Wipro Ltd. reported net profit rose 6% from a year earlier to ₹21.9 billion in the second quarter, helped by a more than 5% increase in IT services revenue in dollar terms.
Gross revenue for the three months ended September 30, however, declined to ₹134.2 billion, from ₹137.7 billion in the year-earlier period, the Bengaluru-based company said in a statement.
“The Wipro results for Q2 exceeding expectations, following a similar trend established by TCS a few days earlier, is indicative of the start of the turnaround of Indian IT companies,” Sanjoy Sen, doctoral research scholar, Aston Business School U.K., wrote in an e-mail.
“Having failed to meet market expectations over the last few quarters, performance pressures had been mounting to demonstrate the return on investments made by them in digital business and other emerging technologies. The current exceeding of market expectations is thus a welcome development,” Mr. Sen wrote.
“With better uptake of these emerging technologies such as robotics automation, particularly in the financial services sector, the fortunes of Indian IT companies seem to have swung for the better, particularly with its new leadership enhancing operational agility and effectiveness,” Mr. Sen added.
Profit from the IT services segment at Wipro — owned 73% by the second richest Indian, Azim Hashim Premji — was ₹22.8 billion, a 4% sequential increase, while the segment’s operating margin for the quarter was 17.3%, compared with 16.8% for the three months ended June 30.
“Our demand commentary is unchanged,” CEO Abidali Neemuchwala said. “We see strength in BFSI backed by our strong digital capabilities.”
“ENU [energy, natural resources and utilities] is stable with performance in Q2 impacted by slower growth in the Middle East. We see continued progress in India business restructuring. Healthcare continues to be volatile due to concern around Affordable Care Act although we are hopeful of revenues bottoming out in Q3,” Mr. Neemuchwala said.
“Communications business is challenged by project completions,” he added.
Revenue from business process management is projected to increase from $30 billion in financial year 2017 to between $50 billion and $55 billion by 2025, according to Nasscom. Digital streams would account for 60-70% of the BPM service providers’ revenue by 2025.
“Digital revenues in Q2 constituted 24.1% of the revenues, driven by shifts of projects from traditional areas to digital in our larger clients,” Mr. Neemuchwala said.
Wipro predicts revenue from IT services in the third quarter would be in the range of $2,014 million to $2,054 million.
“Our Q3 outlook has the seasonal impact of furloughs and higher leaves. Adjusted for the seasonality, we are seeing an improvement in our growth trajectory to match industry growth rates.”
“The IT major’s 3QFY18 revenue growth guidance is unenthusing, at 0-2% Q-o-Q,” Harit Shah, analyst (IT), Reliance Securities wrote in an e-mail. “While select verticals like BFSI and ENU seem to be witnessing good traction, double digit revenue growth still appears to be some time away.”
Wipro filed for 80 patents in Q2, with the total number of patent and patent applications, including Holmes, an artificial intelligence platform, and blockchain technology, at 1,789.