Wipro posts 6.7% sequential decline in Q4 net profit

By: | Published: April 26, 2018 4:26 AM

The company’s profit was impacted as it recognised provisions totalling $32 million (Rs 208 crore) with respect to insolvency of a customer and the impairment loss of an acquisition.

Wipro, India’s third largest IT services exporter, reported a 6.7% quarter-on-quarter decline in its net profit for the fourth quarter of FY18.Wipro, India’s third largest IT services exporter, reported a 6.7% quarter-on-quarter decline in its net profit for the fourth quarter of FY18.

Wipro, India’s third largest IT services exporter, reported a 6.7% quarter-on-quarter decline in its net profit for the fourth quarter of FY18 due to the impact of insolvency of two customers and the impairment loss in one of the acquisitions made by the company. The IT major also expects muted growth in the first quarter of the current fiscal (ending June 30, 2018) due to impact on the Health Plan Services (HPS) business and bankruptcies faced by two of its clients.

The company’s profit was impacted as it recognised provisions totalling $32 million (Rs 208 crore) with respect to insolvency of a customer and the impairment loss of an acquisition.

Wipro reported a net profit of Rs 1,800 crore for the fourth quarter of FY18 while consolidated revenues stood Rs 14,304 crore, showing an annual decline of about 5%. The company’s flagship IT services revenue stood at Rs 13,410 crore. In US dollar terms, the IT services business of Wipro reported a revenue of $2,062 million, which was a sequential increase of 2.4%, a performance in line with its guidance.

Commenting on the results, Wipro CEO Abidali Z Neemuchwala said, “We entered Q4 with confidence driven by the improvements we saw in our deal win trajectory, uptick in client mining and reduced headwinds in some of our businesses. However, we are disappointed at the loss of momentum in Q1 due to surprises arising out of bankruptcies faced by two of our clients with a revenue run rate of over $50 million, additional impact in the HPS business as more clients exit the exchange market and weakness in our communications business unit.”

For the full year ended March 31, 2018 the total revenue of the company declined by 1.7% to Rs 57,035 crore, while the net income dipped 6.4% Rs 8,003 crore. For the quarter ending June 30, 2018, Wipro has projected the IT services revenue to grow in the range of -2.2% to 0.2%, translating to $2,015-2,065 million. “We are confident we will return to growth trajectory starting Q2 due to our strong deal wins and order booking coupled with the continued strength in digital,” added Neemuchwala.

Wipro also announced the divestiture of its hosted data services business to Ensono for a consideration of $405 million. The company expects the transaction to be completed during the quarter ending June 30, 2018. When asked about whether the divestment was factored in the June ended quarter outlook, Wipro CFO Jatin Dalal said, “We have not considered the impact of divestment on the revenue for the quarter ending June 30, 2018. We will revise the outlook for the quarter based on the actual date of completion of the divestment.”

In terms of verticals, banking, financial services and insurance performed well in the quarter and witnessed a sequential growth of 4.7%, while manufacturing and technology recorded a sequential growth of 4.1%. Wipro added 58 new clients during the quarter and the top 10 accounts grew 5.5% sequentially and 14.8% YoY. The company’s two accounts crossed the $250-million mark on a run rate basis in Q4.
The total employee count of Wipro on March 31, 2018 stood at 163,827, a net addition of 1,274 people.

“Post 4QFY18, the performance remains disappointing due to lack of traction in Wipro’s business and more importantly, subdued outlook when most IT firms have indicated positive growth prospects. Client-specific issues continue to impact the IT major and impact revenue and margins,” said Harit Shah, senior analyst – IT, Reliance Securities.

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