Wipro Q4 net up 13%, but Q1 guidance weak

WIPRO EXPECTS ITS BUSINESS TO REPORT NO GROWTH IN APRILJUNE, DUE TO WEAK SPENDING BY CLIENTS IN HEALTHCARE AND RETAIL INDUSTRIES

Wipro Ltd on Tuesday reported a strong set of fourthquarter earnings that beat Street estimates to end a year in which India’s three largest services firms lagged the industry’s average growth pace.

Bengaluru-based Wipro said its dollar revenue improved 2.7% sequentially to $1.95 billion in the three months to March (1.7% rise in constant currency terms), after it had earlier outlined quarterly growth of at-best 2% in constant currency terms in the fourth quarter.

Net profit jumped 13% to $349 million from $309 million in the preceding quarter, due to gains made on the sale of Wipro EcoEnergy for $70 million.

A Bloomberg survey of analysts had estimated a revenue of $2.14 billion (₹13,817.6 crore) and a profit of $327.94 million (₹2,122.6 crore).

For fiscal 2016-17, Wipro reported 4.9% dollar revenue growth, a slight improvement over the 3.7% growth in 2015-16, to end with $7.7 billion in revenue.

The firm ended 2016-17 with 7% growth in constant currency terms. Wipro and its larger rivals Tata Consultancy Services Ltd (TCS) and Infosys Ltd grew slower than the IT industry’s 8.6% growth in the year estimated by industry body Nasscom. Both TCS and Infosys reported 8.3% growth, each, in constant currency terms (TCS and Infosys reported 6.2% and 7.4% dollar revenue growth, respectively).

This means that for the first time since 2009-10 the three largest IT services firms, which together make up a quarter of the industry’s total business, grew slower than their smaller peers.

The big disappointment for analysts, however, was the poor guidance outlined by the management. Wipro, which only provides a quarterly growth forecast, expects its business to report no growth in April-June, due to weak spending by clients in healthcare and retail industries.

“We believe Q1 guidance is not a reflection of the growth potential for the rest of the year. We anticipate the growth momentum to return in Q2 and expect to be at industry growth rates by Q4 FY18,” Wipro chief executive officer Abidali Neemuchwala said.

“The poor guidance in the first quarter means it is early to say if any early signs of a turnaround are there,” said a Mumbai-based analyst at a foreign brokerage.