The IT sector kicked off the earnings season on July 12 with TCS’s announcement. So far industry majors TCS and HCLTech have posted numbers. While TCS seems to have met market expectations, HCLTech seems to have had an underwhelming effect on the analyst community.
Next in line is Bengaluru-based Wipro, which is set to announce its results on July 13. Ahead of the results, here are five key things to watch out for.
Revenue growth
Brokerages estimate Wipro to record revenue decline in the range of 1.2 to 1.6 per cent. The dip will be in line with the band of 1-3 per cent revenue decline that the company had earlier put out as part of the guidance. Revenue is expected to be impacted by exposure to hi-tech and consumer verticals, slowdown in discretionary spends, and weakness in consulting.
Margin and guidance
Margins for Wipro are expected to remain flattish this quarter. Brokerages expect a 20 bps decline on a QoQ basis. The decline is likely to be attributed to the wage hike, which, although, will be partially offset by reduced subcontractor cost.
Kotak Institutional Equities in a note said, “The revenue decline will have a corresponding impact on margins. We forecast a 20 bps QoQ sequential decline even as margins will likely increase on YoY comparison.”
Attrition and hiring
In Q4, attrition moderated to 19.2 per cent from 21.2 per cent in the preceding quarter. Net employee addition fell 69.6 per cent to 13,793 employees in FY23 from 45,416 in FY22. Attrition and hiring will be two key metrics to watch given that the demand has slowed down and the company still has headroom to raise the utilisation level.
Management commentary
Investors will be keen to watch the management’s commentary on issues such as: reasons for the lag in growth; questions around stability in senior management team given several departures; outlook for the consulting business (Capco and Rizing); outlook for tech spending in BFS; cause for divergence in revenue growth and reported deal bookings; positioning in cost take-out and vendor consolidation deals; and, margin levers to meet the aspirational margin level of 17 per cent.
Take on GenAI
Given that Generative AI has been the new technology garnering attention in the IT sector, Wipro’s take on the scope of the technology and the market opportunity it sees, will be interesting. On July 12, the company had announced the launch of Wipro ai360, an AI-first innovation ecosystem. It had also committed to making a $1 billion investment in advancing AI capabilities over the next three years.
Wipro’s share gained 1.54% to trade at ₹397.65 around 12.20 pm on BSE.
Published on July 13, 2023
