Wipro utilisation lags as peers steer ahead

Wipro utilisation lags as peers steer ahead

 At a time when Wipro management is hopeful of better financial performance in the quarters to come, its utilisation levels remain lowest in its peer group consisting of IT giants like Infosys and Tata Consultancy Services (TCS).

Last Friday Wipro reported its April-June quarter (Q1) results and said it sees demand picking up and its CEO T K Kurien showed optimism in saying that they are seeing positive traction in the demand environment with discretionary expenses returning in specific pockets.

The US economy continues to show signs of strong macroeconomic recovery, he said.
However, a look at its performance shows a decline in utilisation rate.

Utilisation rate is defined as the percentage of a consultant’s time that is actually billed for compared to the entire period of time that they are paid for by the consultancy. For example, if a consultant is paid for 300 days in the year but is billed to clients for 200 days, their utilisation rate is 66 per cent.

Wipro's net utilisation (excluding trainees) in Q1 dropped 460 basis points (bps) to 73.3 per cent from 77.9 per cent in the same period last year. Sequentially too it fell 130 bps from 74.6 per cent in Q4 last fiscal.

Reasoning the drop, Kurien said that the company takes freshers during the quarter and has have not stretched the fresher joining dates, thus some ups and downs in the utilization rates is evident.

When compared to its competitors like Infosys and TCS, Wipro's utilisation doesn't look very promising. In Q1 Infosys, whose utilisation had earlier been lagging, reported utilisation of 74.3 per cent excluding trainees. TCS, India's largest software exporter in terms of revenue and also employee base clocked utilisation rate of 82.68 per cent excluding trainees.

Angel Broking Fund Manager Phani Sekhar told Deccan Herald that it could be because Wipro would have hired in anticipation of projects that did not materialise and the low utilisation rate could have impact on margins.

Moreover, despite having over 1 lakh employees more than Wipro or Infosys with 2,77,586 people on its rolls at the end of Q1 this fiscal, TCS still has one the highest utilisation in the industry.

However, HCL Technologies has the highest blended utilisation excluding trainees at 83.8 per cent for three months ended March 31, 2013.

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