Wipro’s net profit drops 12% drop in Q1 as recession fears grip its non-US clients

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Wipro’s net profit drops 12% drop in Q1 as recession fears grip its non-US clients
Thierry Delaporte, CEO and MD of WiproBCCL
  • Indian IT services major Wipro reported a 12% sequential drop in its net profit on recession fears.
  • Wipro also said it thinks the stress on its margins has “bottomed out”.
  • The company has bagged 18 large deals with a total contract value of $1.1 billion.
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Indian IT services major Wipro today reported a 12% decline in its profits to ₹2,717 crore in the first quarter, as against ₹3,087 crore in the previous quarter.

The IT company’s revenues grew 3% sequentially to ₹22,001 crore in the same period, in line with analyst expectations. The IT services business grew 2.1% sequentially in terms of constant currency to $2.74 billion.

Offering guidance for the September quarter, Wipro said it expects the IT services business revenue to be in the range of $2.82-2.87 billion, which translates to a sequential growth of 3-5%.

However, Wipro CEO and MD Thierry Delaporte struck an optimistic note, saying the company is “pleased with the outcomes”.

“Our order bookings grew 32 percent YoY in total contract value terms, powered by large transformational deals, and our pipeline today is at an all-time high,” Delaporte said.

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Wipro also noted that it closed 18 large deals totaling to $1.1 billion in total contract value in the June quarter, with its order book growing by 32%. Overall, its customers in the over $100 million range grew from 13 to 20, while those between $50-100 million surged from 42 to 50, year-on-year.

Here’s Wipro’s first quarter at a glance:

ParticularsQ1 FY23Q4 FY22Q1 FY22
Revenue₹22,001 crore₹21,363 crore₹19,045 crore
Net profit₹2,717 crore₹3,087 crore₹3,243 crore
Margin12.3%14.5%17%

Source: Company reports

Looking at the numbers, it is clear that Wipro’s margins have been stressed, and a falling rupee has not helped the company’s bottomline. The company’s margins contracted on both sequential as well as year-on-year basis.

“At 15% of operating margins, we believe that we have bottomed out,” said Jatin Dalal, Wipro’s chief financial officer.
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Similar to its counterparts, Wipro reported that employee benefit expenses accounted for 57.3% of its revenues at ₹12,613 crore. These wages have gone up marginally sequentially, from 56.8% in the March quarter, while the year-on-year increase looks worse from 53.9% last year.

Geography-wise, Wipro’s non-US profits took a big hit, with Europe and Asia-Pacific, Middle East and Africa reporting major declines. The contribution from the American region went up from 68% in the previous quarter to 74% in the current quarter, further increasing Wipro’s dependence on this region.

GeographyQ1 FY23 resultsChange (QoQ)
Americas 1₹1,103 crore-4%
Americas 2₹1,245 crore2%
Europe₹737 crore-19%
APMEA₹160 crore-18%
Others-₹63 crore-275%

Source: Company reports

Wipro’s attrition rate for the June quarter stood at 23.3% – slightly better sequentially from March’s 23.8%. It added 15,446 new employees to its roster in Q1 FY23, which includes more than 10,000 freshers.

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Wipro also announced the appointment of Päivi Rekonen as an independent director. She is also the chair of the board of directors of the Switzerland-based SEBA Bank AG, apart from being on the board of Konecranes Plc., among other companies.

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