Top 10 takeaways from Wipro’s December quarter earnings

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Wipro, country’s third-largest software services exporter, announced its December quarter earnings on Monday broadly in-line with analysts’ muted expectations as IT major had already warned of a muted performance in the said quarter on account of furloughs and Chennai-floods.

Here are top 10 takeaways from Wipro’s third quarter financial results:

1) Net profit

Wipro posted a 2 per cent rise in quarterly net profit, in line with street estimates. Company’s consolidated net profit came in at Rs 2234.1 crore for the third quarter ended December 31, 2015 as compared to Rs 2192.8 crore in the year-ago period.

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2) Guidance for fourth quarter

For the March quarter of financial year 2016, Wipro expect revenue in the range of $1.875 billion to $1.912 billion, a sequential growth of 2-4 per cent – largely in line with what brokerages were expecting.

3) IT Services Segment

Its IT services revenues stood at Rs 12,310 crore ($1.86 billion), an increase of 9 per cent year-on-year. The IT segment had a headcount of 170,664 as of December 31, 2015 and the company added 39 new customers during the quarter.

4) Dividend

Wipro announced that the Board of Directors have considered and approved an interim dividend of Rs 5 per equity share of par value Rs 2 each to the members of the company whose names appear in the Register of Members of the company as on 27 January 2016, being the record date. Dividend payment date is 02 February 2016.

5) Revenues

The Bengaluru-based firm saw revenues rising 7.1 per cent to Rs 12,951.6 crore in the said quarter from Rs 12,085.1 in the same period last year.

6) operating margins

The operating margins for its IT services business, however, fell to 20.2 per cent in Q3, from 21.8 per cent a year earlier, due to heavy flooding in Chennai city, where it employs about 13 per cent of its staff.

7) Large deals

Other than acquisition of Cellent AG and Viteos Group that it announced last month, the IT major Wipro sustained its momentum in winning large deals globally as described below:

Wipro has entered into a multi-year global infrastructure support engagement with one of the largest medical devices companies in the world.

A leading global nutrition, health and wellness company has selected Wipro to enable the migration of a significant portion of its global IT applications estate to a hybrid cloud.

A large global retailer has selected Wipro as its quality engineering partner. Wipro will help develop a new operating and financial model that will allow the customer to accurately forecast its quality engineering spends and optimize costs, while driving continuous improvements in the quality and time-to-market of its offerings.

Wipro has won a large contract from a European general insurance multinational for provisioning and managing the company’s infrastructure.

A leading security solutions manufacturer, headquartered in the Nordic region, has selected Wipro to transform its IT infrastructure.

An Australia-headquartered manufacturing sector customer has awarded a five-year strategic, IT-as-a-service contract to Wipro.

8) Digital highlights

Wipro’s Digital capability combining design, engineering and analytics is seeing traction in the marketplace. Unique capabilities of Designit combined with Wipro’s technological prowess is driving synergistic deal wins.

Wipro has been selected to help a global bank establish and operate its new digital platform, across 50 markets. With global scale and a blend of strategy, design and engineering capabilities, Wipro’s agile teams will help support consistent customer experience, underpinned by continuous delivery across this new digital platform. Wipro will reinvent the onboarding process for customers, help improve sales conversion rates and reduce operational costs.

9) Cloud business

The company’s cloud applications business is seeing a good traction in the market. In the quarter ending December 31, 2016 the IT major engaged with several clients to design and deploy their enterprise processes leveraging industry leading
SaaS products.

A few marquee engagements include Cloud CRM processes rationalization for a UK-based gas and utility major, simplification of lead & opportunity management processes for a leading US based equipment rental company, modernization of a B2B order management system for a leading chemicals supplier company, design and deployment of recruitment processes for a business process outsourcing enterprise, implementation of performance and goal management processes for an American satellite service provider and transforming the source-to-pay process for an global pharmaceutical and consumer packaged goods major.

10) Management commentary

“We delivered revenues in line with our guidance. We saw a pick-up in large deal closures led by global infrastructure services,” Wipro Member of the Board and CEO T K Kurien said.

He added that customers want to simplify operations and optimise their IT spend and that the company is well- positioned to take advantage of this trend.

Wipro Chief Financial Officer Jatin Dalal said the impact on revenues from the Chennai floods were minimised significantly by execution of Business Continuity Plans (BCP).

“The additional expenses incurred in deploying BCP impacted operating margins for the quarter,” he added.

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