Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Wipro: Improved performance - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 17, 2003

    Wipro: Improved performance

    Wipro has reported a 29% growth in revenues and 4% growth in profits on a YoY basis in 2QFY04. Also, while revenue growth for 1HFY04 has been at a similar rate of 29%, profits have risen by around 20%. The company continues to face pressure on the operating margins front (down 500 basis points, both for the quarter and the half-year).

    Financial performance: A snapshot
    Rs m 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Sales 10,621 13,745 29.4% 19,923 25,735 29.2%
    Other Income 165 197 19.4% 307 343 11.7%
    Expenditure 8,231 11,275 37.0% 15,345 21,060 37.2%
    Operating Profit (EBIT)** 2,390 2,470 3.3% 4,578 4,675 2.1%
    Operating Profit Margin (%) 22.5% 18.0%   23.0% 18.2%  
    Interest - -   - -  
    Depreciation - -   - -  
    Profit before Tax 2,555 2,667 4.4% 4,885 5,018 2.7%
    Extraordinary items (23) 6   (667) (48)  
    Minority interest 21 11   24 14  
    Tax 307 360 17.3% 549 592 7.8%
    Profit after Tax/(Loss) 2,204 2,302 4.4% 3,645 4,364 19.7%
    Net profit margin (%) 20.8% 16.7%   18.3% 17.0%  
    No. of Shares 232.5 232.5   232.5 232.5  
    Diluted Earnings per share* (Rs) 37.9 39.6   31.4 37.5  
    P/E Ratio (x)   35.5     37.5  
    (* annualised)            
    ** includes depreciation            

    On a sequential basis, Wipro’s revenues have improved by around 11% while profits are also up by an equal amount. This rise in revenues could be largely attributed to the growth in volumes (11%). On the pricing front, while offshore prices increased by 0.1% sequentially, the rise onsite has been 2.2%. Though billing rates have increased for Wipro, on the offshore front, when compared with Infosys, the rise in on the lower side. Just to put things in perspective, Infosys saw a 2.3% and 1.4% rise in offshore and onsite prices in 2QFY03.

    On a YoY basis, revenue growth for 2QFY04 was mainly a result of increased revenues from global IT services that were up by around 43% on a YoY basis. The company has continued to increase its focus on this segment and has acquired a few companies in FY03 to make further inroads into markets for ITES (Spectramind), consulting (NerveWire) and telecommunication (Ericsson’s R&D Labs). Among other segments, while revenues from Asia-Pacific IT services declined by over 1% in the September quarter, those from consumer care and lighting grew by 10%.

    Revenue contributors…
    Rs m 2QFY03 2QFY04 Change
    Global IT services & products 7,222 10,309 42.7%
    % of revenues 68.0% 75.0%  
    India & Asia-Pacific IT services 2,230 2,199 -1.4%
    % of revenues 21.0% 16.0%  
    Consumer care & lighting 743 825 10.9%
    % of revenues 7.0% 6.0%  
    Others 425 412 -2.9%
    % of revenues 4.0% 3.0%  
    Total revenues 10,621 13,745 29.4%

    Wipro Technologies (Global IT services & products)
    Wipro’s focused efforts to grow its IT services business is reflected in higher revenue contribution (75% of revenues in 2QFY04 from 68% in 1QFY04). Revenue growth for this segment is a result of 38% YoY growth in its Enterprise Solutions business that now contributes to around 59% (60% in 2QFY03) of Wipro Technologies revenues. Also, growth in revenues from R&D services has also provided a fillip. Notably, R&D services had been a pressure point for Wipro in the recent past owing to reduction in spending by the company’s client’s i.e. global telecom majors.

    Despite this growth in revenues, the PBIT margins for this segment have declined substantially by around 830 basis points. This is mainly due to rising expenditure towards personnel, selling and marketing initiatives. 2QFY04 also saw Wipro adding 3,091 employees, which comprised of 2,030 added in the ITES segment. This takes the total employees for Wipro Technologies to 24,625 by the end of September 2003. The company has also hiked its average compensation by around 12% for offshore employees. During the quarter, Wipro added 35 new customers (15 in R&D services and 20 in Enterprise Solutions).

    Wipro Infotech (India & Asia Pacific IT Services & Products)
    Revenues from this segment accounted for around 16% of total revenues (21% in 2QFY03), and declined by over 1% on a YoY basis. However, the PBIT margins for this segment witnessed an improvement of around 110 basis points. The services business grew by 22% YoY and contributed to around 31% of the segment’s revenues.

    At the current market price of Rs 1,406, the stock is trading at a P/E multiple of 37.5x annualised 1HFY04 earnings. The management has projected revenues of US$ 241 m for 3QFY04 for its global IT services business (including ITES), which is a growth of around 9% sequentially. As the company’s integration with its acquired entities goes through, higher revenues are expected from high-end services like IT consulting and package implementation. However, margin pressure is likely to continue owing to salary hikes and increased marketing expenditure. But till the time clarity regarding Wipro’s inorganic initiatives emerges, investors need to practice caution. It has to be remembered that Wipro is trading at significantly higher valuations compared to its peers.



    Equitymaster requests your view! Post a comment on "Wipro: Improved performance". Click here!


    More Views on News

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Wipro: A Good Performance (Quarterly Results Update - Detailed)

    May 4, 2017

    Acquisitions and digital services aid growth.

    Wipro: Another Flat Quarter (Quarterly Results Update - Detailed)

    Feb 9, 2017

    Wipro has reported a 1% QoQ decrease in the consolidated topline and a 1.9% QoQ increase in the consolidated bottomline for the quarter ended December 2016.

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 11:46 AM



    Compare Company With Charts