Wipro, India’s third largest IT services exporter, reported a 7.2% sequential rise in net profit for the three months ended March, surpassing market expectations on a better operational performance. It, however, provided a muted growth guidance with a projection that its IT services revenue would decline by 2% or remain flat at best for the first quarter of FY18, largely impacted by the repeal of Obamacare in the US.
Wipro also announced a bonus issue in the ratio of 1:1. The company’s board of directors will consider a proposal for buyback of shares around July, 2017, and this comes on the back of similar programme of Rs 2,500 crore announced in April, 2016.
Wipro’s consolidated net profit for the fourth quarter stood at Rs 2,267 crore as compared to Rs 2,115 crore that it recorded during the December quarter. The rise in net profit was largely due to other income of Rs 408 crore from the sale of its eco-energy business. Wipro managed to see a rise in net profit despite the headwind of an appreciating rupee against the US dollar.
The big plus for Wipro during the fourth quarter of FY17 was the growth in its core IT services business which recorded a sequential rise of 2.7% in US dollars going beyond the expectations of the market which was expecting it in the range of 1.5-1.8%. Its operating profit margins during the quarter remained flat at 18.3%.
Wipro CEO Abidali Neemuchwala said, “While Q1 is soft for Wipro, Q1 in FY18 has its own set of challenges due to uncertainty in US healthcare industry and structural disruption in retail.”
Wipro had acquired US based healthcare IT firm – Healthplan Services for $460 million in February, 2016. The uncertainty over the repeal of Obamacare in the US by President Donald Trump has led to slowdown in business in the American healthcare market. However, Neemuchwala expressed confidence that this is likely to be just a one quarter phenomenon, adding when there is clarity on the policy front they are expected to bounce back.
The Wipro scrip ended at Rs 494.55, with a gain of 0.56% on BSE on Tuesday. The results were declared after market hours.
The revenue growth for Wipro during the fourth quarter of FY18 came in despite sectoral challenges and was also aided by its $500 million acquisition of Apprio in October last year. This cloud services company reported a revenue of $200 million for calendar year 2015.
For the FY17 fiscal as a whole, Wipro reported a consolidated revenue growth of 4.9% to touch $7.7 billion. This is almost similar lines like its other peers namely – Tata Consultancy Services and Infosys. TCS closed FY17 with a growth of 6.2% in US dollars while it was 7.4% for Infosys. This is also reflection of the current state of Indian IT industry which is expected to grow only in single digits with companies like Infosys providing a revenue guidance of 6.5-8.5% for FY18.
In rupee terms, the consolidated revenues of Wipro for FY17 stood Rs 55,040 crore with a growth of 7.4%. The net profit during this period was Rs 8,514 crore registering a decline of 4.9%. Wipro’s total employee headcount at the end of the quarter stood 181,482 which was net addition of 8,570 for the entire fiscal.