Wipro net profit dips 3.7% in Q1

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Bangalore | Published: July 24, 2015 12:19:26 AM

Wipro, India’s third-largest IT services exporter, has reported a 3.7% sequential decline in its consolidated net profit to Rs 2,187.7 crore...

Wipro, India’s third-largest IT services exporter, has reported a 3.7% sequential decline in its consolidated net profit to Rs 2,187.7 crore on higher finance cost and lower other income. Revenue from IT services grew 3% quarter-on-quarter to Rs 11,577 crore and dollar revenue increased 1.1% to $1.79 billion. Consolidated revenues stood at Rs 12,238 crore, showing a year-on-year rise of 10%.

The operating profit margins continued to decline to 21% even in Q1 against 22% in the comparable sequential period, impacted by wage hikes and currency movement. In US dollar terms, the IT services business reported a revenue of $1,794.1 million, a 1% sequential rise — a performance in line with its guidance. For Q2, Wipro has projected the IT services revenue to grow 1.5-3.5%, translating into $1,821-1,857 million.

Wipro CEO TK Kurien said, “Overall, while we are seeing a stable demand environment, there is a pressure on pricing in new deals. We see a pick up in momentum in Q2 as reflected in our guidance and we expect H2 to be better than H1.”

Wipro continued its investments in start-ups and announced that it has picked up minority stakes in two US-based technology firms — Talena and Vicarious.

Wipro announced its results after market hours on Thursday. The Wipro scrip closed at R588.40, up 0.52%, on the BSE.

“The Q2 guidance of 1.5-3.5% in slightly ahead of expectations. Management commentary about the revenues from the energy sector having bottomed out and H2 being better than H1 are also encouraging,” said Dipen Shah, head of Private Client Group Research, Kotak Securities.

Kurien said Wipro will continue to defend its margins and did not expect this to decline significantly. The Q1 for Wipro has traditionally been a muted period and the positive aspect this time has been its ability to match its guidance. In Q1, the IT major faced certain challenges from the healthcare vertical and its top ten clients list, officials said.

“We continued to drive productivity and improve operating levers even as we invested for growth in people, process and IP. In the quarter, we maintained strong cash flow generation while operating margins were on predictable lines, modestly lower due to employee compensation measures,” said CFO Jatin Dalal.

In terms of verticals, retail, consumer goods and transportation were the star performers with a sequential growth of 5% while the energy and healthcare segments recorded negative growth.

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