Wipro set to join $10-billion club

IT services major Wipro on Thursday posted better than expected Q1 performance with sound sequential revenue growth on the back of momentum in the large deal space.

Though the IT firm faced margin pressure owing to Capco acquisition and wage hikes, it guided for sequential revenue growth of 5 to 7 per cent for Q2 of FY22, which may translate into mid to high teens of revenue growth for the whole fiscal. The company is hopeful of crossing the $10 billion annual run rate of revenues in FY22.

The Bengaluru-headquartered firm reported a 35 per cent year-on-year rise in its consolidated net profit to Rs 3,230 crore for the quarter ended June 2021. Revenues rose 22.4 per cent year-on-year basis to Rs 18,250 crore during this period. In dollar term, gross revenues were at $2.5 billion.

In the IT services segment, which accounts for more than 95 per cent of Wipro's gross revenues, the company reported revenues at $2.41 billion, which is 21.3 per cent on YoY basis in constant currency terms. Sequentially, the IT services' revenue growth was at 12 per cent in CC term. Excluding Capco, Wipro's organic growth stood at 4.9 per cent sequentially.

In comparison, TCS grew 2.4 per cent sequentially, while Infosys revenue rose 4.8 per cent over the last quarter in constant currency term.

For Q2, Wipro guided for revenues of $2.535 billion to $2.583 billion, that translates into 5-7 per cent sequential rise.

"Even at the lower end of our guidance, we will cross the $10 billion annual run rate of revenues. The Q1 performance and Q2 guidance set us up for a well ahead of double-digit growth for the full year, even excluding Capco," said Thierry Delaporte, CEO & MD of Wipro.

The Azim Premji-promoted IT firm also bagged eight large deals, resulting in a total contract value of more than $715 million in Q1 of FY22.

However, the company witnessed a drop in its operating margin, which was more than the market estimates. It saw a dip of 220 basis points sequentially in its margin that came at 18.8 per cent. "While 1.3 per cent was due to Capco acquisition, the rest 90 basis points impact was due to our significant investment in talent," said Jatin Dalal, Chief Financial Officer at Wipro.

Among the verticals, BFSI (banking, financial services & insurance) grew by 22.4 per cent QoQ, energy & utilities was up 11.1 per cent, communication vertical saw 12.8 per cent growth, and consumer business unit grew up 14.1 per cent in sequential term.

The company added 12,178 employees on net basis during the first quarter to take its headcount to 209,890. "We will onboard 33 per cent more freshers in FY22, versus the previous year. We also intend to onboard more than 6,000 freshers in the second quarter. Overall, we will roll out 30,000 offers to fresh graduates this year, who will join next year," said Saurabh Govil, chief human resources officer at Wipro. During the quarter, attrition rose 340 basis points to 15.5 per cent for the company. "We are taking all kinds of measures including salary hikes, promotion and skill-based incentive to retain talent. As far as taking back people to office is concerned, we will start it from September. However, the percentage will vary for various geographies," said Govil.