Wipro Q1 Results: Profit Rises Despite Disruption From Covid-19 Pandemic
Wipro Ltd.’s quarterly profit rose even as the Covid-19 pandemic continued to take a toll on business.
Net profit rose 2.8% over the previous quarter to Rs 2,411 crore in three months ended June, according to its exchange filing. Analysts’ estimates compiled by Bloomberg had pegged profit at Rs 2,069 crore.
- Total revenue fell 5.3% over the previous quarter to Rs 14,922crore—higher than the estimated Rs 14,414 crore.
- Revenue from IT services fell 7.3% to $1,922 million.
- Operating profit rose 1.3% to Rs 2,573 crore.
- IT services margin expanded to 19% from 16.1% earlier.
The novel coronavirus pandemic froze economic activity after India imposed the world’s biggest lockdown. For technology firms, that meant a rise in costs since most employees worked from home.
Software outsourcers also lost billings due to the global pandemic as they generate most of their business overseas. Bulk of their revenue—from clients in financial services, manufacturing and communications—was hit because of the weakness seen in these sectors.
Wipro, however, was able to improve its operational metrics despite the decline in revenue mainly on the back of lower employee costs which is its largest expense. Employee expenses for Wipro declined 6.1% sequentially to Rs 8,026 crore.
“We expanded the margins during the quarter, despite lower revenues, on the back of solid execution of several operational improvements and rupee depreciation,” said Jatin Dalal, the company’s chief financial officer, was quoted as saying in a media statement. “We also continued to sustain robust cash generation with operating cash flows at 174.9% of net income.”
Wipro has been struggling to keep up with peers like Tata Consultancy Services Ltd. and Infosys Ltd. amid already slowing economic growth. The pandemic and uncertainty around it could stifle their attempt to return to growth.
Clients are likely to cut back spending as the pandemic will force companies to prioritise critical technologies over initiatives aimed at tech transformation, according to Gartner. Worldwide IT spending is expected to decline 8% over last year to $3.4 trillion in 2020, it had predicted in May.
Wipro has appointed former Capgemini SE executive Thierry Delaporte as its chief executive officer to help the company tide over these challenges and regain lost ground. Amid Delaporte’s challenges will be to deal with growing protectionism in the West and the large-scale economic disruptions caused by Covid-19.
“Profitable growth will be the most important priority on my agenda,” Delaporte said in today’s statement. “I am confident that we will be able to deliver long-term, sustainable growth in the interest of all our stakeholders.”
Shares of Wipro Ltd. closed 1.1% lower, ahead of the results, while the benchmark BSE Sensex ended1.8% down.
(Corrects an earlier version that misspelt Thierry Delaporte's first name)