech, which have also reported an increase in mid-high teens. Wipro’s board has approved an interim dividend of ₹1 per share.

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Financial services led the pack of industry verticals for Wipro, contributing nearly 35% to overall revenue, followed by consumer (18.9%) and health (12%).

Akshara Bassi, research analyst, global cloud and servers, Counterpoint India, said the deal momentum would “surely see some impact" in 2023 amid the recessionary environment.

Wipro’s order book grew 26% from a year ago to a record $4.3 billion in Q3, with 61.7% comprising integrated digital, engineering and application services, while 38.3% came from cloud infra, digital, risk enterprise and cybersecurity services.

Attrition eased for the fourth consecutive quarter to 21.2% from 22.7% a year earlier, down 150 basis points. It was down 180 bps on a sequential basis. One basis point is one-hundredth of a percentage point.

Wipro’s falling attrition mirrors the downward trajectory of the trend in the IT sector, with peers like TCS, Infosys and HCL Tech all reporting a drop in attrition, along with an expectation of further moderation.

“We believe Wipro will continue to see higher margins incrementally going ahead. However, headline numbers (revenue and Ebit—earnings before interest and taxes) missed expectations. Growth continues to be weak. The revenue growth guidance by the company for FY23 was below ours and the Street’s expectations," said Ruchi Mukhija, vice-president, equities research at Elara Capital.

“The lowering attrition rate of 21.3% was in line with our expectations. This was also a quarter where we had expected hiring to come down," Mukhija added.

The company has further guided for the full-year IT services revenue growth to be in the range of 11.5-12% in constant currency terms. To be sure, Infosys, which reported its Q3 results on Thursday, upped its revenue growth guidance for FY23, while HCL Tech trimmed the upper end of its company, services and Ebit margin guidance for the fiscal.

While 11.5-12% revenue growth translates into a –0.6%-1% growth rate in constant currency terms, Wipro’s managing director and chief executive Thierry Delaporte said he does not see the coming quarter to be soft and that the degrowth may be due to seasonality and the gap between deals fructifying to revenue generation.

“Tech spending remains robust. Cloud transformation remains a priority among clients. Our total bookings were over $4.3 billion, led by solid large deal signings of over $1 billion. We improved our margins by 120 basis points, and our attrition moderated for the fourth quarter in a row," Delaporte said.

“We are continuing to gain market share as a result of deepening client relationships and higher win rates. Clients are turning to us to help them manage an evolving macro environment and balance their transformation goals with cost optimization. Our ability to deliver on client objectives regardless of where they are in their cloud journeys is positioning us favourably in a consolidating market."

Wipro’s IT services Ebit rose 6.3% to ₹3,750.4 crore from ₹3,528.9 crore a year ago, but the margin took a hit of 130 basis points, at 16.3% for the quarter. Sequentially, the Ebit margin rose by 120 bps.

Chief financial officer Jatin Dalal said, “Our operating margin is now at 16.3%, which is an expansion of 120 bps from last quarter. This expansion was after absorbing the investments we made in our people by way of salary increases, promotions and long-term incentives for our senior leadership. Margin growth was led by strong operational improvements and automation-led efficiencies. We generated strong operating cash flows at 143% of our net income for the quarter, and our EPS increased by 14.6% quarter-over-quarter."

Among markets, the US contributed just over 60% to overall revenue, followed by Europe at 28.8% and the Asia Pacific, Middle East and Africa (APMEA) markets at 11%.

Delaporte also said clients continue to see tech as a driver of transformation. “We don’t believe there is any reason to expect a slowdown in spending going ahead. Having said that, while a slowdown is unlikely, clients may shift focus towards types of deals where they see a faster return on investments."

Shares of Wipro closed unchanged on Friday at ₹393.65 apiece against a 0.86% rise in the BSE IT index.