Wipro Q1FY13 Preview: Decision delay expected to push revenue growth down
Decision Delay Expected To Push Revenue Growth Down
Wipro’s revenue from IT services is expected to register 0.50% growth sequentially to $1544mn. Growth would be lower as delay in decision making, setback in project ramp up and huge uncertainty into the systems affected the volume growth. Cross currency also expected to impact growth by 200bps.
INR Depreciation Would Reduce Margin Pressure
On a constant currency basis, Wipro’s operating margin is expected to remain under pressure as low utilization and lower volume growth would impact performance. But, due to currency benefit margin is expected to remain flat sequentially. Way2Wealth believes, operating margin would reach 16.85% in Q1FY13 against 17.26% in the previous quarter.
Decision Delay Continues; Sporadic Pricing Pressure Exist
Wipro management is not much concerned about overall demand scenario delay in decision making and low conversion rate is hurting the overall growth. The company is also experiencing pressure on pricing in the weaker segment, like investment banking and capital market. But, overall pricing environment is not worrisome to the management.
BFS Remain Under Pressure; Insurance Good Pipeline
Wipro is also experiencing pressure on BFS segment mainly due to low volume traction in the investment banking and capital market space. But, retail banking and insurance is expected to continue with their growth momentum on the basis of relatively stronger deal pipeline.
Workforce Alignment Complete; Capability Alignment Continues
The management indicated restructuring process as work in progress. The organizational alignment is completely done. However, aligning capabilities is nearly 50% done, whereas, filling the differentiation gap is only 30% complete. Nevertheless, the early taste of success of restructuring is already felt by the company in the form of improved customer satisfaction, increased employee satisfaction and better gross margin for the projects.
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- Pair Trade: Wipro and HCL Tech
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