Wipro confident of weathering recessionary pressures

IT behemoth Wipro reported a better-than-expected profit in the third quarter and reassured investors it was optimistic of tiding over any potential global economic slowdown due to its strong order books.

The news came after industry leader Tata Consultancy Services missed profit estimates and warned about 2023. Another rival Infosys topped profit estimates and raised its revenue forecast for the year. Both of them flagged concerns tied to certain geographies and businesses amid global recessionary pressures.

“We have delivered another quarter of double-digit revenue growth. We are continuing to gain market share as a result of deepening client relationships and higher win rates. Given our strong bookings, there is no real reason to expect a slowdown, though the priorities of clients are shifting, with a focus on quick return on investment,” Wipro CEO Thierry Delaporte said.

He also flagged some “level of volatility with regard to discretionary spending” and said that was affecting some of its clients and causing “some amount of lag" in ramping up large projects”.

The Ajim Premji-promoted firm had record order bookings of $4.3 billion in the third quarter, signing 11 large deals of total contract value worth over $1 billion. Like its peers, Wipro flagged concerns in key verticals like retail, hi-tech, amid slowdown talks, but pointed out that it is benefitting from vendor consolidation and gaining market share.

Wipro’s consolidated profit in the third quarter rose 2.82 per cent to Rs 3,053 crore, topping the analysts’ average estimate of Rs 2,900 crore, according to Refinitiv IBES data. Gross revenue from operations rose 14.35 per cent to Rs 23,229 crore.

Revenue from IT services, which contributes more than 95 per cent to its gross turnover, was at $2.8 billion, an increase of 0.6 per cent over the past quarter, in constant currency terms. Operating margin from IT services’ segment improved sharply by 120 basis points over the previous quarter to 16.3 per cent. Wipro said it expected to see further improvement in that number due to a fall in attrition and possible improvement in utilisation.

The company has forecast a 11.5- 12 per cent rise in its revenue during FY23, which translates to be in the range of -0.6 to 1 per cent sales growth in constant currency terms, for the fourth quarter.

“Wipro’s IT services margin beats estimates but the fourth-quarter guidance is below expectations. Beating the margin, a steady order book and moderation in attrition are the key positives,” analysts at Emkay Global wrote in a note on Friday.

Among verticals, growth was led by the consumer and manufacturing sectors. During the quarter, Wipro’s attrition rate dropped by 180 basis points sequentially to 21.2 per cent. Its headcount fell marginally by 435 employees to 258,744.

“We expect the downtrend in attrition to continue. We have onboarded around 3,000 freshers this quarter and will onboard about 5,000 in Q4,” Wipro Chief Human Resources Officer Saurabh Govil said.