Wipro Quotes A Charming Guidance

Wipro announced its Q1FY14 earnings on Friday, July 16, 2013. The company’s performance was no different from that in the earlier quarters. However, its strong guidance and positive outlook have helped develop a positive sentiment around the company.

Wipro’s Q1FY14 revenues grew sequentially by 0.2% to USD 1588.3 million. In terms of service offerings, weakness was spotted everywhere apart from Analytics and Information Management and Consulting, which grew by 6.5% and 3.5% respectively. However, together these contribute to a tenth of total revenues and thus didn’t help buoy the overall performance.

In terms of verticals, Financial Solutions and Energy, Natural Resources & Utilities grew by 0.8% and 3.7% respectively. The others saw a decline as compared to Q4FY13. Geographically, Europe grew by 1.9% while the Americas declined by 0.7%. Revenues from India & Middle East declined by 6.7% sequentially. However, this figure stood at -1.5% in terms of constant currency.

In Q1FY14, Wipro’s operating margin declined to 20.0% from 20.2% in Q4FY13. The reduction in margin was mainly on account of an increase in wages in Q1FY14. Wipro, in the quarter under review, gave an annual wage raise of 6-8% for offshore employees and 2-3% for onsite employees.

In Q1FY14, the IT company added 28 customers and ended the quarter with 946 active clients. This seems slightly worrying considering the fact that it added 52 customers in Q4FY13 and had 978 active customers. However, it is important to note that the size of deal wins has been large.

A pick-up in deal closures that are large in size has resulted in this positive outlook. Wipro has estimated Q2FY14 revenues to be in the range of USD 1620 million to USD 1650 million. This translates into sequential growth estimate of 2% to 3.88%, which is quite encouraging.

The strength in Wipro’s order book and the optimistic outlook of the management does make it look like Wipro is closing in on a turnaround. Its restructuring efforts seem to have started paying off, though it will show up in its financials in the coming quarters.