Overdependence on US hurting Wipro: Analysts

Bengaluru-based IT major Wipro, which has seen the least growth in revenue terms for the past five years among the top four IT companies, needs to rejig its verticals according to analysts.

The company is announcing its third-quarter results on Friday. An analysis of numbers of past five years reveals that Wipro has grown at a rate of 52.4% lower than HCL Technologies. Both the companies have been caught up in the battle for the third slot in India’s IT space.

Wipro has shown a compounded annual growth rate of 5.7% over the last five years in its revenue, which is 52.4% lower than the growth shown by HCL. HCL grew by 12% annually during the same period. On the other hand, first placed TCS and second-placed Infosys have shown growth of 10.8% and 8.9% respectively.

“They have got their geographical mix wrong. They are depending too much on their US business, unlike Infosys and TCS, who have been diversified in the geographical mix,” an equity analyst with market advisory Motilal Oswal said.

US business contributes close to 60% of Wipro’s revenues. Many others blame the IT major’s dependence on the banking, financial services and insurance (BFSI) vertical, that contributes over 30% in the company’s revenue mix. “You can’t depend so much on BFSI, when you have Infosys and TCS there with such amazing product offerings,” an analyst tracking the sector said.

In fact, in the second quarter of the current financial year, when most of the IT services companies witnessed double-digit growth in their revenues as well as profits on the back of the rupee depreciation, Wipro stood out to be a lone underperformer. The company’s bottom-line tanked by 14% during the quarter to Rs 1,885 crore.

Its gross revenue went up by 8% to Rs 14,541 crore during the second quarter, compared with Rs 13,423 crore in the corresponding quarter last year.

In fact, the growth Wipro saw before the results, has been attributed to the rupee movements. Even as Wipro is expected to deliver a strong performance in its third quarter, many analysts attribute its gains in the past quarters to the fluctuations in the rupee.