Wipro Q2 profit up 5.5%, constant currency revenue grows 0.3%; Q3 guidance disappoints

Country's third largest software firm Wipro said its consolidated net profit increased 5.5 percent sequentially to Rs 2,191.7 crore for quarter ended September 2017. The growth was driven by fall in total expenses, lower finance cost and higher other income.

Profit for the quarter ended June 2017 stood at Rs 2,076.5 crore.

Consolidated revenue from operations for the quarter fell 1.4 percent quarter-on-quarter to Rs 13,468.7 crore due to more than 50 percent fall in IT products business.

Generally the Street looks at company's IT services business that grew by 1.1 percent to Rs 13,168.9 crore compared with previous quarter, supported by BFSI segment. However, lower business from healthcare and life sciences segment limited revenue growth.

IT services revenues in dollar terms grew by 2.1 percent quarter-on-quarter to USD 2,013.5 million in July-September quarter. Constant currency growth was at 0.3 percent.

“We surpassed the milestone of USD 2 billion in quarterly revenues for IT Services on the back of rigorous execution of our strategy," Abidali Z Neemuchwala, Chief Executive Officer and Member of the Board said.

Revenues largely matched analysts' expectations but constant currency growth and Q3 guidance missed estimates. Rupee revenues were expected at Rs 13,200 crore while dollar revenues were estimated at USD 2,020 million for the quarter, with constant currency growth of 0.9 percent, according to average of estimates of analysts polled by CNBC-TV18.

For Q3FY18, Wipro expects revenues from IT services business to be in the range of USD 2,014-2,054 million, a growth of 0-2 percent over Q2. A CNBC-TV18 poll estimated Q3 revenue growth target of 1.5-3 percent.

"Digital revenues were 24.1 percent of IT services revenues," Wipro said.

EBIT (earnings before interest and tax) increased 4 percent sequentially to Rs 2,278.4 crore and margin expanded 50 basis points to 17.3 percent in quarter ended September 2017, which beat analysts' expectations of Rs 2,191.2 crore and 16.6 percent, respectively.

“Productivity gains generated by HOLMES automation suite and operational efficiencies overcame the incremental impact of wage hikes and expanded IT Services margin to 17.3 percent," Jatin Dalal, Chief Financial Officer said.

Wipro during the quarter added 3 clients in USD 50 million category and 7 clients in USD 10 million band while 8 clients were added in USD 5 million category, 13 clients in USD 3 million and 3 in USD 1 million.

Total number of active customers at the end of September quarter stood at 1,274, up from 1,244 clients in June 2017, the company said.

It further said revenue contribution from its top 5 customers during the quarter increased to 11 percent (from 10.3 percent in Q1) and top 10 clients added to 18 percent (from 17.5 percent) to business.

The stock price of Wipro which announced earnings after market hours closed down 0.24 percent at Rs 289.35 on the BSE.