Wipro’s Quarterly Numbers: A Mixed Bag

Wipro announced its Q2FY13 results on Friday, November 02, 2012. Overall, we are of the view that this result announcement was a mixed bag. The company showed progress at some points and lacked the required gusto on others. Moreover, the company announced the board’s approval to the proposed demerger of non-IT business from the company to form an unlisted entity called Wipro Enterprises.

On the results front, the IT services’ revenues for Wipro came in at USD 1.5407 billion in Q2FY13 as compared to USD 1.5148 billion in Q1FY13, marking a sequential growth of 1.71 per cent. This growth in the topline has been in line with the company’s quarterly guidance of USD 1.52 billion to USD 1.55 billion. However, this growth figure has been rather subdued as compared to other IT players in the space and especially considering the fact that Q2 is usually a relatively stronger quarter.

Wipro had kept their estimates stagnant for Q2FY13 at USD 1.52 billion to USD 1.55 billion, which was the same as for Q1FY13. This has changed this time and the company announced a guidance of USD 1.56 billion to USD 1.59 billion for Q3FY13 which estimates a sequential growth of 1.25 per cent to 3.20 per cent, which although moderate is at least an upward movement in guidance.

On the margins front, though the operational margin of Wipro reduced by 31 basis points to 20.67 per cent, this reduction marked an improvement in operational efficiency considering the fact that wage hikes should have taken a larger toll on the margins. With this the operational profit of Wipro came in at Rs.1,731 crore in Q2FY13.

On the client front, Wipro’s order book looks healthier than earlier with the company adding 53 customers in Q2FY13 as compared to 37 in Q1FY13. With this the total number of active customers comes to 939 for Wipro which is indicative of a relatively better Q3FY13. While the order book has seen improvement, Wipro saw some decline on the employee metrics. Its employee additions came down from 2,632 in Q1FY13 to 2,017 in Q2FY13. The company also saw a decline in gross utilisation which came down from 68.3 per cent in Q1FY13 to 66.8 per cent in Q2FY13.

This result has been a mixed bag considering the moderate revenue growth, reduced hiring and lower utilisation on one hand and operational efficiency, higher guidance and client additions on the other. Overall, although this quarter has been subdued, we are optimistic about the coming quarter, having looked at the placement of figures in the result announcement.