Wipro net down in Q2; revenue outlook flat for Q3

Bengaluru: Unlike its peers TCS and Infosys, India’s third largest software firm Wipro on Friday reported lower net profit for second quarter and projected flat revenue from its IT services for third quarter of this fiscal (2016-17) due to weak demand and uncertainty in technology spend.

For the second consecutive quarter (July-September) the company’s consolidated net profit declined 7.7 per cent year-on-year (YoY) to Rs 2,074 crore from Rs 2,246 crore in same period year ago and was flat (0.8 per cent) sequentially from Rs 2,059 crore in the first quarter (April-June) of this fiscal (FY 2017).

Consolidated revenue for the quarter under review (Q2), however, increased 10 per cent to Rs 13,766 crore from Rs 12,514 crore in like period year ago and 1.2 per cent) sequentially from Rs 13,600 crore in first quarter. (Q1).

With the demand environment mixed in a seasonally weak quarter, the company projected $1,916-1,955 million ($1.92-1.96 billion) revenue for October-December (Q3) quarter, hinting flat sequential growth from $1,916 million ($1.9 billion) its services business generated for the second quarter (Q2).

“As we look forward, the demand environment is mixed in a seasonally weak quarter affected by furloughs and lower number of working days,” said Wipro Chief Financial Officer Jatin Dalal in a statement here.

Furloughs refer to the long year-end Christmas vacation and New Year holidays from December 24 to January 1 for enterprises worldwide.

In dollar terms, net income was $313 million and revenue $2,068 million ($2.1 billion), including $1,916 million ($1.9 billion) from services, which is 4.6 per cent up year-on-year (YoY) but flat (0.8 per cent) sequentially from $1,931 million in Q1.

Revenue ($1,916 million) from IT services was lower than its guidance range of $1,931-1950 million given on July 19 for second quarter.

In rupee terms, IT services revenue grew 9 per cent YoY to Rs.13,140 crore.

Revenue from IT products was Rs.770 crore ($115 million) during the quarter.

“We delivered revenue in constant currency at the top end of our guidance range in second quarter,” claimed Chief Executive Abidali Z. Neemuchwala on the occasion.

Gross profit from IT services segment declined 5 per cent YoY to Rs.2,340 crore ($352 million) and operating margin slipped to 17.8 per cent for the quarter under review from 20.4 per cent in like period ago but remained flat sequentially at 17.8 per cent as in first quarter.

“We maintained margins in Q2 despite the impact of salary increase for an incremental two months due to operational improvements in automation-led productivity, offshoring and utilization,” asserted Dalal on the occasion.

The IT services business added 47 new clients in the quarter under review (Q2) as against 50 quarter ago and 67 year ago, taking the total number to 1,180 by September-end as against 1,208 in June-end and 1,100 year ago.

The IT services division added (net) 375 techies in the second quarter, taking the headcount to 174,238 from 173,863 quarter ago and 168,396 year ago.

Attrition rate, however, remained flat at 16-17 per cent sequentially and annually.