Wipro CEO expects revenues to rebound in the next few quarters

• We are not the only ones seeing a dichotomy between volumes and revenues, said Wipro CEO.
• He expects its large deal TCV of $1.3 billion wins to drive quality revenue next year.
• The typical pyramid of large and small deals has evolved, and small deals in the market are much fewer.
  

After Wipro posted a sequential revenue fall for the third consecutive quarter, its CEO Thierry Delaporte said that it will see a rebound in the next few quarters. This was after the company said that its upcoming quarter’s constant currency revenues could fall anywhere between 1.5-3%, after its Q2 revenues fell 2%.

“We are not the only one seeing a dichotomy between volumes and revenues. For several years, we have seen growth and in the last few quarters what we are seeing is reflective of the industry,” Delaporte said at the company’s Q2 earnings press conference.

Like many of its peers, the Bengaluru-based IT major reported rampdowns, furloughs and reductions – that’s resulted in revenue leakage. The company, which has a larger exposure to consulting business in the BFSI segment, was hit harder than its peers.

The constant currency revenues of its strategic business unit Americas 1 (healthcare, consumer goods, retail and Latin America etc) grew by 0.9% QoQ, its Americas 2 unit (banking, manufacturing, hi-tech, utilities and Canada) fell by 2.6%.

Europe saw a steep fall of 5.4% sequentially. “Given our strong order booking in Europe, we’re confident of a swift rebound,” said Delaporte.

Top-heavy deal book

The company’s total bookings for the quarter stood at $3.8 billion. Its large deal total contract value (TCV) stood at $1.3 billion – which is the highest it has seen in the last nine quarters.

“Our large deals will drive quality revenue for the next year,” he said, adding that he derives confidence from the number of large deals they have booked.

Yet, the total number of new customers for the quarter were at 49, which is much lower than the 65 in Q1. On a year on year comparison, its new customer number fell over a half from 128. Its total number of active customers also fell both sequentially and on an annual basis to 1,393.

Explaining this, Delaporte said that the typical pyramid of large and small deals has evolved. “There are a lot less of the very very small deals. It’s our strategy that we want to reduce the number of small clients and focus on large accounts and grow them. Because, a very large number of small deals are not predictive,” he said.

The company kickstarted a programme three years back to improve its margins. Even in a difficult quarter, the company said that it was able to deliver a 10 basis point improvement in operating margin to 16.1%. It also promised that it will remain range-bound without any guidance for the quarters ahead.

The company said that it is confident of discretionary spending coming back to the system which will set it back on the track. “It’s very important for Wipro to keep focus on key elements of transformation,” said Delaporte.