The appointment of Srinivas Pallia as the new CEO of Wipro has been viewed positively by analysts, as he has been chosen from within the company rather than an outsider being brought in for the top job. An external candidate takes a longer transition time and brings in disruption, which the company cannot afford at this point of time, is the general sentiment. However, analysts also pointed out that Pallia will take time to achieve any tangible improvements in the company’s performance.
As earlier reported, Thierry Delaporte resigned as Wipro’s CEO and managing director on April 6, with immediate effect.
Pallia, who has been with Wipro for over three decades, most recently served as the CEO for Americas 1, the company’s largest and fastest-growing strategic market. He is also a member of the Wipro executive board.
“Appointing a company veteran could be positive only sentimentally and will stop the stock from falling sharply,” an analyst who covers the company at a domestic broking firm said. “However, growth will take at least four to six quarters. Even TCS (Tata Consultancy Services) changed their CEO abruptly. And even though the current CEO Krithivasan was heading their largest vertical, still, the earnings of TCS have not been great,” he added.
Furthermore, since Wipro focuses mostly on the consulting business, which is on a downturn now, and the global macro situation is still not improving, only the FY25 outlook will dictate the course of the company, he added.
Wipro’s underperformance
In the recent quarters, Wipro has been underperforming as compared to its rivals, and has lost its market capitalisation from the third to fourth spot, and lost over 10 of its senior leaders, including chief financial officer Jatin Dalal, chief operations officer Sanjeev Singh, chief growth officer Stephanie Trautman and others in 2023 alone.
Even during the October-December quarter, Wipro’s profit declined 12% year-on-year at `2,694 crore, a fourth consecutive quarter decline. As a result, Kotak Institutional Equities (KIE) retained its “reduce” rating on the stock, also citing that “a Y-oY decline in TCV (total contract value) and guidance of a revenue decline at the mid-point for 4QFY24 do not reflect a quick demand recovery”.
Analysts further believe that most of the growth at Wipro since Delaporte assumed leadership was majorly because of the acquisitions the company made. The Bengaluru-based company spent at least $2-3 billion in acquisitions during Delaporate’s term.
On the earnings front, analysts expect yet another weak quarter by the company in January-March. KIE expects the company to post a 0.4% sequential decline in its revenue and sees the fiscal year 2025 revenue growth to be guided at a 0.5% decline to 1.5% growth.
The company will declare its Q4 earnings on April 19.