Wipro grows Q1 profits 0.1%; CEO Delaporte says no earnings guidance for upcoming quarters

Information technology (IT) services firm Wipro has posted a flat growth of 0.1% in net profit to Rs 2,390 crore for the first quarter of the financial year 2020-21, amid the Covid-19 induced global economic crisis. 

Last week, its Mumbai-based peer TCS reported a 14% drop in net profits for the June quarter. 

While Bengaluru headquartered Wipro saw its revenue decline 4.4% in constant currency, TCS reported a sharper fall at 6.3.% in constant currency terms.

Wipro reported an overall revenue of Rs 14,913 crore for the June quarter, a 1.3% year-on-year growth from Rs 14,716 crore. Its revenue from IT services increased 1.7% to Rs 14,595 crore from Rs 14,351 crore for the same quarter a year ago. 

Surprisingly, Wipro improved its margin by 1.4% sequentially and 0.6% year-on-year to 19% through better employee utilisation as well as rupee depreciation. TCS saw its margin drop during the quarter. 

CEO Thierry Delaporte, who took over the position in Wipro only last week, said that the company will continue to focus on profitable growth instead of growth at all costs.

“Margins are important to reinvest for future growth as the technology landscape evolves rapidly,” Delaporte said. 

However, he did not give any guidance for the upcoming quarters. “I would like to be a bit cautious as some markets are stable, but it is difficult to assess how it will evolve. It is still uncertain as to how the deal volume and pipeline will look through the year,” he said.

Paris-based Capgemini veteran Delaporte said that the several enterprises have sought digital transformation for business continuity and that gives the company hope for growth in the future. The firm looks to leverage its relationship with partners such as Microsoft, AWS and Google Cloud, while chasing bold and ambitious deals, he said.

Wipro CFO Jatin Dalal said that the banking, financial services and insurance (BFSI) segment remained stable, while communication and consumer business verticals saw deal momentum. The BFSI sector is the most important vertical for the $190 billion company and makes up about 35% of the industry topline.

Wipro’s BFSI vertical declined only 1.2%, much lower compared to the 5% that TCS witnessed. The former’s healthcare vertical, manufacturing, energy, high-technology and consumer business unit verticals grew during the quarter. 

The Indian IT industry revenue is estimated to fall around 3% this year, according to credit rating agency ICRA. Research firm Gartner also expects IT expenditure to decline 7.3% this year. 

During the March quarter of the last financial year, Wipro reported a 4.7% year-on-year growth in gross revenues to $2.1 billion. The Azim Premji-owned company reported revenues for its IT services segment at $8.3 billion for the financial year ended March 2020, a 1.7% year-on-year growth.