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Wipro Q4 profit down 7% QoQ; sees Q1 IT services revenue at $2,015-2,065 mn

A Reuters poll of analysts estimated Wipro's Q4 net profit at Rs 2,118.7 crore and revenue of Rs 14,007.5 crore.

April 25, 2018 / 06:19 PM IST
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Wipro posted a consolidated net profit of Rs 1,800 crore for the fourth quarter of FY18, down 6.7 sequentially from Rs 1,930.1 crore.

The quarter was mainly impacted by two factors - bankruptcies of two clients, and an additional impact on the healthcare and life sciences business as more clients exit the exchange market.

Revenue from operations grew 0.7 percent for the quarter to Rs 13,669 crore. Rupee revenue from IT services was Rs 13,412 crore, up 1.3 percent sequentially from Rs 13,235 crore in the last quarter.

IT services revenue in dollar terms was USD 2,062.0 million, up 2.4 percent sequentially. Constant currency revenue grew 1.1 percent sequentially. It had expected revenue of between USD 2,030 to 2.070 million implying sequential growth of nearly 1-3 percent.

IT services EBIT margin was 14.4 percent, a 40 basis points contraction on quarter. Excluding the impact of insolvency of a customer and the impairment loss in one of its acquisitions, IT services margin for the quarter was 16.0 percent.

IT services EBIT for the quarter stood at Rs 1,932 crore compared to Rs 1,959 cr, down 1.36 percent QoQ.


The third-largest Indian software services company expects revenue from the IT services business to be in the range of USD 2,015 to 2,065 million in the first quarter of FY19. But, in a release to the exchange the company noted there may be a revision in the outlook.

"We had announced the divestiture of our hosted data center services business to Ensono for a consideration of USD 405 million. We expect the transaction to complete during the quarter ending June 30, 2018. For the purpose of the Outlook, we have not considered the impact of the divestment on the Revenue for the quarter ending June 30, 2018. We will revise the Outlook for the quarter based on the actual date of completion of the divestment," the company said.

Wipro will unlock value by transitioning eight data centers and over 900 employees of its hosted data center services business to Ensono. As part of the agreement, Wipro will make a strategic investment of USD 55 million in Ensono’s combined entity.

Consequent to insolvency of two of its customers, the company recognised provisions of Rs 1,437 crore for impairment of receivables and deferred contract cost during Q4 against Rs 3,175 crore in the preceding quarter, and Rs 4,612 crore in Q4FY17.

In a filing to the stock exchange earlier this month, Wipro had said it expected an impact on profitability “at the net income level in the range of 65-75 basis points of the consolidated revenues for the quarter ended March 31, 2018” because of an Indian telecom services client declaring bankruptcy.

The client is widely believed to be Aircel, which filed for bankruptcy filed in the National Companies Law Tribunal in Mumbai due to fierce competition and high levels of debt.

The total dividend for the financial year 2017–18 was Re 1 per equity share. The company also completed a buyback of Rs 110,000 million in December 2017.

CEO Abidali Neemuchwala said softness in the communications and telecom businesses continue. CFO Jatin Dalal, however, noted Wipro will improve margins through the year.

Reacting to the results, Sanjoy Sen, Doctoral Research Scholar, Aston Business School, UK said, “It is indeed dismal to see Wipro focused on writing off assets resulting from client insolvency at a time when both the Energy & Resources sector and the Telecom sector (to which these write-offs relate) have once again started making significant IT investments fuelling growth in its peers such as TCS."

"While Wipro continues to make the “me too” investments in emerging technologies like blockchain, robotics and artificial intelligence, there may be an opportunity to communicate its strategic direction more clearly to the marketplace including customer pipeline, deal status etc that would help boost its market image and share prices rather than creating further ambiguity over its lacklustre results."

"Divestment opportunities must be more clearly related to the new investments that Wipro leadership proposes to make, exactly what both TCS and Infosys have done with significant clarity a short while ago," he said.

Industry body National Association of Software and Services Companies expected the industry to grow between 7-8 percent in the year.
Moneycontrol News
first published: Apr 25, 2018 04:13 pm

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