scorecardresearchWipro Q3 net profit rises 2.8% to ₹3,053 crore; says tech spends robust amid macro uncertainties

Wipro Q3 net profit rises 2.8% to 3,053 crore; says tech spends robust amid macro uncertainties

Updated: 14 Jan 2023, 09:40 AM IST
TL;DR.
Wipro's Q4 guidance, however, came below analysts' expectations. Wipro said its IT services revenue is expected to grow in the range of -0.6 per cent to 1 per cent sequentially in constant currency in the quarter ending March 2023.
Thierry Delaporte, chief executive officer of Wipro Ltd., speaks during a news conference at the company's headquarters in Bengaluru, India, on Friday, Jan. 13, 2023. Wipro announced its third-quarter financial results on Jan. 13. Photographer: Aparna Jayakumar/Bloomberg

Thierry Delaporte, chief executive officer of Wipro Ltd., speaks during a news conference at the company's headquarters in Bengaluru, India, on Friday, Jan. 13, 2023. Wipro announced its third-quarter financial results on Jan. 13. Photographer: Aparna Jayakumar/Bloomberg

(PTI) Wipro Ltd on Friday reported a better-than-expected 2.8 per cent rise in consolidated net profit for the December 2022 quarter to 3,053 crore and exuded optimism about "strong" bookings for the fourth quarter despite global headwinds.

The company's Q4 guidance, however, came below analysts' expectations. Wipro said its IT services revenue is expected to grow in the range of -0.6 per cent to 1 per cent sequentially in constant currency in the quarter ending March 2023.

The Bengaluru-based company expects revenue from the IT services business for the full year to be in the range of 11.5-12 per cent in constant currency terms.

The revenues of Wipro - which competes with TCS, Infosys, HCL Tech and others in the market - stood at 23,229 crore in Q3FY23, 14.3 per cent higher than the same period of the previous year.

Seen sequentially, the revenue grew about three per cent over the September quarter, while the net profit rose 14.8 per cent quarter-on-quarter.

"The macro-economic uncertainty we had discussed last quarter continues. However, tech spending remains robust," Thierry Delaporte, CEO and Managing Director of the company said during the Q3 results briefing.

"We are expecting to do another strong performance in bookings in the fourth quarter," Delaporte said.

Wipro's pipeline of large deals is "both strong and diversified", he added.

Clients are looking for value-driven transformation, tighter governance and improved return on investments, Delaporte said, adding cloud transformation continues to be a priority.

IT Services segment revenue increased to USD 2,803.5 million, up 6.2 per cent year on year.

The IT services operating margin for the quarter was at 16.3 per cent, improving 120 basis points quarter-on-quarter as the company "continued to turn the tide on margins".

"The hard work we've put in to improve our supply chain, delivery excellence, and operations automation, has resulted in greater efficiencies. All this has contributed to a margin expansion of 120 basis points quarter-on-quarter," Delaporte said.

The margin expansion was despite absorbing the impact of three full months of salary increases, and also factors quarterly promotions as well as the restricted stock units the company granted to senior employees.

The total bookings were up by 26 per cent and large deal bookings were up by 69 per cent year-on-year.

"Our large deals include new and existing clients seeking a transformation partner, or going through vendor consolidation. Renewals with existing clients are often accompanied by services expansion, taking market share from others, and expanding into new areas of our clients' businesses," Wipro's top honcho said.

Voluntary attrition moderated 180 basis points from the previous quarter, landing at 21.2 per cent for the trailing twelve months for the quarter, easing analyst concerns. The attrition stood at 22.7 per cent a year ago.

Wipro's total headcount stood at 2,58,744 at the end of the quarter against 2,59,179 in the September quarter, lower by 435.

"Top 5 clients grew 15.7 per cent year-on-year and top 10 clients grew 14.7 per cent year-on-year in constant currency terms, underscoring deepening relationships with top strategic clients," the company said.

Wipro Chief Financial Officer Jatin Dalal said the expansion of margins was after absorbing the people-related investments by way of salary increases, promotions and long-term incentives for senior leadership.

"Margin growth was led by strong operational improvements and automation-led efficiencies. We generated strong operating cash flows at 143 per cent of our net income for the quarter and our EPS increased by 14.6 per cent quarter-over-quarter," Dalal said.

IT Products segment revenue for the quarter was 170 crore (USD 20.8 million).

Record total bookings of over USD 4.3 billion in contract value, was 26 per cent higher over the year-ago period.

"Clearly, the investments we've been making in our clients, our efforts to bring about a shift in our portfolio, and proactive deal-shaping – are all paying off now," he said.

Wipro said its strong bookings were driven by Fullstride Cloud Services, and Engineering services, which grew at 25 per cent and 45 per cent year-on-year, respectively.

According to Wipro, clients continue to see technology as the driver of performance for them.

"When we look at the performance in bookings we have had in this quarter, there is no real reason to believe that there is any slowdown in the demand," he asserted.

While there is a certain level of uncertainty, clients will continue to see technology as a driver but may lean towards deals that deliver rapid return on investment, focus on efficiency and possibly also consider reducing or slowing down discretionary spending, Delaporte said.

Regarding inorganic growth, the company's strategy has not changed and it continues to focus on strategic opportunities.

"We are focusing on identifying companies that are bringing capabilities, and expertise in a sector or in a given market that will compliment our own position around strategic offerings, such as cloud, data, engineering services, digital transformation and cyber security," Delaporte said.

Emkay Global Financial Services said that while IT services margin beat estimates, Q4 guidance is "below expectation".

First Published: 14 Jan 2023, 09:40 AM IST