Wipro anticipates macro hurdles ahead, keeps lower revenue guidance for Q1

From L-R: CFO Jatin Dalal, CGO Stephanie Trautman, CEO Thierry Delaporte, CHRO Saurabh Govil and COO Amit Chaudhary

Wipro met the lower end of its guidance both in revenue growth for the year in constant currency (-0.6 percent) and for YoY revenue growth at 11.5 percent, but it is the company’s guidance for the first quarter of FY24 that is likely to spell trouble.

The company has guided for a revenue growth of -3 to -1 percent, and expects the macro environment to be challenging. It expects margins to be at the 16 percent band it has been for the last quarters.

The revenue growth decline of -0.6 percent in CC terms was attributed to the uncertainty in the market and the resulting slowdown in discretionary spending by Chief Executive Officer Thierry Delaporte.

“Looking ahead, we believe the macro environment will remain challenging. Our clients, our industry, and many sectors are impacted by the prolonged uncertainty in the economic environment. These headwinds are impacting our business and projections as well,” he said.

Pan-vertical decline

In terms of markets, both the company’s Americas markets as well as Europe all saw a growth decline in Q4 on a CC QoQ basis sequentially, with only the Asia Pacific/Middle East/Africa (APMEA) market growing by 0.7 percent in this time period.

When it comes to verticals, the company has seen a decline of 2.4 percent QoQ in CC terms in the BFSI (banking, financial services and insurance) vertical, -0.9 percent in Consumer, -2.7 percent in technology, -0.3 percent in manufacturing, -0.4 percent in communications, with growth primarily coming from the energy, natural resources and utilities vertical at 5.9 percent, and health at 2 percent.

This came through in the commentary as well, where the CEO called for softness in BFSI, retail and consumer packaged goods, and technology. Wipro, which has made acquisitions such as Capco and Rizing in the consulting space, said that there is softness there too.

“When there's a slowdown, consulting is usually impacted the first, but also the first one to bounce back when there's an acceleration. That's what we're observing. Having said that, we continue to win very nice deals, and I think the nature of the deals we are winning, by combining our consulting business with our technology expertise, is clearly reinforcing our position with a lot of our clients,” he said.

Macro-economic challenges

Delaporte however maintained that they’ve maintained a record performance in bookings — with bookings during the last quarter of the fiscal at $4.1 billion, of which $1.1 billion were large deals.

The CEO said that the company has not seen any cancellations.

The banking crisis was expected to weigh on the results of IT companies. The first three months of the year were marked by the global banking contagion due to the collapse of various regional banks based in the United States such as the Silicon Valley Bank (SVB), Signature Bank, and Credit Suisse. This added to the IT industry's existing struggles with macroeconomic challenges.

“There are deals in the business, we see plenty of opportunities, and we are winning them. The volume of business and activity is good from that standpoint, and we are winning. Do we see a slowdown in decision-making? Not really. I don't see a radical change of pattern in the deal cycles. What do we see in the market? We see that while there is good activity happening leading to this record booking growth, there's also a slowdown in discretionary spending. That is visible in particular in some industries like banking, financial services, and technology,” he said.

“I think it's probably a reality that the impact of the discretionary spend reduction is somewhat readjusting a little bit the growth line,” Delaporte added.

Wipro also announced a buyback of Rs 12,000 crore at a price of Rs 445 per share, which is a 19 percent premium to the current market price.