Wipro regains sweet spot, in recovery mode

Written by fe Bureau | Bangalore | Updated: Jan 11 2014, 01:24am hrs
WiproWipro, India?s third-largest IT services exporter, is now showing very strong signs of recovery. Express
Wipro, Indias third-largest IT services exporter, is now showing very strong signs of recovery aided by certain strategic changes undertaken by the company coupled with revival of growth in certain market segments which have traditionally been its sweet spot, according to an analyst body and another brokerage house.

Technology analyst body Everest Groups CEO Peter Bendor-Samuel in his blog post sherpas in blue shirts said, Everest Groups ongoing analysis of global service providers performance revealed some notable market shifts in the most recently reported quarter. We note especially that Wipro seems to be righting its ship. Although its growth previously had lagged its peers and the industry, the last quarter evidenced higher growth.

Wipro has been lagging behind its peers like TCS, Infosys and HCL Technologies and only the second quarter of FY14 fiscal it returned back with a 2.7% sequential growth after showing flattish growth in preceding quarters.

Samuel attributed this improved performance to some of the strategic initiatives undertaken by CEO TK Kurien.

We need to give some credit to the strategic maneuvers that CEO TK Kurien and Wipros executive council made. First of all, they have been implementing a verticalisation strategy. They also are focusing on large accounts. We believe these strategies make sense and could well contribute to further growth, he said.

Ever since, Kurien took over as the CEO in 2011, he has undertaken certain deep systemic changes within Wipro by putting lot more feet on the ground in terms of sales and marketing staff, being more aligned with the customer expectations and sidelining the non-performers.

Kotak Institutional Equities, a brokerage house in its preview for the third quarter of FY14 on Wipro said, We expect Wipro to report US dollar revenue growth of 3.3% with constant currency revenue growth of 2.7%, in the middle of the 1.8-3.6% range guided by Wipro. The revenue growth will likely be close to the top end of its peer group after several quarters of lagging behind. It also expects Wipro to guide for 1.5-3.5% for the fourth quarter of FY14 aided by recent large deal wins in infrastructure management services segment.

The current revival for Wipro could also be due to inherent strength in certain segment and geography. Samuel said, In addition, taking a step further back, we believe that Wipro is reaping the benefit of its concentration in services areas that are recovering infrastructure and Europe. The industry has seen growth in infrastructure services really picking up over 2013. Also, as Europe recovers from its economic crisis (particularly in the UK, Germany and the Nordics), Wipros strong position in Europe allows it to also benefit from this growth.

Kotak Institutional Equities said investor focus on Wipro would be in two key areas: progress in account management & new deal wins and measures taken to defend in core areas of competence.