Wipro Q4 profit up 7% but Q1 revenue guidance misses estimates; announces 1:1 bonus

Software firm Wipro Tuesday reported better-than-expected earnings for January-March quarter and announced a 1:1 bonus issue but the dollar revenue guidance for Q1FY18 disappointed the Street.

Its consolidated profit for the quarter grew by 7.2 percent sequentially to Rs 2,267 crore on better operational performance while consolidated revenue increased 4.86 percent to Rs 15,033.8 crore.

Usually, analysts closely watch its IT services business that showed 1.56 percent growth quarter-on-quarter at Rs 13,402.1 crore in Q4FY17.

IT services revenue in dollar terms stood at USD 1,954.6 million, an increase of 2.7 percent sequentially, the company said in its filing, adding the non-GAAP constant currency revenue in dollar terms grew 1.7 percent QoQ.

Wipro expects its Q1FY18 revenues from IT services business to be in the range of USD 1,915 million to USD 1,955 million, which is far lower than analysts' estimates.

In percentage terms, the revenue growth for Q1 is expected to be in the range of negative 2 percent to 0 percent over its Q4 revenue of USD 1,954.6 million while a CNBC-TV18 poll was expecting 0-2 percent growth for June quarter.

Q1 is traditionally a soft quarter for the company but Q1 is not the reflection of growth potential for the rest of FY18, Abidali Z Neemuchwala, Chief Executive Officer of the company said while addressing a press conference.

"We are confident that the recovery in energy & utilities and demonstrated strength in digital will help the company improve growth trajectory during the course of the current financial year."

The company had certain project cancellations in healthcare business, which will impact Q1, he said.

He expects growth momentum to return in Q2FY18 and sees industry leading growth rate by Q4FY18.

Digital eco-system, which was 17.5 percent of IT services revenues in Q1 has grown to 22.1 percent of IT services revenues in Q4, he said.

According to average of estimates of analysts polled by CNBC-TV18, IT services revenue was estimated at Rs 13,090 crore and USD 1,938.5 million for the quarter.

Revenue from its existing customers dropped to 96 percent in March quarter, from 97.6 percent in previous quarter.

Wipro added 1 client each in USD 75 million, USD 50 million and USD 20 million categories. Total numbers of active customers increased during the quarter to 1,323 from 1,259 in previous quarter.

Gross utilisation was at record high during the quarter, increased to 73.1 percent from 71.6 percent on sequential basis while attrition (trailing twelve months) remained flat at 16.3 percent but quarterly annualised attrition fell to 14.8 percent from 15.4 percent QoQ.

EBIT (earnings before interest and tax) from IT services grew by 4.6 percent quarter-on-quarter to Rs 2,526.9 crore and margin expanded by 56 basis points to 18.86 percent in the quarter ended March 2017, which also beat analysts' expectations of Rs 2,324 crore and 17.75 percent, respectively.

Consumer business unit during the quarter showed 3.3 percent growth sequentially (2.6 percent in constant currency); energy, natural resources & utilities 3.4 percent (1.9 percent); Finance solutions 4.4 percent (3.2 percent); and manufacturing and technology 5.3 percent (4.7 percent).

However, communications segment degrew 3.9 percent QoQ (fell 6.6 percent in constant currency); healthcare, life sciences & services business also declined 1.4 percent (down 2 percent).

American business reported a 1.4 percent growth sequentially (1.2 percent in constant currency), revenue from Europe up 6.4 percent (4.4 percent) and India 1.9 percent (0.5 percent). APAC and other emerging markets grew by 2.3 percent QoQ but fell 0.7 percent in constant currency.

For FY17, the company said IT services segment revenue grew 4.9 percent to USD 7,704.5 million and 7 percent in constant currency compared with previous year. In rupee terms, IT services revenue increased 8.4 percent to Rs 52,844 crore.

Wipro said board of directors approved issue of bonus shares, commonly known as stock dividend in the US, in the proportion of 1:1 (one bonus equity share for every one fully paid-up equity share held).

It further said the board will consider a proposal for buyback of equity shares of the company around July 2017. The company reappointed Azim Premji as its chairman for two years.

The stock price of Wipro, which announced earnings after market hours, closed up 0.93 percent at Rs 496.35 on the BSE.