Revenue May Jump 17% YoY; Moonlighting, Slowing Deal Wins In Focus

Wipro Q2 Earnings Preview: Wipro will report its September-quarter results on Wednesday, October 12. Analysts expect Wipro to deliver a constant currency growth of 4 per cent on a quarterly basis, with broad-based growth across sectors.

Consolidated profit after tax (PAT) for Wipro may jump 10 per cent on a sequential basis but decline 4 per cent on-year to Rs 2,815 crore in the second quarter of FY23 (July-September).

Management commentary on growth guidance, demand environment amid recession fears, new deals and total contract value (TCV) along with hiring activity and attrition rates would be closely tracked by investors.

Brokerages estimate the company to post a revenue growth of 15-17 per cent on a year-on-year (YoY) basis to around Rs 22,612 crore on the back of large deal wins during the quarter such as the acquisitions of consulting firms Rizing and Convergence.

Jefferies expects the Wipro to to deliver a 4 per cent QoQ constant currency (CC) revenue growth. Its margins may expand by 20 bps QoQ with the impact of wage hikes (that came into effect from Sept 1), supply-side pressure and higher travel costs to be offset by pyramiding, operating leverage and some pricing benefit.

“We expect a modest 30 bps increase in EBIT led by aggressive compensation control and increase in utilization rates,” said Kotak Institutional Equities.

The Street believes IT companies’ margins have bottomed out for now and will improve sequentially for all the bluechips. Jefferies expects Wipro Q2FY23 margins to expand by 20 bps QoQ as “impact of 1-month wage hike, supply side pressure and higher travel costs will be offset by pyramiding, operating leverage and some pricing benefit.”

ICICI Securities expects 30 bps sequential improvement in margins, on account of some tailwinds such as moderation of subcontractor costs, utilisation improvement and control on variable payouts.

When it comes to the December quarter, analysts believe the company will guide for a muted 0-2 percent revenue growth. “High furloughs across many verticals can impact growth potential” says Kotak Institutional Equities.

Apart from revenue guidance for Q3, investors will be closely monitoring the management’s commentary on recent mergers and acquisitions, deal wins/pipeline and clients’ IT budget.

BNP Paribas is awaiting updates on core geographies and top-10 accounts, while Kotak Institutional Equities says the main focus is on impact of recession, especially in Europe which accounts for one-third of Wipro’s total revenue.

Investors are also watching out for comments on attrition and ‘moonlighting’. Wipro Chairman Rishad Premji, who termed the practice of moonlighting as ‘cheating’, said on September 21 that the IT major found 300 people working directly for one of their competitors in the last few months.

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