Given the recent traction in deals at larger rival TCS, Wipro’s commentary on deal wins will also be keenly watched.
Wipro, one of the largest IT services providers in the country, will announce its earnings for the March quarter and financial year 2017-18 on Wednesday.
It would be the third Nifty-listed IT company to announce results after Infosys and TCS this earnings season. Both TCS and Infosys posted decent sets of numbers, either in-line or better than analysts' expectations.Here are five factors to watch out for:
Analysts expect sequential constant currency revenue growth to not exceed 1.5 percent in quarter under review. They also expect the company to forecast between 0-2 percent growth for the June quarter, which is traditionally low.
According to a Reuters poll, analysts on average expect Wipro to post a March quarter net profit of Rs 2,118.7 crore and revenue of Rs 14,007.5 crore.
Given the changing dynamics of the industry, and increased hiring in local client geographies like US and Europe, margins at most IT services players have been under pressure.
In the December quarter, the company's EBIT margin contracted by almost 240 basis points due to a client turning insolvent. This quarter too, one of Wipro’s telecom clients has declared bankruptcy, which could have a negative impact on its margins.
The company's IT services margin in the December quarter was 14.8 percent, and adjusted for the client specific issues, was 17.2 percent.
The Street will watch out for what measures Wipro is taking to enable margin expansion.
Telecom client issues
Wipro said earlier this month that one of its Indian telecom clients filing for bankruptcy would impact its profit for the March quarter.
The client is widely thought to be Aircel, which filed for Corporate Insolvency Resolution Process (CIRP) with the National Company Law Tribunal (NCLT) on February 28.
Analysts have said they will keenly watch for an update on client-specific issues, especially in India and the Middle East.
Update on energy and utilities
In the December quarter, Wipro had said another of its clients in the energy and utilities vertical was undergoing insolvency proceedings. The energy and utilities business contributes 12.4 percent of Wipro’s revenue, and there will be interest around an update on these issues.
Even for the healthcare vertical, which has also been weak of late, commentary will also be keenly watched.
Given the recent traction in deals at larger rival TCS, and its own spate of client-specific issues, Wipro’s commentary on deal wins will also be a factor to watch out for.The Great Diwali Discount!
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