Wipro maintains momentum in deal wins amid a tough quarter

Wipro’s sequential revenue growth in the June quarter was in line with its guidance but failed short of analysts’ expectation. On the positive side, it showed resilience on the margin front while showing a sustained traction in new deal wins.

Like some of the larger peers, it showed a marginal uptick in the banking, financial services, and insurance (BFSI) vertical, the largest vertical contributing 34% to the revenue during the quarter. While its revenue guidance for the September quarter looks a bit more optimistic than its forecast for the June quarter, demand revival is likely to take a few more quarters.

IT services segment revenue of the country’s fourth largest software exporter fell by 1.2% sequentially to $ 2,625.9 million in the June quarter. While it was in line with its forecast range of -1.5% to 0.5% change, it was lower than the analysts’ average expectation of 0.3% growth. The operating margin inched up sequentially by 10 basis points to an eight-quarter high of 16.5%. Overall net profit rose by 6% from the quarter ago to Rs 3,003.2 crore helped by higher other income.

Wipro reported a marginal sequential improvement in the headcount for the June quarter after showing a drop in the previous six quarters. Its headcount increased by 337 to 2,34,391. The employee attrition rate fell by a tad 10 basis points to 14.1% from the quarter ago.

The BFSI vertical revenue increased marginally by 0.3% on a sequential basis in the June quarter over and above the 2.6% growth seen in the previous quarter. The consumer vertical reported 1.5% growth after showing 0.4% drop in the prior quarter. Barring these two verticals, other verticals including healthcare, energy and utilities, technology, manufacturing, and communications reported a sequential decline in revenue for the June quarter.

While the company’s top line remained under pressure, it continued to report momentum in deal wins. The total contract value (TCV) of new deals was $ 3,284 million compared with $ 3, 607 million in the prior quarter. Large deals consisting of deal size above $ 30 million accounted for a TCV of 1,154 million, similar to $ 1,191 million in the quarter ago.

The company expects revenue to either drop by 1% or improve by similar magnitude for the September quarter on a sequential basis excluding the currency fluctuations. This is more optimistic compared with its first quarter forecast.