After several quarters of reeling under the effects of major leadership restructuring, Wipro is expected to bounce back this quarter, putting up a better show in terms of sequential revenue growth compared with other top players. The firm?s IT Services revenues are expected to grow by almost 3% sequentially, while margins are likely to be an improvement over the last quarter as well. Consolidated profits, however, will remain stagnant.
?Wipro is likely to have done better than Infosys this quarter, and volumes are likely to be up. We are seeing revenues 2-3% higher sequentially,? says Dipen Shah, head of fundamental research, Kotak Securities. For the fourth quarter, Infosys, had registered a 2% drop in revenues. TCS reported 0.4% rise, while HCL’s revenues declined marginally. A growth of 3% would be in line with Wipro’s earlier guidance of 1-3%.
?Profits for Wipro will stay flat at R1,459. We are not expecting major surprises, but it will be interesting to see the quality of volume growth, as well as how the company has managed billing rates and margins,? Shah adds.
Last quarter, Wipro had just about managed to meet market forecasts with a 12% sequential growth in net profits to R1,456 crore. Pricing was up by 3-4%. On the margins front, the company is likely to beat peers, with the least impact of rupee appreciation. A report from brokerage firm Sharekhan had pegged a currency impact of 81 bps for Wipro, against a 70 bps gain last quarter. EBIT and EBITDA margins for both Infosys and TCS for the fourth quarter have seen a 100-150 bps fall.
Analysts, however, feel the most pertinent thing to watch for with Wipro will be how the management overhaul, effected a year ago by chairman Azim Premji, has shaped up.
?The past few quarters have not been good for Wipro. What the market really wants to understand now is, how has the restructuring finally shaped up and are the effects behind us now? Client additions and commentary on hiring are going to be key,? says Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities Ltd. In the last quarter, the firm had added 39 clients, lower than 44 in the second quarter. A net addition of 5000 employees had been made, while attrition fell to its lowest in over a year.
Markets are expecting Wipro IT Services to give a revenue guidance of 2-4% for the first quarter of FY13.
