Fitch Forecasts 4.5% Revenue Growth For Wipro In Fiscal 2026, Maintains 'A-' Rating With Stable Outlook

Wipro's revenue is expected to grow by approximately 4.5% in fiscal 2026, driven primarily by favourable sector trends and a recovery in discretionary customer spending, according to global rating agency Fitch.

Fitch has maintained Wipro's long-term foreign and local currency issuer default ratings at 'A-' with a stable outlook.

The agency forecasts Wipro's revenue to increase by around 4.5% in fiscal 2026, following a slight decline in fiscal 2025. This growth is anticipated to be supported by a recovery in discretionary customer IT spending, particularly in the US, where customers are expected to benefit from declining interest rates.

"We expect customers in Europe to remain under pressure in a weaker economic environment and to focus on cost optimisation and efficiency improvement. There are early signs of revenue recovery in the third quarter of fiscal 2025, with IT services revenue rising by 0.6% year-on-year," the agency said in a statement.

Wipro will maintain its position as India's fourth-largest IT services company by revenue. The IT services industry's long-term growth is expected to be driven by digital transformation, cloud computing, and generative AI. Wipro is equipping about 50,000 of its 2,37,732 employees with advanced AI certifications. Fitch anticipates a 20% improvement in Wipro's Ebitda margin in fiscal 2025 and fiscal 2026.

"We expect the Ebitda margin will remain around this level as the company is likely to focus on revenue growth rather than maximising profitability. Wipro has improved profitability by cutting general and administrative expenses and increasing its use of offshoring. In addition, a fall in the attrition rate has helped to lower hiring and training costs and moderate wage growth pressure," the agency said.

Fitch expects Wipro to prioritise 'tuck-in acquisitions' over large ones, which are typically more margin dilutive. The agency is confident that Wipro will pursue 'opportunistic acquisitions' to gain exposure to new geographies or capabilities.

Recently, Wipro acquired Applied Value Technologies, a global provider of corporate application services and support, for $40 million. The deal is expected to be finalised by the end of March 2025.

Wipro has maintained the same credit rating since 2021. A positive rating action or upgrade is unlikely in the medium term, Fitch said, except if the company profile significantly improves, for example, increased market share and expansion in pre-dividend FCF (free cash flow) while maintaining Ebitda leverage below 1.3 times.

"The company generates substantial FCF and holds a large cash balance that is more than sufficient to cover short-term debt maturities of Rs 103 billion in December-end 2024. We expect Wipro will generate pre-dividend FCF of around Rs 160 billion in fiscal 2026, which will cover shareholder returns and acquisition spend," it said.

(With PTI Inputs)