What To Expect From Wipro Q4 FY23 results, A Preview

Indian IT services major player, Wipro will be announcing its Q4FY23 results in few hours on Thursday. Everyone is eyeing it as Wipro competitors Infosys and TCS, posted a weak performance earlier in April.

As per media reports the market analysts are anticipating that even Wipro will post a decline in revenues sequentially. The information technology space is growing through a difficult phase and most of the companies including major bellwethers did mass lay off to deal with costs.

It is worth noting that Wipro would also consider a proposal of share buyback. IT major had last come out with a Rs 9,500 crore share buyback in 2020. The company had bought back 23.75 crore shares at Rs 400 apiece then. As per data available with AceEquity, the IT major announced about the completion of the extinguishment of shares on January 21, 2021.

Here is what to expect from the techie player keeping in mind that Wipro changed its operating structure mid-year.

Mixed expectation on revenue growth

Brokerage Elara Securities and Sharekhan expect that Wipro to clock about 5 per cent growth in profit on about 13 per cent rise in revenues.

ICICI Direct Research noted in its report: "Wipro is expected to report a QoQ revenue decline of 0.5 per cent." Similar revenue projections were made by DART, on the back of cuts in discretionary IT spends.

"Expect revenue decline of 0.6 per cent in constant currency terms QoQ in line with guidance of (0.6) percent to 1 per cent due to softness in consulting business and discretionary spend," the report highlighted.

While Centrum broking forecasts about 12.80 per cent YoY rise in revenue for Wipro and a 2.6 per cent rise in profit after tax for the quarter.

Consulting Business would report low numbers

Two leading brokerages, Motilal Oswal and HDFC Securities expect softness from the consulting business. It is one of the key business segment and the major driver of the company's revenues along with three new operating verticals at the company, Wipro Consulting.

In 2021, Wipro acquired Capco, an IT consulting company.

"There's weakness in discretionary and consulting services including Capco which is tracking 3-4 per cent from its peak revenue (~USD 1bn), HDFC Securities noted.

"Consulting should remain soft. Clients continue to cut discretionary spending," noted Motilal Oswal.

Reduction in margins

ICICI Direct Research expects reduction in margins of the company due to the ongoing global macroeconomic headwinds, which have besotted tech companies worldwide.

"Wipro is expected to report a margin decline between 20 and 140 basis points," ICICI's report said.

"On the margins front, we expect margins of most IT companies to be muted due to headwinds such as lower revenue, which despite some cost optimisation levers will impact margins for the quarter," ICICI Direct further added.

Attrition to remain muted

While on attrition part, experts feel that hiring numbers are also expected to remain muted, just like previous quarters.

Furthermore, the HDFC Securities report noted that the employee utilisation at the company could improve. Also, the hiring, especially fresher hiring would be recalibrated based on demand.

"Margin levers are pyramid structure, utilization, and automation offset by headwinds like lower revenue growth and normalisation of travel and facility expenses", the report said.

"Fresher hiring of 24-25k in FY23E will be recalibrated based on demand, but there is a lot of scope to improve the pyramid as historically Wipro has been lower than peers on freshers," HDFC securities added.

The current market price of Wipro stock is Rs 374.65 per share, its up by 0.04 per cent ahead of the results and over previous day's closing price. Its 52-week high is Rs 530 per share and 52-week is Rs 351.85 per share.