Demand for IT Services remain strong: Wipro
Wipro observed that the demand for IT services remains strong aided by transformation projects and cloud adoption. For clients with IT services vendors that are affected by the Ukraine-Russia war, Wipro is becoming an additional vendor for the clients. However, at this stage, the incremental business has been limited. While European clients are in a halt mode given the eastern European war, there has been no slowdown in technology spending so far. Wipro reiterated its guidance of 2-4% q-q growth in revenues in constant currency for 4QFY22.
Narrowed EBIT Margins:
For the 9 months period in FY22, Wipro has operated in a narrow EBIT margin range of ~18.1% despite challenges on salary costs due to an increase in industrywide attrition. Wipro continues to optimize the pyramid, and its efforts to train its employees on new skills are helping it to address the increasing demand for new skills.
Impact of CEO’s 5 pillar strategy:
CEO of Wipro, Thierry Delaporte, outlined five key pillars of his strategy in Nov 2020. These include a focus on revenue growth, sales transformation, a solution-focused approach, simplification of organizational structure, and nurturing talent. There is significant progress in each of these areas, as evidenced in the company’s organic growth rate converging to the industry level in the 9MFY22 period.
M&A Strategic Pillar for Growth:
M&A is a key strategic pillar of growth for Wipro with a focus on acquisitions to fill capability gaps and deepen its presence in new verticals. Capco acquisition is progressing on track as evidenced in strong growth in BFSI vertical in the last few quarters. Wipro aims to maintain its payout ratio of 45-50% despite its M&A activities.
Wipro’s revenue is expected to grow between 17-25% with a stable EBIT margin over FY22-23
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