Wipro Saw Revival In Discretionary Spend, Banks In Q3 On Strong Deal Pipeline

IT major Wipro Ltd. is witnessing a gradual recovery in discretionary spending within the BFSI and healthcare sectors, with growth also seen in its consulting business, Capco. The company relies on a better demand environment and its deal pipeline for its performance in the last quarter.

“In January, typically, many of our clients are finalising their budgets. We see discretionary spending coming back, but slowly, one of the reflections that we have in the context of the BFSI segment is Capco business, where in the third quarter we had a year-on-year growth, both on the bookings as well as revenues,” Srini Pallia, chief executive officer and managing director at Wipro, told NDTV Profit. 

In a seasonally weak third quarter, the company recorded 0.1% revenue growth at Rs 22,319 crore, a 4% profit increase at Rs 3,354 crore, and expanded its margins to 17.3%, beating market estimates. The company has guided for the next quarter to a range of 1% decline to 1% growth in constant currency terms.

The guidance is based on the current visibility and performance as of today, Pallia noted. In the third quarter, industries such as healthcare and BFSI showed strong results, and the overall demand environment remains positive. The company’s pipeline is also healthy across all four markets. However, the guidance is contingent on the visibility available at this time, he explained. 

While the company is seeing slow revival of discretionary spending in the BFSI and healthcare, it continues to see cost optimisation and operational efficiency as key topics in client conversations. The CEO, however, also said that there is an increasing focus on spending related to Gen AI across operations, infrastructure, and applications, presenting new opportunities, especially in areas involving data readiness, AI, and cloud.

Wipro’s IT services operating margin for the quarter came in at 17.5%, an increase of 0.7% quarter-on-quarter and 1.5% year-on-year. The company will maintain its margins in a “narrow band” going forward, said Aparna Iyer, chief financial officer at Wipro, in conversation with NDTV Profit.  

“We are very happy to be at 17.5%. The earlier aspirational target band was 17-17.5%. We are at the top end of that band. It's been delivered on the back of continuous improvements through improved execution rigor in both the core IT services and our consulting businesses. So we feel very confident about holding our margins in a narrow band,” she said.

Iyer added that the margin performance will be sustained and improved if the revenue environment remains supportive and the company has a strong execution in the quarter. 

The IT major’s utilisation level has been consistently dipping from 87.7% in the first quarter, 86.4% in the second quarter, to 83.5% in the third quarter. "It is a very seasonal thing. This is a quarter where there are furloughs, because of that, every Q3 you will see utilisation dipping, but the core business utilisation continues to be at the right levels," said Saurabh Govil, chief human resources officer at Wipro.

The company expects to see utilisation levels go up, back to normal levels in the fourth quarter.