Wipro guidance disappoints St

Wipro, India’s third-largest software exporter, on Tuesday posted first-quarter results that trailed analyst estimates and gave weak earnings guidance for the July-September quarter, sending its shares to a nine-month low.

The company gave a guidance of 0.3-2.3% sequential growth for the second quarter, which is way below the analyst expectations of 2-4%.

Dipen Shah, head, PCG Research, Kotak Securities, in a client note on Tuesday, said, “The volume growth of 0.8% was in line with the guidance but lower than the peers. Ebidta margins also disappointed. The Q2 guidance also reflects the macro uncertainty and the limited revenue visibility.”

Volumes for Wipro during Q1 grew 0.8% quarter-on-quarter
(q-o-q) and 10.7% year-on-year.

The general industry feeling is given the current guidance it will be difficult for Wipro to grow above 7% this fiscal or even 5-6%.
Global spending on IT may expand 3% this year to $3.6 trillion, compared with a 7.9% pace last year, research firm Gartner said on July 9.

However, Shashi Bhusan and Pratik Shah, analysts with Prabhudas Lilladher, said Wipro’s guidance was positive given the current environment and that the softness of Q1 should be factored in.

Wipro also reported a 1.4% q-o-q fall in IT services revenues at $1.5 billion, though it was in line with estimates. Also, it saw a 1% decline in offshore pricing, in line with Infosys and TCS results.
However, T K Kurien, executive director and chief financial officer, IT business, Wipro, said pricing was not a matter of concern as of now.

“The pricing decline has not been much and we are not seeing any massive pressure from any vertical except investment banking. More or less, the business has played out largely as expected despite the volatility in environment. Given the investments we have made, I think we are well placed,” he said.

Elaborating on deals won in the quarter, Kurien said, “In our top 10 accounts, eight have crossed $100 million as against four in the same quarter last year.  Top five accounts grew 5% sequentially. Thus, the quarter under review saw an addition of 37 clients, 21 of them in the analytics business.”

Wipro reported a de-growth in every vertical except manufacturing and hi-tech, where it posted a 0.5% growth.

Analytics, another focus area for Wipro, grew 3.3% sequentially.
The company continues to focus on BFSI, energy and utilities, healthcare, life sciences and services. Ankita Somani, telecom analyst at Angel Broking, said Wipro is still in the process of realigning its capabilities and positive results from organisation restructuring are yet to be seen.

The utilisation for the company, without trainees, stood at 77.9%, up 180 basis points q-o-q. Despite a 10% rupee depreciation, the EBIT margins for the company declined by 30 basis points during Q1.

It also gave out salary hikes of about 8% for offshore and 3% for onshore employees.

Geographically, Europe revenues grew marginally while Americas registered a de-growth of 2.2%

Azim Premji, chairman of Wipro, said, “In today’s complex business environment, global corporations are increasingly investing in transformational technology initiatives to improve competitiveness. We see this shift as an opportunity for us to lead this change and help customers differentiate in this fast-evolving market.”