Q1 Results: Wipro’s Profit Slips, Margin Narrows On Wage Hike
Net profit of the information technology company fell 3.9 percent to Rs 2,388 crore for the quarter ended June.
Wipro Ltd.’s profit for the April-June period slipped but met estimates even as its margin narrowed due to wage hike and a stronger rupee in the quarter.
Net profit of the information technology company fell 3.9 percent to Rs 2,388 crore for the quarter ended June on a sequential basis. This compares to a Rs 2,328-crore estimate by Bloomberg.
Revenue of the Bengaluru-headquartered company fell 2.4 percent to Rs 14,786 crore over the previous quarter. Analysts tracked by Bloomberg had pegged it at Rs 15,161 crore. Revenue also slipped due to the company’s divestment in Workday and Cornerstone OnDemand business to Illinois-based Alight for a cash consideration of up to $110 million.
Ahead of the first quarter earnings season , Edelweiss had said that Wipro’s revenue could dip due to cross-currency headwinds.
Revenue from IT services was down 1.3 percent sequentially to $2,038.8 million, which fell short of the company’s forecast of $2,046-2,087 million for the quarter ended June with an anticipated sequential growth of -1 to 1 percent.
The company has forecast the growth for the second quarter of the ongoing fiscal to be in the range of 0-2 percent with revenue expected between $2039 million and $2,080 million.
Wage Hike, Rupee Weighs On Margin
The company’s operating profit fell 9.2 percent sequentially to Rs 2,452 crore in the quarter. Operating margin fell 120 basis points to 16.6 percent. Analysts had forecast a 90 basis points dip in margin due to wage hikes and a stronger rupee, which is expected to be partly offset by Wipro’s premium pricing and operational efficiencies.
Wipro’s Chief Financial Officer Jatin Dalal said at the post-earnings press conference that a two-months’ impact of salary increase and rupee appreciation played on the “adverse side” of the margin.
Demand environment is stable in global markets but in pockets like the banking, financial services and insurance segment, the decision making has been slow, the company’s Chief Executive Officer and Executive Director Abidali Neemuchwala said at the press conference, adding that although there are uncertainties in the capital market space along with some “softness” in European banking, the U.S. segment of their BFSI remains strong.
The company, he said, entered the quarter with certain “macro uncertainties” around socio-political aspects where customers took longer to make decisions. “Trade, Brexit has made customers more watchful as they make their decisions.”
Margin from IT services continued to slide for the second straight quarter. Dalal said the company had a slower start to the year. “We, however, remain focused on our operations and continue to invest in talent and capabilities for the future.”
Wipro had earlier announced a buyback proposal for purchase of up to 323.1 million equity shares of Rs 2 each from shareholders at a price of Rs 325 per equity share payable in cash for an aggregate amount not exceeding Rs 10,500 crore. However, the company is awaiting approval from the Securities and Exchange Board of India to complete the buyback process.
Shares of Wipro closed 0.2 percent lower at Rs 259.60 apiece ahead of the earnings announcement compared with a 0.21 percent gain in the Nifty Index.