Wipro Q2 misses estimates, challenges persist for Indian IT industry

Bengaluru: Little changed for home grown IT conglomerate Wipro Limited in the quarter ended September 2023, as reflected by its Q2 results on Wednesday. The Bengaluru-headquartered tech and consulting major reported anet profit at Rs 2,667 crore, almost flat compared to the same period last year, but missing analysts' estimates.

Gross revenue declined 0.1% year-on-year to Rs 22,516 crore. However, sequentially, it declined 2.3%. This was the third straight quarter of sequential revenue decline for India’s fourth largest IT company.

For the current quarter (October-December), Wipro expects revenue from its IT services business to fall as much as 3.5% on back of a global economic slowdown. 

Amid macroeconomic uncertainty, clients are hyper focused on efficiency, alongside low discretionary spending and slow deal conversion, said Wipro Chief Executive Thierry Delaporte.

Business from top contributing verticals, including banking, financial services and insurance, manufacturing and consumer declined for the company during the period under review.

Conforming to the trend reflected by peers during the period, that of record order book numbers, Wipro reported $3.78 billion in orders, with the highest large deal TCV of $1.3 billion in nine quarters.

However, even as the top IT conglomerates reported record order books, a difficult business environment amid global macroeconomic uncertainty continues to be a cause of concern for the tech industry in India.

“The near time challenges still persist for the IT sector,” said Omkar Tanksale, a research analyst at Axis Securities, adding that it will take at least a couple of quarters for the revenue growth momentum to bounce back.

Furthermore, while analysts look at the order book strength as a potential tailwind for the sector, slower ramp up of deals continues to pose a challenge.

“While Wipro has been able to secure important, large-ticket deals during the quarter, such deals may take longer to effectively translate into revenues,” said Nirav Karkera, who heads research at financial services provider Fisdom.

“The softer demand environment continues to reflect in the rather dim outlook for the upcoming quarter,” commented Karkera.

Moreover, even as all the four players reported a decline in attrition to levels, they reflected a net decline in workforce levels revealing low hiring trends. 

The IT major also said that its board has approved the merger of five of its wholly-owned subsidiaries - Wipro HR Services, Wipro Overseas IT Services, Wipro Technology Product Services, Wipro Trademark Holding, and Wipro VLSI Design Services - into Wipro Limited. This is however entirely for administrative convenience with no impact on business operations, whatsoever, Delaporte assured.

Meanwhile, the country's sixth biggest IT services company, LTIMindtree, on Wednesday reported a decline in September quarter net profit at Rs 1,162 crore, compared with Rs 1,189 crore in the year-ago period, 

Its overall revenues grew 8.2% to Rs 8,905 crore for the reporting quarter, from Rs 8,228 crore in the year-ago period and Rs 8,702 crore in the June quarter. However, there was a sharp contraction in the operating profit margin to 16%, as against 17.5% in the year-ago period, which seems to have been the biggest reason for the decline in the overall profits.

(From Left) Amit Choudhary Chief Operating Officer Stephanie Trautman Chief Growth Officer Thierry Delaporte Chief Executive Officer & Managing Director Aparna Iyer Chief Financial Officer and Saurabh Govil Chief Human Resources Officer of Wipro Limited. are seen during a press conference to announce the Q2FY24 financial results at Wipro Limited in Bengaluru on Wednesday. DH Photo/ B H Shivakumar

Thierry Delaporte CEO Wipro Ltd. seen during a press conference to announce the Q2FY24 financial results at Wipro Limited in Bengaluru on Wednesday. DH Photo/ B H Shivakumar