Wipro merged its ISRE (Indian business from state-run enterprises) sector with its broader IT Services segment after revenue in the same segment fell by 20.18% in FY23. According to the company’s filing, the revenue reduction was caused by the completion, closure, or ramping down of longer big government contracts.
The IT major has also indicated the difficulty in the collection of overdue accounts receivables from government-related businesses.
Wipro operates in three segments — IT Services, IT Products, and ISRE. While the IT Services category contributed 98.7% of Wipro’s revenue in FY23, the IT Products segment contributed 0.7%.
In FY23, the ISRE Segment provided 0.6% of total revenue. In FY22, the ISRE Segment contributed 0.9%. During FY21 and FY22, revenue from government-related business exceeded sales from the IT product segment.
“General and administrative expenses as a percentage of revenue from our ISRE segment decreased from (1.01)% for the year ended March 31, 2022 to (2.59)% for the year ended March 31, 2023. In absolute terms, credit in general and administrative expenses increased by Rs77 million. This was primarily due to increased write-backs in lifetime expected credit loss during the year ended March 31, 2023, resulting from the collection of overdue accounts receivable,” said the company in a filing.
It added, “As a result of the above, segment results as a percentage of our revenue from our ISRE segment decreased by 851 bps, from 16.08% to 7.57%. In absolute terms, the segment results of our ISRE segment decreased by Rs 732 million.”
Wipro carved out ISRE as a separate segment from its global IT Services business in FY19. Wipro said in its filing, “Historically, projects in our ISRE business have been primarily SI (system integration) projects that have complex deliverables and, compared to our IT Services segment, longer working capital cycles and different downstream processes, including billing and collections. Most ISRE deals come in the form of a tender process, with little room to negotiate the terms and conditions. We have pivoted our ISRE strategy to focus more on consulting and digital engagements and to be selective in bidding for SI projects with long working capital cycles. Over the years, we have significantly improved our quality of revenue in the ISRE segment.”
“Further, the projects which had longer gestation periods and higher balance sheet investments has since been significantly completed, closed or ramped down. As a result of our strategy with respect to SI projects, and increasing emphasis on consulting and digital engagements instead, our ISRE and IT Services segments now have similar sales cycles, billing and collection processes,” the filing stated.