The uncertainty around the course of COVID-19 has left tech bellwether Wipro unable to predict the extent to which the pandemic would disrupt its business and operations. As economic activity was severely impacted, it has disrupted the businesses of its customers, Wipro said in its annual report released on Monday.
As per the company, this is likely to have a significant impact on its customers’ earnings and their IT spending with Wipro. “The potential impact to Wipro’s results would depend to a large extent on future developments regarding COVID-19 that cannot be accurately predicted at this time,” the report said.
Wipro has warned in its annual report that its profitability could suffer if it is unable to continue to successfully manage its costs. It said that its cost management strategies include maintaining appropriate alignment between the demand for its services and resource capacity and optimising the costs of service delivery.
For example, the conditions caused by COVID-19 may affect the rate of customer spending, including through increased requests by customers for price discounts and adverse impacts on its ability to provide on-site services to its customers; or delays to the provisioning of its offerings, including due to travel restrictions imposed by many countries could adversely affect its future revenues, operating results and overall financial performance.
Wipro cautioned that it was making substantial investments in new facilities and physical infrastructures, and its profitability could be reduced if its business did not grow proportionately.
“We have invested substantially in construction or expansion of software development facilities and physical infrastructure in anticipation of growth in our business. The total amount of investment in property, plant and equipment in fiscal year 2020 was ₹23,497 million ($311.7 million). Additionally, as of March 31, 2020, we had contractual commitments of ₹14,011 million ($185.8 million) related to capital expenditures on construction or expansion of our software development and other facilities. It has warned about cost overruns or project delays which could increase its fixed costs. If we are unable to grow our business and revenues to sufficiently offset the increased expenditures, our profitability could be reduced,” the company said.
Outgoing CEO and MD Abidali Neemuchwala got a total compensation of over $4.42 million during the fiscal ended March 31, while Wipro founder Azim Premji opted for a total compensation of only $1,35,772. However, he chose not to take any profit linked commission.
