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Wipro margins, revenues beat estimates in Q3

Margins grew 4.8 per cent to touch 19.8 per cent on increased utilisation of workforce.

ET Bureau|
Jan 19, 2019, 10.27 AM IST
Bengaluru: Wipro brought cheer to investors with higher-than expected growth in margins and revenues in the third quarter of FY19 and announced issue of bonus shares and an interim dividend. The software services exporter, however, had a warning for the street — growth in the coming three months to March would be tepid or flat to 2 per cent.

The Bengaluru-based company rewarded shareholders with one bonus share for every three held by them and an interim dividend of Rs 1 per share, on a day when its scrip touched a record high before closing 2.91 per cent up at Rs 346.20 on BSE. The company’s third-quarter net profit jumped 29.6 per cent to Rs 2,510 crore from Rs 1,930.1 crore in the December quarter of FY18. Revenue rose 10.2 per cent to Rs 15,060 crore from Rs 13,669 crore in the year-ago period.

“We have had a good order book. I do not see any major issue with the demand environment,” Wipro CEO Abidali Neemuchwala told reporters. Indian IT services providers are witnessing higher growth as customers increase spend on digital services and optimise costs on legacy technologies.

Margins grew 4.8 per cent to touch 19.8 per cent on increased utilisation of workforce, improved automation and a marginal gain from forex benefits. It added around 928 people in the quarter.

Concerns over US slowdown

However, concerns about a possible economic slowdown in US, its main market, remained.

“There are two risks that we are monitoring carefully. One is the macroeconomic voices that we hear (of a potential slowdown in the US economy)... and the UK in general what is happening with Brexit,” he said.

On the New York Stock Exchange, which opened after the company announced its results, Wipro ADR rose 2 per cent to trade at $5.34 at 11.10 pm India time. While the commentary on the demand environment has been optimistic, Wipro continues to face challenges internally that will impact its business next year. Verticals such as healthcare and manufacturing, and the India unit will see some restructuring.

“These three will be a drag (for) at least a couple of quarters,” Neemuchwala told ET in an interview.

Wipro saw a 10 per cent dip in healthcare enrollment-based services for its US unit, HealthPlan Services, in December. This could potentially continue in the quarter to March.

“Once there is regulatory certainty and insurance companies start participating in that, whatever is the new regulation we will be upgrade our platform to meet the requirement and the entire business will be back on track,” Neemuchwala said. “We don’t know when (it will happen).”
wipro graph

Analysts were disappointed with the guidance for the fourth quarter.

“Consolidated EBIDTA margin (has) beat(en) expectations . However, 4QFY19 revenue growth guidance disappointed at the lower end,” said Madhu Babu, IT analyst with brokerage Centrum, in a note.

In the nine months to December, Wipro grew 5.7 per cent, more than double the growth of 2.7 per cent in fiscal 2018. However, this growth is slower than larger rivals Tata Consultancy Services, which grew at 12.1 per cent in the nine months of fiscal 2019, and the growth rate of 8.1 per cent for Infosys.

HCL Technologies, which outgrew Wipro early this year, is expected to announce its third quarter results in January end.

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