Wipro, the fourth largest IT services company in India, has registered a 3.2 percent sequential growth in consolidated profit for the quarter ended September 2020, while IT services segment earnings were ahead of analysts estimates on all front. The company announced share buyback of Rs 9,500 crore.
Consolidated profit increased to Rs 2,465.7 crore for the quarter, compared to Rs 2,390.4 crore in previous quarter.
Consolidated revenue during the quarter increased 1.2 percent sequentially to Rs 15,096.7 crore.
The IT services segment, which is widely tracked by analysts, witnessed a 3.7 percent quarter-on-quarter growth in dollar revenue at $1,992.4 million in Q2. Non-GAAP constant currency IT services segment revenue increased by 2 percent QoQ (against negative 7.5 percent in Q1), said Wipro in its BSE filing.
Numbers were ahead of CNBC-TV18 poll estimates which for dollar revenue and constant currency revenue were pegged at 3 percent and 1-1.5 percent QoQ growth respectively.
The rupee revenue of IT services segment grew by 1.2 percent to Rs 14,768.1 crore in Q2FY21.
"We had an excellent quarter with growth in revenues, expansion of margins and robust cash generation. I am very excited about the opportunities that are ahead of us and encouraged by the acceleration in business momentum we have seen this quarter," Thierry Delaporte, CEO and Managing Director said.
The strategy is to focus on growth in prioritised sectors & markets led by vertical solution offerings, he added.
Wipro expects revenue from IT services business to be in the range of $2,022 million to $2,062 million, which translates to a sequential growth of 1.5-3.5 percent, which was much better than the analysts' estimatesof 0-2 percent.
IT services earnings before interest and tax (EBIT) increased 1.9 percent QoQ to Rs 2,835.1 crore and margin for the quarter expanded by 20 bps QoQ to 19.2 percent, which too beat CNBC-TV18 poll estimates which were pegged at Rs 2,777 crore and 18.7 percent for the quarter respectively.
"We improved on several operating parameters to deliver margin expansion of 0.2 percent in the IT Services segment. Free cash flows as a percentage of net income for the first half was at 160.7 percent of net income," Jatin Dalal, Chief Financial Officer said.
As a part of capital allocation, the software services provider has approved a buyback proposal for purchase of up to 23.75 crore equity shares (representing 4.16 percent of total paid up equity) from the shareholders of the company on a proportionate basis by way of a tender offer.
The buyback price is Rs 400 ($5.4) per equity share payable in cash for an aggregate amount not exceeding Rs 9,500 crore ($1.3 billion), Wipro said, adding the buyback proposal is subject to the approval of shareholders through postal ballot.
Wipro acquired Eximius Design for $80 million and will complete the deal in Q3.
Technology stocks rallied quite sharply, especially after the June quarter earnings, as IT companies did not see much impact of lockdown. The Nifty IT index itself rallied 35 percent during the quarter, but Wipro outperformed the index and climbed 70 percent during the quarter.