Abidwali Neemuchwala’s scorecard as Wipro’s CEO for four years
- The stock has lost nearly half its value and overall profits have declined.
- The prospects for the future are still cloudy due to reliance on banking, financial services, and insurance.
- These are the five charts and a table on how the company has fared under Neemuchwala’s leadership
Wipro tried to cushion the blow by announcing that Neemuchwala will stay on until a successor is found. Yet, the stock went down 2% in the morning trade— the total fall since the senior Premji stepped down is now up to 10%.
Wipro is ranked four among India’s tech titans
In the last few years, Wipro has continued to lag behind peers like TCS and Infosys in terms of market value.
|HCL Tech||₹163484.75 crore|
|Tech Mahindra||₹78585.71 crore|
|As of Jan 31, 2019; Source: Moneycontrol.com|
The leadership of Neemuchwala
Neemuchwala spent 23 years in TCS but he was made the CEO of Wipro just 10 months after he joined -- to steer the company out of its hurdles.
However, the former IIT Mumbai alumnus had reportedly little experience in client facing roles, which is crucial for a software exporter like Wipro.
The profit after tax in the financial year ending March 2016 was nearly ₹10,600 crore, three years later it was lower by 7%. And, the prospects are not looking very good either.
As recently as October 2019, global investment bank Morgan Stanley placed Wipro in the ‘underperform’ list, blaming the management. “The company management is uncertain of macro environment, and with growth lower than peers, Wipro should sustain lower P/E (price-earnings) multiple,” said Morgan Stanley.
The ‘price to earnings ratio’ measures its current share price relative to its earnings per-share (EPS). It is a way of the company. Higher the P/E ratio, more valuable the company.
After the most-recent earnings for the three months ending December 2019, Neemuchwala hinted that the worst is behind for Wipro. “If you look at the portfolio, I do feel good that things that we had set out to both reengineer our portfolio and address Wipro-specific issues, as well as a lot of the investment in capability that we have been doing where we get the mind share and traction with customers with a very robust set of deal wins gives me confidence that those issues are behind us,” Neemuchwala said in a call with analysts.
Not just Wipro, Indian IT has struggled as a whole
The challenges, especially the reliance on banking, financial services, and insurance, are not unique to Wipro. Between Brexit, the US-China trade war, and a plethora of other challenges on the global scale, the growth in the BFSI segment has been volatile at best for most IT companies.
However, Wipro was lagging behind its peers on the recovery path at the end of December 2019.
The street was clearly not enthused. “The soft guidance for 4Q (Jan-March 2020) indicates that reaching industry-level growth is an uphill task. We reckon that growth will continue to lag peers ahead based on soft outlook on around 50% of rev comprising BFSI (banking, financial services, and insurance, Communications and Technology (hi-tech sub-segment),” said a report by HDFC securities.
The incoming CEO after Neemuchwala has a tough task at hand to pick up a flailing business uphill in a tough business environment. That would also make it tougher for Chairman Rishad Premji to find Neemuchwala’s replacement.