Wipro Q2 result update: Net profit stagnates at Rs 2,667 crore; board approves subsidiary merger

Wipro, the fourth-largest IT company by market capitalisation, following TCS, Infosys, and HCL Technologies, announced its results for the September quarter today. 

According to the details, the company’s revenue from operations showed minimal change, decreasing by 0.11% from Rs 22,539 crore to Rs 22,515 crore in Q2 FY24. The company’s gross profit increased to Rs 6,596 crore from Rs 6,156 crore, with a gross profit margin of 29% for the quarter. 

However, the company’s operating profit for Q2 FY24 was Rs 3,334 crore, compared to Rs 3,250 crore in the corresponding quarter last year, representing a modest year-over-year growth of 2.6%. The operating profit margin of the company also improved slightly year-over-year, from 14.41% to 14.80% during the quarter. 

Furthermore, the net profit for the September quarter was Rs 2,667 crore, marking a marginal growth of 0.70% compared to the Rs 2,649 crore in the corresponding quarter last year. Based on these results, it appears that the company did not perform well, either in terms of top-line or bottom-line figures for the quarter. 

Segment and Region performance: 

The total IT revenue of the company is Rs 22,395 crore, compared to Rs 22,755 crore. The majority of the revenue comes from America, followed by Europe and the APMEA region.  

When examining the sector mix, the top contributor is the BFSI sector, accounting for 33.6% of the total, followed by the Consumer sector in the second position, contributing 18.7%, and the healthcare sector ranks third, contributing 12.7% of the total revenue. 

Current business performance and outlook: 

“We continue to thrive in the market despite the uncertain macro environment,” stated Thierry Delaporte, CEO and Managing Director. “We concluded the second quarter with 22 accounts exceeding the USD 100 million range, which is twice the number we had in FY’21. Our total contract value for large deals reached USD 1.3 billion, marking the highest figure in the last nine quarters,” he further added.

“Looking ahead to the fourth quarter ending December 31, 2023, we anticipate that revenue from our IT Services business segment will fall within the range of USD 2,617 million to USD 2,672 million. In terms of constant currency, this equates to a projected sequential decline of -3.5% to -1.5%”, said management. 

Deals: 

During the quarter company’s total bookings amounted to USD 3.8 billion, with a YoY constant currency growth of 7%. Among these, large deals had a Total Contract Value (TCV) that increased by 79% YoY in constant currency, reaching USD 1.3 billion. 

Merger of Subsidiaries into Wipro: 

The board has given approval for the merger of five of its wholly-owned subsidiaries into ‘Wipro Ltd. According to a regulatory filing made by the company with the stock exchanges today separately, the five subsidiaries namely Wipro HR Services, Wipro Overseas IT Services, Wipro Technology Product Services, Wipro Trademark Holding, and Wipro VLSI Design Services. 

The implementation of the scheme is contingent upon obtaining essential statutory and regulatory approvals as required by applicable laws, including the approval of the National Company Law Tribunal. 

The merger of these subsidiaries into ‘Wipro Ltd.’ is strategically designed to streamline operations, create synergies, reduce overhead costs, optimize the legal structure, and simplify legal and regulatory compliance, enhancing overall operational efficiency. 

Share performance: 

The shares of Wipro Limited began the day at Rs 411 per share, remaining unchanged compared to the previous day’s closing price of Rs 411.25 per share. They reached an intraday high of Rs 413.60 per share and eventually closed the day with a slight decline in their share price at Rs 407.40 per share on the BSE. 

Furthermore, the stock’s performance over the past year has not been particularly strong, as it has generated a moderate 7.5% return during this period. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.