Wipro follows IT trend, logs 2.8% rise in Q3 consolidated net profit

In step with top IT players’ third-quarter performance, Wipro on Friday reported a consolidated net profit of Rs 3,052 crore for October-December FY23, an increase of 2.8 per cent year-on-year (YoY).

Net profit was Rs 2,969 crore in the year-ago period. Consolidated revenue grew 14.35 per cent to Rs 23,229 crore in the quarter as against Rs 20,313.6 crore in the previous year. The IT services segment, the largest contributor to the firm’s revenue, grew 12.8 per cent YoY to Rs 23,055.7 crore. Wipro’s net profit beat the Bloomberg estimate, which was Rs 2,975 crore, but missed its revenue estimate, Rs 23,345 crore, marginally. “The macroeconomic uncertainty continues.

However, tech spending remains robust. Clients will continue to see technology as a driver, but might be shifting in their priority towards the type of deals that are delivering a rapid return on investment, focusing on efficiency and reducing discretionary spending,” said Thierry Delaporte, chief executive officer and managing director.

The company expects full-year revenue from its IT services to grow 11.5-12 per cent in constant currency terms.

The big positive for the company was that its total contract value (TCV) came in at $4.3 billion, one of the highest ever for the company. Total bookings were up 26 per cent YoY and large deal bookings increased 69 per cent.

“There is a little bit of lag for the conversion of strong bookings we delivered in Q3. We are expecting to do another strong performance in bookings in the next quarter,” Delaporte said.

Veer Trivedi, research analyst, SAMCO Securities, in his first cut, said: “The revenue growth guidance for Q4 in constant currency (CC) terms is seen at -0.6 per cent to 1 per cent QoQ. On a full-year basis, it will likely underperform its peers. The top line aside, the company did put in a good showing in its operating metrics. The margins improved 120 basis points QoQ and are expected to improve further. The deal wins, like its other leading peers, were strong.”

Jatin Dalal, chief financial officer, said: “The expansion of margins was after absorbing the investments we made in our people by way of salary increases, promotions and long-term incentives for our senior leadership. Margin growth was led by strong operational improvements and automation-led efficiencies.”

The other positive was the drop in attrition, which reduced for the fourth consecutive quarter. Attrition for the trailing twelve months in the December quarter came down to 21.2 per cent from 23 per cent in the preceding quarter. However, the firm has reported a net contraction of 435 employees in the quarter. The headcount now stands at 258,744.

Illustration: Binay Sinha

The December quarter, which is traditionally a weak quarter for top Indian IT players, has turned out to be better than expected. This was validated by strong deal wins by the top four IT services firms.

TCS was perhaps the only one that managed to reach the mid-range of its deal pipeline at $7.8 billion. It has maintained deal wins in the range of $7-9 billion. In the case of Infosys, HCLTech and Wipro, deal wins were above expectations at $3.3 billion, $2.3 billion, and $4.3 billion, respectively.

Biswajit Maity, principal analyst at Gartner, is of the opinion that a growing interest in digitisation among customers has led to the growth of IT companies.

“There is no doubt that this momentum will continue for the next few years because these companies have a very good pipeline of opportunities. Increasingly, customers are focusing on automation, digital transformation as well as ongoing innovation,” he added.

The strong numbers in an uncertain macro situation show how the top IT players have managed to work on strategies that allowed them to grow in difficult times. Analysts also pointed out in a slowdown mostly the big players were able to gain market share owing to vendor consolidation, which the top Indian IT players have managed well.

The biggest positive for the top players was drop in attrition, which also has meant easing pressure on margins. The biggest fall was seen by Infosys at 24 per cent in Q3FY23 from the high of 27 per cent in the preceding quarter, and also below 25.5 per cent in the same quarter last financial year.

HCLTech’s attrition was down to 21.7 per cent from 23.8 per cent QoQ, and TCS saw a dip in addition for Q3FY23.