Stock Market

Wipro Q2 profit rises 0.9%, Q3 dollar revenue guidance at 0-2% disappoints

Chillicious Bureau

Software services provider Wipro on Friday has reported a 0.9 percent growth in consolidated profit at Rs 2,070.4 crore for the second quarter (July-September) on sequential basis.

Consolidated revenue during the quarter increased 1.5 percent to Rs 13,896.8 crore compared with Rs 13,697.6 crore in preceding period.

Dollar revenue from IT services segment, which the street closely tracks, declined 0.8 percent quarter-on-quarter to USD 1,916.3 million in September quarter but grew by 0.9 percent in constant currency.

“We delivered revenues in constant currency at the top end of guidance range,” Abidali Z Neemuchwala, chief executive officer said in its filing. The company had expected dollar revenue growth of 0-1 percent in constant currency for Q2.

Dollar revenue missed analysts’ estimates but the same in constant currency was slightly above expectations. According to analysts polled by CNBC-TV18, dollar revenue growth estimated at 0.4 percent and constant currency at 0.5-0.7 percent for the quarter while rupee revenue growth expected at negative 1.5 percent.

IT services revenue in rupee terms grew by 0.2 percent quarter-on-quarter to Rs 13,136 crore in Q2.

Wipro expects its revenues from IT services business to be in the range of USD 1,916-1,955 million for October-December quarter, a growth of 0-2 percent over September quarter.

The above guidance was lower than analysts’ expectations of 1-3 percent growth for the quarter.

Neemuchwala expects to see more uncertainty in US after presidential elections.

IT services EBIT (earnings before interest and tax) increased 0.4 percent QoQ to Rs 2,337.2 crore during the quarter.

EBIT margin remained unchanged at 17.8 percent on sequential basis, which was ahead of estimates of 17.04 percent, due to operational efficiency.

Headwinds in salary increases were offset by strong operational improvements in automation-led productivity, offshoring and utilisation improvements.

Jatin Dalal, chief financial officer said demand environment is mixed in a seasonally weak quarter affected by furloughs and lower number of working days.

Business units – Healthcare, life sciences & services grew 4.3 percent and energy, natural resources & utilities 1.3 percent on a constant currency basis sequentially.

America business during the quarter registered a 1.8 percent growth and Europe 0.3 percent on a constant currency basis sequentially while Asia-Pacific & other emerging markets and India & Middle East business declined 0.1 percent and 1.1 percent, respectively.

The company said during the quarter digital ecosystem revenue contribution was 19.6 percent and consulting ecosystem 5 percent to total revenue.

Gross utilisation in Q2 improved to 71.2 percent from 69.9 percent and net utilisation (ex-trainees) to 82.8 percent from 79.7 percent on sequential basis.

Wipro on Thursday has signed a definitive agreement to acquire Appirio, a global cloud services company, for a purchase consideration of USD 500 million. The acquisition is expected to be closed by December 2016.

“This acquisition will establish Wipro’s dominance in cloud application services and further strengthen Wipro’s brand as a digital partner of choice,” Neemuchwala said.

The scrip of Wipro, which announced earnings after market hours, closed 0.75 percent up at Rs 499.20 on the BSE.