Wipro, the country’s fourth-largest IT firm, saw the number of active clients fall by 51 during the second quarter. The company maintains that while it is investing in deeper relationships with large clients, it is also letting go some of the low profitable work.
Speaking to FE, Aparna C Iyer, CFO, Wipro, said, “From a strategic standpoint, we are investing deeper in our larger relationships and, therefore, our top ten clients have resisted to decline. Now this is because we’ve gone deeper and we are nurturing these accounts a lot better.”
Iyer added that the company is pleased that over the last six quarters, large relationships have doubled from 11 to 22. The number of active clients at the end of September quarter stood at 1,393, down from 1,444 in the June quarter.
Iyer further elaborated, “The discretionary spend cuts impact our top clients, but smaller clients are hit a lot more. This is where we are not seeing the momentum that we would have seen in a different macroeconomic environment. So, you’re seeing smaller-ticket size clients coming down as a reflection of the macroeconomic environment.”
She highlighted that this is less profitable, low-value work that they were doing with their clients. “We no longer want to pursue them. Therefore, we are pivoting ourselves.” She also explained also that these are much smaller set of clients and that this strategy adds very well to the firm’s operating margin defence.
Wipro, which has invested and built its consulting service over last few years, including acquisition of global management and technology consultancy company, the UK based Capco for $1.45 billion, is also facing a significant headwinds in its consulting business.
Iyer said, “The consulting business is more susceptible, more sensitive to the macroeconomic environment and that has resulted in planned cutting down on discretionary spends, including consulting.”
Iyer said, “The consulting businesses that we’ve actually built over the last few years, they’re actually spread across Americas 1, Americas 2 and Europe. They are across Wipro’s strategic market units (SMUs) and in fact even in APMEA (Asia Pacific Middle East), you will find consulting.”
However, Wipro is confident of the practices that it has built and invested over last few years. “They’re extremely rich in domain (consulting practices). Our consulting investments that we’ve made are in areas of strength. BFSI is one of our largest sectors and we have excellent domain expertise there. When the market rebounds, in fact, the cycles that you will see is consulting followed by products and tech and then followed by services.”
Speaking about net profit that declined to Rs 2,667 crore in Q2FY24, down 0.6% year-on-year, Iyer explained that the company’s other income was down because of lesser investible surplus in the company’s treasury post the share buyback programme.
She added: “Therefore, you see the other income of the company going down. What is a good measure for you to look at is our EPS (earning per share) growth because that factors the lower number of shares and the same profits being available. So, our EPS has grown 4% and that is something that we are happy about.”
When asked about hiring freshers, Iyer said Wipro is not going to campus this year and it will focus on onboarding all the commitments made. “There is a shift in the macroeconomic environment and we need to be sensitive to that,” she said.