Wipro profit drops in Q4; to buyback up to 4 cr shares

The firm’s operating profit margin came in at 20.1%, a fall of 10 basis points over December quarter

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WIPRO ON Wednesday reported a sequential 0.2 per cent drop in net profit to $337 million for the three months to March. The bottom line was impacted largely by higher taxes and lower other income even as the firm outlined an ambitious target of achieving $15 billion in revenues by FY20 with an operating profit margin (OPM) of 23 per cent.

While Wipro’s IT services revenues touched $1.88 billion, recording a sequential growth of 2.4 per cent in Q4FY16, the IT major’s OPM came in at 20.1 per cent, a fall of 10 basis points over the December quarter.

For the first quarter of FY17, India’s third largest IT services exporter has guided for lukewarm dollar revenue growth of 1-3 per cent. Growth at the Bengaluru-headquartered firm has been largely aided by the acquisitions made in the six months to March.

Wipro CEO Abidali Neemuchwala observed after the results announcement that the demand environment was stable. “While the increase in client budgets is minimal, there is a reallocation of technology budgets from the maintenance side to new projects at a great velocity,” the CEO said.

Neemuchwala said the core leadership team had laid out the $15-billion target after a tremendous amount of detailing.

“We have broken down key themes we will drive to meet our ambition,” he said, though he did not spell out whether acquisitions had been pencilled into the revenue target. Wipro has identified six core areas to focus on including digital, client mining, localisation, non-linearity, hyper automation and building partner ecosystem.

The IT major recorded a 3.7 per cent revenue growth in US dollars for FY16 to $7.34 billion, in line with expectations but the lowest among peers. The top line was impacted by the slowing growth in energy vertical - in which it has made significant investments due to falling oil prices. The consolidated net profit for the fiscal was $1.3 billion recording a growth of 3 per cent.

Wipro’s performance has lagged its peers and even the industry benchmark set by Nasscom. Since FY13, the IT major has been recording annual revenue growth rates in single digits. In comparison, Infosys has given an aggressive revenue growth guidance of 11.513.5 per cent in constant currency terms while TCS sounded more confident for FY17, shaking off the under-performance it had witnessed over the last six quarters. The firm’s headcount stood at 1,72,912 with a net addition of 2,248 during the fourth quarter of FY16. It managed to keep its attrition rate steady during the fiscal. HR head Saurabh Govil said that its attrition rate of 14.9 per cent in the fourth quarter was the lowest in 11 quarters.

The Wipro scrip closed at Rs 601.35 on the BSE on Wednesday, up 2.07 per cent. The results were announced after market trading hours.

Meanwhile, the company in a stock exchange filing said on Wednesday that its board of directors has approved the proposal to buy back shares worth Rs 2,500 crore from the investors. Wipro plans to buy back four crore shares at Rs 652 apiece, it said. The buyback price is 7.8 per cent premium to its closing price on Wednesday.

Wipro CFO Jatin Dalal said, “Given the cash we have on our balance sheet. We have always looked at opportunities where we could return the cash to shareholders and it goes towards our objective of striving towards more value to our share holder.”

On the buyback price, Dalal said based on the 60-day average price of Wipro, it translates into around 15-16 per cent premium. The buyback proposal of Wipro will come as a major boost for the investors as the stock price has been hovering in a particular range (around Rs 545-550) with no significant upward movement. FE