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Wipro’s net profit drops 12% in Q1 as recession fear grips its non-US customers

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  • Indian IT services company Wipro reported a sequential decline in net profit of 12% on fears of a recession.
  • Wipro also said it thinks the pressure on margins has “extinguished”.
  • The company has won 18 major deals with a total contract value of $1.1 billion.

Indian IT services company Wipro today reported a 12% decline in profits to 2,717 crore in the first quarter, from 3,087 crore in the previous quarter.

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

Wipro provides guidance for the September quarter and expects IT services revenue to be in the range of $2.82-2.87 billion, translating to 3-5% sequential growth.

However, Wipro’s CEO and MD Thierry Delaporte were optimistic, saying the company is “satisfied with the results”.

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

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

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

Particularities Q1 FY23 Q4 FY22 Q1 FY22
Revenue ₹22,001 crore ₹21,363 crore ₹19,045 crore
Net profit ₹2,717 crore ₹3,087 crore ₹3,243 crore
Margin 12.3% 14.5% 17%

Source: Company Reports

Looking at the numbers, it’s clear that Wipro’s margins are under pressure, and a declining rupee hasn’t helped the company’s profits. The company’s margins shrank on both a sequential and annual basis.

“At 15% of operating margins, we think we have bottomed out,” said Jatin Dalal, Chief Financial Officer of Wipro.

Like its counterparts, Wipro reported that employee benefits cost represented 57.3% of its revenue at ₹12,613 crore. These wages have increased marginally sequentially, from 56.8% in the March quarter, while the year-on-year increase looks worse than last year’s 53.9%.

Geographically, Wipro’s non-US earnings took a big hit, with Europe and Asia Pacific, the Middle East and Africa reporting major declines. The US region’s contribution rose from 68% in the previous quarter to 74% in the current quarter, further increasing Wipro’s reliance on this region.

Geography Results Q1 FY23 Change (QoQ)
America 1 ₹1,103 crore -4%
America 2 ₹1,245 crore 2%
Europe ₹737 crore -19%
APMEA ₹160 crore -18%
others -₹63 crores -275%

Source: Company Reports

Wipro’s outage rate for the June quarter was 23.3% – slightly ahead of March’s 23.8% sequentially. It added 15,446 new employees to its roster in Q1 FY23, including more than 10,000 freshmen.

Wipro also announced the appointment of Päivi Rekonen as an independent director. She is also the chairman of the board of directors of Swiss-based SEBA Bank AG, in addition to serving on the board of directors of Konecranes Plc, among others.

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