WIPRO Q1 NET UP 1.2%; ANNOUNCES ~11,000-CR SHARE BUYBACK
Firm announces share buyback of ~11,000 crore Q1 FY18 performance
India's third largest IT firm Wipro on Thursday posted a 1.2 per cent rise in its consolidated net profit at ~2,076.7 crore for the April-June quarter. Besides, the company's board has announced a share buyback proposal of ~11,000 crore, entailing 343 million equity shares at ~320 apiece. The Bengaluru-based firm had registered a net profit of ~2,052 crore in the year-ago period.
Wipro, the country’s third-largest software exporter, said its first quarter profits rose 1.2 per cent to ~2,077 crore and revenues rose 0.2 per cent to ~13,626 crore. The company beat Street expectations, as it saw improving business from clients in banking, energy and utilities.
The Bengaluru-based firm bettered its own guidance to report information technology (IT) services revenue, calculated in dollar (the currency in which it bills majority of its customers), of $1.97 billion, a 0.3 per cent growth over the previous quarter. Wipro had forecast revenue to be negative 2 per cent to flat growth of $1.95 billion.
IT services' operating profit margin for the quarter was 16.8 per cent, a drop of 100 basis points, compared to 17.8 per cent in the year-ago period and also lower than 18.3 per cent in the March quarter. It attributed the decline in margins to appreciation of the rupee against the dollar and impact of wage hikes that it gave in June.
“On the back of a quarter of good execution, we expect the momentum to continue. While the core business continues to improve, regulatory uncertainties in the healthcare payer market are causing headwinds. We continue to build momentum towards Q4 and aim to be at industry level growth rates in Q4,” said Abidali Z Neemuchwala, chief executive officer of Wipro.
Wipro also announced a share buyback of ~11,000 crore, or $ 1.7 billion, at a price of ~320 or $4.95 a share, which is 24 per cent higher than the average price of the stock for the past six months.
Wipro is the fourth Indian IT services firm to announce a buyback after TCS, Infosys and HCL Technologies as there have been sluggish return on IT stocks. While the largest Indian IT firm TCS announced a buyback of shares worth ~16,000 crore last week to repurchase 56.1 million shares at ~2,850 each, Infosys said it would spend as much as $2 billion in either share buyback or dividends to shareholders this financial year.
Wipro’s buyback announcement lifted its American Depositary Receipt (ADR) by 5.1 per cent on the NYSE on Thursday.
The first quarter has been a mixed bag for large IT companies as they struggled with technology shifts towards digital and cloud, automation of low-end tasks and growing protectionism in the developed markets. Wipro’s growth lags both larger rivals Infosys and Tata Consultancy Services (TCS).
Infosys saw its first quarter profits grow 1.4 per cent to ~3,483 crore and revenue by 1.8 per cent to ~17,078 crore on the back of improved efficiency and marginal growth from customers, prompting it to raise its dollar guidance for the year ahead. TCS had reported muted numbers on the back of slower growth from clients in banking and financial services and retail. Its first quarter profit dropped 5.82 per cent to ~5,950 crore and margins got hit due to currency fluctuations and impact of wage hikes in the quarter.