Margins under pressure, IT companies moving slowly

During the months of January through March, Wipro’s net profit increased somewhat sequentially by 0.70% to Rs 3,074.5 crore, falling short of the Rs 3,129 crore Bloomberg consensus estimate. The period’s revenues, which were similarly less than the projection of Rs 23,460 crore, were down 0.16% sequentially to Rs 23,190 crore.

The board of directors of the IT company authorized the buyback of shares worth Rs 12,000 crore, pending postal shareholder approval. Through a tender offer, the company will purchase up to 269,662,921 shares of Rs 2 each from shareholders for Rs 445 (4.91% of all fully paid-up equity shares).

With its Q4 results, Wipro joined rivals TCS, Infosys, and HCL Technologies who had also reported either a sequential decline in revenues or, at best, single-digit growth. Only TCS and Wipro reported positive sequential growth in terms of profits.

Analysts claimed that HCL Tech’s results offered some consolation because the company’s performance was not as poor as anticipated. Revenue decreased sequentially by 1.2% in constant currency, which was less than the consensus estimate of a 1.5% decline.

However, these companies were able to stabilize their attrition rates during the quarter, with HCL Tech and Wipro bringing it down to under 20%. Attrition rates at TCS and Infosys decreased to just over 20%.

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