Wipro’s restructuring started over a year back but the exercise has not yet yielded any concrete results, according to Prabhudas Lilladher analysts Shashi Bhusan and Pratik Shah.
Wipro’s restructuring started over a year back but the exercise has not yet yielded any concrete results, according to Prabhudas Lilladher analysts Shashi Bhusan and Pratik Shah.
At an analyst meet on June 11, the Wipro management spoke at length on the ongoing restructuring process and strategy to address the changing need of the customer but failed to give a clear vision on growth.
After taking part in the conference, the Prabhudas analyst duo said they continued to remain cautious on the “elusive growth” and expected a long wait for overhaul in Wipro.
The duo said Wipro’s recast remains incomplete. For, only organisational alignment has been completed so far, while alignment of capabilities is half done. Worse, 70% of the task of filling up the differential gap still needs to be completed.
Their report, however, noted that the Wipro management was seeing early gains from the recast in improved customer satisfaction, increased employee satisfaction and better gross margin for the projects.
“The (Wipro’s) sales cycle is now slower than what they witnessed in April (earlier the management indicated acceleration in decision making in April-2012 after a slow start for calendar year 2012. The growth is likely to be anemic for Q2FY13. The company didn’t indicate any improvement in the demand environment. There is pricing pressure in some verticals. The deal closure continues to remain a moving target since January,” Bhushan and Shah wrote in their report.
Ankita Somani, research analyst - IT and telecom, Angel Broking, also does not expect restructuring to bear fruit before the second quarter of this fiscal. Somani believes recent initiatives on cloud, analytics and mobility, along with telecom, were part of a new focus area at Wipro.
“We expect Wipro to have a CAGR (compounded annual growth rate) of 15% in net profit from FY12 to FY15, which is market leading and will be somewhat a result of these initiatives," said Somani.
A Wipro executive who did not wish to be named said the company’s offerings that included cloud and mobility were helping it in differentiation.
“Our consistent efforts in this direction are slowly beginning to show results now with Wipro having 250 analytics clients out of a total of 900-plus clients. Client spending has also increased on this front, and the analytics business -- it has become a separate service line since the last one-and-a-half years -- has been growing upwards of 30% on-year,” he said.
Ashish Chopra, IT analyst, Motilal Oswal, feels the next two quarters would be crucial in terms of revenue growth. According to him, since the major theme of restructuring was to mine existing clients, the company had achieved that to some extent with the number of $100-million-plus clients having increased from three to seven in the last four quarters. This, he believes, was an early sign of restructuring bearing fruit.
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