Wipro Q4 Results Review - New CEO Under The Microscope: Nirmal Bang

Nirmal Bang Report

Wipro Ltd.'s Q4 FY24 revenue growth declined by 0.3% QoQ in constant currency terms against guidance of growth of (-)1.5% to +0.5% (our estimate +0.5%).

Q1 FY25 guidance of -1.5% to 0.5% CC QoQ growth in IT Services revenue does not come as a surprise as all IT players who have declared results so far have indicated near term demand weakness. The rangebound margin guidance at ~16% is also not surprising as Wipro wants to reinvest in growth.

The new CEO – Srini Pallia (Insider takes charge) - indicated five pillars of his strategy – focus on large deals, to deepen relationships with larger clients & partners, focus on industry specific offerings – led by Consulting and infused with AI, talent and scale to provide AI-ready solutions and operational rigor. These do not seem to be very different from what we have heard from any other large IT Services company CEO in the recent past.

Srini indicated that he is not going to change the organisational structure that was instituted by Thierry, the previous CEO.

While the stated intent is on ‘accelerating growth’, he is banking on strong execution. We believe he likely has a three-year runway to deliver industry matching – if not industryleading – growth. However, unlike Thierry who was lucky to start his stint when demand was strong, Srini comes during a time when demand is weak.

We maintain Sell on Wipro with target price of Rs 422, which is based on an unchanged target price-to-earning multiple of 16.6 times (30% discount to TCS) on March-26 earning per share.

The EPS has been cut by 1.5-4.5% for FY25-FY27. The high discount of 30% to TCS that we are assigning is due to its significantly below peer group revenue performance in the recent quarters and the significantly lower return on invested capital due to its inability to squeeze out enough value from its merger and acquisition moves.

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