Wipro revenue rises 13%, profit takes hit

Shilpa Phadnis and Veena Mani
BENGALURU: Wipro’s September quarter performance was a mixed bag. Revenue beat street estimates, but margins were a miss. Profitability has been under pressure for some time now, partly because of higher employee costs.
The results were announced after the stock market closed in India, but on the NYSE, shares were down by over 3% in morning trade.
Revenue stood at $2.8 billion. In constant currency, revenue rose 4.1% sequentially and 12.9% year-on-year. The corresponding numbers for TCS, which announced results on Tuesday, were 4% and 15.4%.
Wipro CEO & MD Thierry Delaporte said there is a change in the level of optimism among clients, as businesses around the world are dealing with inflationary pressures, geopolitical turmoil, energy crises, and rising interest rates. “Almost every major economy is experiencing economic deceleration,” he said.

Wipro expects its IT services business to be in the range of $2,817 million and $2,872 million in Q3, translating to a sequential growth of 0.5% to 2%, and an year-on-year growth of 10.1% to 11.8%. It’s a seasonally weak quarter, marked by the holiday season and furloughs.
“For the full year, we are certain that we will report double-digit growth,” Delaporte said. He said bookings in the last quarter were robust. Wipro signed 11
deals with a total contract value of $725 million, a 24% growth year-on-year. It had clocked $1 billion in TCV in the preceding quarter.
Delaporte said large deal bookings rose 42% year-on-year in the first half of the fiscal. “As of today, our pipeline has a well-balanced mix of transformation, growth, and cost-takeout engagements,” he said.
Operating margin inched up 16 basis points sequentially to 15.1%. A year ago, it was 17.8%. Net income was up 4% sequentially, but dropped 9% year-on-year due to higher interest expenses.
Delaporte noted that a quarter ago the company had communicated that 15% was the bottom for margins, and it would improve from there. “I think we will follow this trendline,” he said.
Chief financial officer Jatin Dalal said three positive levers were at play, including an improvement in selling, general and administrative expenses, operational improvement, and forex benefits.
Wipro made a modest net addition of 605 employees in the September quarter, indicating concerns around the slowing global economy. The total headcount is around 2.5 lakh.
The company onboarded 14,000 freshers in the first half, which is over 72% of what it added in the whole of last year. "We are now offering promotions to our employees every quarter, and in Q2, we promoted about 10,000 colleagues. The annual salary increases were given to our colleagues across bands in Q2, with
a steep differentiation in rewards for our top talent," CEO Thierry Delaporte said. The company said it would roll out 100% variable pay to 85% of its employees.
Voluntary attrition moderated for the third quarter in a row. It dropped to 23% from 23.3% sequentially. Net utilisation dropped 400 basis points. Asked about the issue of moonlighting, Delaporte said it's a question of ethics. He said it is fine “to do some small things here and there”, but it is totally different to be working for companies in the same space as Wipro. “It is not right to have two jobs with conflict of interest,” he said.
He said Wipro is not doing anything new or different. “It is clear to our people when joining Wipro," he said. Company chairman Rishad Premji had recently said that some 300 employees had been fired for moonlighting.