Wipro Q3 results: Net profit up 21% YoY; firm says demand environment improving steadily

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New Delhi: Wipro on January 13 posted 20.8% jump in consolidated net profit at Rs 2,968 crore for the December 2020 quarter.

The net profit attributable to shareholders in the year-ago period was at Rs 2455.9 crore, according to a regulatory filing by Wipro.

The company logged 3.9 per cent quarter-on-quarter growth in IT services revenue, the “highest in 36 quarters”.

Overall, the revenue from operations grew nearly 1.3% to Rs 15,670 crore in the quarter ended December 2020 as compared to the corresponding period of the previous year.

Earnings per share for the quarter was at Rs 5.21, an increase of 20.7%.

Wipro, which gets a bulk of its topline from IT services, said it expects revenues from that business to be in the range of USD 2,102 million to USD 2,143 million in the March 2021 quarter.

This translates into a sequential growth of 1.5% to 3.5 per cent for the March quarter, and the company said the outlook reflects the current demand environment and strength of its new and improved operating model.

“Last year, we witnessed some very unprecedented times and now with improved vaccine prospects, we are filled with optimism for 2021. We are very hopeful that it will be a better year for the society, for businesses, our clients, and for us,” Wipro CEO and Managing Director Thierry Delaporte said at an earnings call.

He further said the growth in Q3 was broad-based and several operating metrics were at “all time best”, including offshore mix and utilisation. Wipro said its order book is strong across sectors and service offerings, and that there is significant traction in markets and all key geographies. The demand in Europe is particularly strong, driven by acceleration in adoption of cloud and digital transformation, Delaporte added.

The company’s focus now is “only on growth” and on “accelerating the momentum”, he pointed out.

For the just-ended quarter, IT services revenue grew 3.9% sequentially to USD 2,071 million.

In October, Wipro had said it expects its revenue from IT services business to be in the range of USD 2,022-2,062 million for the December quarter, a sequential growth of 1.5-3.5%.

“Wipro has delivered a second consecutive quarter of strong performance on order booking, revenue and margins. Five of our sectors grew over 4% sequentially. We closed our largest ever deal win in Continental Europe,” Delaporte said.

The demand environment is steadily improving, especially for digital transformation, digital operations and cloud services, he added.

The company’s revenue from IT products during the December quarter was about Rs 160 crore (USD 21.3 million), while that from India state run enterprises business was Rs 240 crore (USD 32.8 million).

Wipro Chief Financial Officer Jatin Dalal said margins are at a 22-quarter high.

“The expansion was led by improved revenue growth trajectory and excellence in operations with several metrics at an all-time high. Our operating cash flows grew by 45 per cent year on year with a significant improvement in outstanding receivables,” Dalal said.

Listing out the highlights for the quarter, Wipro said it closed it largest deal in Continental Europe with Metronom.

Wipro’s total employee count stood at 1,90,308 as on December 31, 2020. Delaporte further said the company has started to make investments in frontline sales and domain specialists.

“For 80 per cent of our employees, we completed the promotion cycle effective December 1 and we will also be rolling out salary increases for them effective January 1. We have also announced a 100% variable payout for Q3 and Q4, which will make it three consecutive quarters of full payout,” he said.

Wipro’s margins for Q4 will have “headwinds” of these investments but “will still remain elevated”, he added.

The company has declared a dividend of Re 1 per equity share. The payment of interim dividend will be made on or before February 2, 2021, the company said.

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said Wipro has reported “slightly better-than-expected revenue performance, while margin front continued to beat our estimates.”