Wipro Q1: Client insolvency issues, future roadmap to be on Street's radar

Revenue growth  Analysts expect sequential constant currency revenue to decline by 1.2 to 2 percent. According to a Reuters poll, analysts on average expect Wipro to post a June quarter revenue of Rs 14,004.8 crore and net profit of Rs 1,974.2 crore. Margins Wipro had said in the March quarter that the impact of the insolvencies of two of its clients would spill over to the June quarter. Analysts expect EBIT margin to remain flat or fall up to 30 basis points due to continuing revenue pressures and a part time impact of wage hikes. The company's IT services margin in the March quarter was 14.4 percent, and adjusted for the client specific issues, was 16 percent. The Street will watch out for what measures Wipro is taking to enable margin expansion. Healthcare vertical update In the previous quarter, Wipro said that revenue of HealthPlan Services, a US-based health insurance company acquired in 2016, was down by about $150 million and it was expected to further impact earnings in the June quarter. Motilal Oswal analysts said investors would watch out for commentary on the verticals of healthcare and communications. Update on energy and utilities One of the clients whose insolvency affected Wipro's fourth quarter results was in the energy and utilities vertical. Analysts at Kotak Institutional Equities said they would await "state of demand from weak utilities, healthcare and communications verticals". Deal wins Given the recent traction at TCS, and its own spate of client-specific issues, Wipro’s commentary on deal wins will also be a factor to watch. Growth drivers The Street would await commentary on growth drivers for the future of the company once its revenue-impacting factors stabilise. This would include Wipro's outlook for digital business, said IDBI Capital analysts in a note.