Acquisitions to spur Wipro's topline in Q1

Bengaluru IT services major Wipro will post industry leading growth rate in revenues in the first quarter (April-June) of current financial year after completion of Capco acquisition.

After a long period, the Bengaluru-headquartered firm will not only match its peers' growth rates, but also exceed them after lagging in past years.

"Wipro's revenue growth guidance of 8-10 per cent in sequential term will be the highest for the Indian IT industry. Even posting such sequential growth rate may not be possible for mid-tier firms during this period," said a Mumbai-based analyst.

The Azim Premji-promoted firm last week revised upwards its IT services revenue outlook to 8-10 per cent sequential growth in the June 2021 quarter, following the completion of its $1.45 billion buyout of Capco. Earlier, the company had guided for a sequential growth of 2-4 per cent in its IT services revenues in the June 2021 quarter without including revenue from Capco and Ampion acquisitions after the announcement of its fourth quarter results. However, as the Capco acquisition was completed before scheduled time, the company has now guided for higher revenue growth including the revenues from this new entity.

"We expect revenue from our IT services business to be in the range of $2.324 billion to $2.367 billion. This translates to a sequential growth of 8 per cent to 10 per cent," the company said in a statement last week.

In the fourth quarter ended March 2021, Wipro reported a revenue growth of three per cent in constant currency term from its IT services segment.

In comparison, TCS grew its revenues by 4.2 per cent sequentially, while Infosys' revenue rose 2 per cent over the last quarter.

The Azim Premji-promoted firm has shown marked improvement in its performance under its new CEO who took over last year. While in the large deal space,the company bagged 12 large deals with a total contract value (TCV) of $1.4 billion. Similarly, it has posted positive growth in all its key markets.

"Wipro has seen strong deal wins ($7.1 billion of which $2.6 billion are large deals in H2FY21) and healthy traction in digital technologies like cloud, customer experience and cyber securities in Q4FY21. This coupled with the restructuring of organisation, client mining and aspiration to win one large deal every quarter will lead to sustained revenue growth in the longer run," ICICI Securities said in a research report.

While the company is likely to post industry leading revenue growth rates, its margins are expected to be impacted in the near term.

"Going forward, the company plans to give wage hikes to the remaining 20 per cent of its employees, bonus to skilled employees, promotion in April-June period, which is expected to be a headwind for the company's margins. In addition, margin dilution of around two per cent due to Capco acquisition will further impact margins," the brokerage firm wrote in its report.

IT major plans wage hike, bonus to staff

• Wipro reported 3% revenue growth in Q4 of FY21
• IT major revised growth forecast for Q1 of FY22 to 8-10% as against previous guidance of 2-4%
• Wipro recently acquired Capco and Ampion