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Wipro surprised the market on Thursday with better than guided revenue growth for the June 2017 quarter. But, the weak guidance for the September quarter from the company has cast doubts over the recovery sustaining.
In the June 2017 quarter, sequential dollar revenue growth was 0.9 per cent (0.3 per cent in constant currency terms). Better than expected growth in BFSI (at 3.2 per cent) and pick-up in growth from India post-restructuring, helped.
Wipro has guided for a revenue of $1962-2001 million in the September quarter. At the lower end of the guidance range, it is a decline of 0.5 per cent, sequentially.
Growth in the key vertical for the company — communications, has not picked up pace. After a 6.6 per cent drop in revenue (sequentially in constant currency terms) in the March quarter, in the recent quarter, it was a decline of 2.6 per cent. In manufacturing too, the revenue declined by 0.9 per cent. The worst hit was the healthcare and lifesciences segment that contributes about 15 per cent of revenue, where revenue dropped 3.1 per cent sequentially. The business of HealthPlan Services is hit by uncertainties around the Affordable Care Act.
Wipro bought HealthPlan Services in 2016; it is a BPaaS service provider to health insurance companies.
The company added no new clients in the $100 million or $75 million buckets, compared to the March quarter. Margins too were weak. It was sharply lower at 16.8 per cent — the lowest in last several quarters. In March 2017 quarter, the operating profit margin was 18.3 per cent.
BuybackWhile Wipro’s efforts to revive growth — from actively looking for acquisitions and sealing deals to focus on improving client mining and push to automation through Holmes platform, may be applauded, growth is failing. Deal wins in the $50 million plus bucket is not encouraging. New client additions are happening mainly in $1-5 million bracket.
The company has announced a buyback at the price of ₹320 per share — this is 19 per cent higher than Thursday’s close price (₹269). However, note that the offer is for 343.75 million equity shares — which is just 7.06 per cent of the outstanding shares. The acceptance ratio may be modest as promoter and promoter group shareholders too intend to participate in the buyback.
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