Earnings Outlook
Wipro's growth seen dn QoQ, weakest among large-cap IT cos
This story was originally published at 13:11 IST on 15 January 2025
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By Anjana Therese Antony
MUMBAI – The sequential growth figures for Wipro Ltd. for the December quarter are likely to decline, making the company's earnings for Oct-Dec the worst among blue chip information technology players in India, analysts' estimates show. Seasonal weakness, furlough headwinds, client-specific challenges in Europe, and softness in communications and manufacturing segments are expected to pull down the financial performance of the company, broking firms said in their earnings preview reports.
The Bengaluru-based information technology company's consolidated net profit is seen falling nearly 5% on quarter to INR 30.57 billion, according to the average of the estimates of 15 broking firms. If so, this would be the first sequential decline in the bottom line in four quarters. Of the 15 brokerage houses, JM Financial Institutional Securities has the lowest net profit estimate of INR 29.12 billion, while Emkay Global Financial Services has the highest at INR 31.57 billion.
Wipro's consolidated revenue is seen 0.3% lower sequentially at INR 222.31 billion, according to the average of the estimates. Nirmal Bang Institutional Equities has the highest top line estimate of INR 225.82 billion and Prabhudas Lilladher has the lowest of INR 220.40 billion. In the last six quarters, the top line declined sequentially four times.
From a year ago, the top line may rise just 0.1%, the first on-year rise in five quarters. The bottom line may grow 13.5%, which would be the second-fastest growth in the metric in 12 quarters after the 21.3% growth posted in Jul-Sept.
Recently, global broking firm CLSA downgraded Wipro's stock rating to 'hold' from 'outperform' and said the company was expected to remain a laggard in terms of the December quarter earnings, with flat sequential revenue growth in constant current terms. "The next leg of re-rating for Wipro can only be achieved if it starts growing in line with peers," media reports said, citing CLSA. In Jul-Sept, the company's sales in constant currency were up 0.6% on quarter, compared to analysts' expectation of flat sequential growth.
"We expect IT services revenue to decline by 0.5% QoQ in cc (constant currency) terms, with cross currency headwind of around 100 bps," Centrum Broking said in its earnings preview report. This fall, however, would be slower than the worst-case scenario expected by the company. After the Jul-Sept earnings were released, Wipro had said it expects its IT services revenue to fall up to 2% or be flat on quarter in constant currency terms in Oct-Dec. This surprised analysts, who had expected the company to retain the revenue guidance at -1% to 1%, projected for the September quarter. Wipro had also estimated the revenue to be in the range of $2.61 billion to $2.66 billion for Oct-Dec.
Similar to its net profit and revenue growth figures, Wipro's operating margin is also widely expected to decline sequentially due to the impact of wage hikes and a likely decline in utilisation rate. The benefit of the rupee's depreciation is unlikely to offset the impact of these factors on the operating margin, calculated as earnings before interest and tax margin, broking firms said. The domestic currency closed at 85.6150 a dollar in December. As their revenue comes in dollars, depreciation of the rupee improves the profitability of IT companies.
The EBIT margin is seen in the range of 15.6-16.6%, according to estimates from nine broking firms, lower than the 16.8% posted a quarter ago. The metric had risen by 30 basis points sequentially in Jul-Sept, outperforming the most optimistic forecasts analysts had given for that quarter.
Wipro, India's fifth-largest information technology player in terms of market capitalisation, is scheduled to release its quarterly results on Friday. Its post-earnings press conference with the leadership team will be held at 1630 IST and the conference call with analysts at 1900 IST. Investors will closely look for comments on recovery in European operations, trends in discretionary spending by clients, expectations on policies under the US president-elect Donald Trump, strategic initiatives from the new management, margin outlook, growth in Jan-Mar, and impact of senior management attrition, among others.
The company has seen a series of resignations, particularly since September 2023, starting with its Chief Financial Officer Jatin Dalal, then chief executive officer Thierry Delaporte in April 2024, chief technology officer Subha Tatavarti in August, and ehief executive officer of Europe strategic market unit Pierre Bruno in November. Currently, Aparna Iyer is the CFO, Srinivas Pallia the CEO, and Omkar Nisal is CEO of Europe strategic market.
When it comes to deals, broking firms expect the company's large deal wins during the December quarter to be around $1.2 billion-$1.4 billion, lower than $1.49 billion a quarter ago. At 1226 IST, shares of Wipro were 0.7% lower at INR 290.60 on the National Stock Exchange.
Following are the Oct-Dec earnings estimates for Wipro based on reports from 15 brokerage firms in descending order of the estimate of net profit:
| Broking firm |
Net profit (in INR million) |
Net sales (in INR million) |
Revenue (in $ million) |
EBIT margin (in %) |
| Emkay Global Financial Services Ltd | 31,568 | 222,972 | -- | -- |
| Nirmal Bang Equities Pvt Ltd | 31,484 | 225,817 | 2,659 | 16 |
| Kotak Institutional Equities | 31,241 | 221,940 | -- | -- |
| Elara Securities (India) Pvt Ltd | 31,196 | 220,793 | 2,619 | 16.6 |
| Sharekhan Ltd | 31,140 | 221,964 | -- | -- |
| KR Choksey Research | 31,084 | 225,246 | -- | -- |
| IDBI Capital Market Services Ltd | 30,863 | 220,453 | 2,612 | 16.5 |
| HDFC Securities Ltd | 30,500 | 223,080 | 2,624 | 15.8 |
| Prabhudas Lilladher Pvt Ltd | 30,400 | 220,400 | 2,604 | -- |
| Systematix Shares and Stocks (India) Ltd | 30,236 | 221,942 | 2,622 | 16.3 |
| Centrum Broking Ltd | 30,190 | 221,939 | -- | 16.5 |
| Indsec Securities and Finance Ltd | 30,100 | 222,300 | 2,600 | 16.2 |
| Motilal Oswal Financial Services Ltd | 29,700 | 221,500 | 2,620 | 16.3 |
| Nuvama Wealth Management Ltd | 29,678 | 221,696 | 2,626 | 16.1 |
| JM Financial Institutional Securities Pvt Ltd | 29,115 | 222,541 | -- | -- |
| Average | 30,566.33 | 222,305.53 | 2,620.63 | 16.23 |
End
US$1 = INR 86.51
Edited by Avishek Dutta
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