Analyst Concall
Don't see margin rising for now, aim 17.5% Jan-Mar - Wipro
This story was originally published at 22:04 IST on 17 January 2025
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--Wipro: Expect to keep Jan-Mar margin at 17.5%, see it moving in thin band
--CONTEXT: Comments by Wipro management in post-earnings call with analysts
--Wipro: Saw margin expansion Oct-Dec on better execution, reduced overheads
--Wipro: Don't see any particular headwinds for Jan-Mar
--Wipro: Deal pipeline strong in Europe, need to focus on execution
--Wipro: Expect employee attrition to reduce in the coming quarters
--Wipro: Will explore dividends as well as buybacks in future
By Anshul Choudhary
MUMBAI – Wipro Ltd.'s management refrained from giving any hopes of further expansion in margins in the March quarter as demand in some segments and from certain regions, including Europe, is still soft. They see signs of improvement in their largest segment of banking, financial services, and insurance, but the recovery is happening gradually, which is also the reason for their conservative outlook.
The management has guided that its operating margin is likely to move in a thin band going forward with the company expecting to keep it at around 17.5% during the March quarter. "Is there a revised aspiration band (for margin)? Nothing that we would like to share at the moment. We have got to 17.5%... it is a 12-quarter high, and we are conscious that we should sustain it," Aparna Iyer, chief financial officer of Wipro, said at a conference call for analysts post earnings.
During the December quarter, the company managed to expand its IT services operating margin by 70 bps to 17.5%. The company said this expansion in margins was led by better execution in core business and consulting, along with reducing overheads. Further, they have fully absorbed the negative impact on margins due to wage hikes announced a few months back, the management said. Going forward, they expect to keep hiring more people, with attrition likely to come down in the coming quarters.
The management don't see any major risks for their bussiness at least for the March quarter. The management downplayed any significant impact of the recent depreciation of the rupee against the dollar as the company hedged against currency volatility. "I don't think there are any particular headwinds as we start Q4... salary increases and everything is behind us, it is going to be a lot of 'business as usual'," Iyer said in the call.
The management is conscious of the weakness in demand in Europe and the APMEA region. For context, the company calls Australia, New Zealand, India, West Asia, South East Asia, Japan, and Africa together as APMEA. The demand in these regions has been soft, and the company is working on it. Within segments, the company is seeing soft demand in consumer, and energy, manufacturing and resources.
On steps being taken to improve revenues from the two key regions, the management said they have given charge to new leadership in these regions, including naming a new chief executive officer for the APMEA region. They said the deal pipeline is very strong in Europe, and the company will now focus on improving execution.
Clarifying on their announcement of increased payouts to shareholders, the management said the company prefers dividends and buybacks as the mode of payout. Earlier Friday, the company revised its capital allocation policy and increased the payout percentage to 70% or more of net income in a block of three years as compared to 45-50% earlier. End
Edited by Saji George Titus
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