Today’s Wipro Q4 Results: Weak Discretionary Spending May Lead to a Decline in Net Profit and Revenue

On April 19, Wipro, a significant IT player, is scheduled to release its Q4 financial results, after TCS and Infosys. Analysts predict that Wipro’s net profit for the quarter ending in January–March 2024 would have decreased by 8–10%, reaching between Rs. 2,778 crore and Rs. 2,829 crore. Additionally, a 4-5% decline in sales is anticipated for Q4 of FY24.

Wipro announced a net profit for the quarter ending in March 2023 of Rs 3,076 crore.

The analysts believe that seasonality, a decline in discretionary spending, and a cautious mood across significant verticals that affect sales growth are the main causes of the decline in Q4 net profit and revenue.

Brokerage firm analysts see Wipro’s sales falling by 4-5 percent year over year and staying between Rs 22,126 crore and Rs 22,346 crore.

In its note, Nomura said that it anticipates a sequential decline in Wipro’s sales of 0.4% in constant currency terms (CC). It projects a 20 basis point increase in EBIT margins, driven mostly by Wipro’s ongoing cost containment initiative.

It advised following observations on the consulting industry and the prognosis for CY24 client budgets.

According to a different brokerage, Sharekhan, Wipro’s Q4 FY24 earnings is predicted to drop 8.4% YoY to Rs 2,816 crore from Rs 3,075 crore in the previous year. Wipro’s revenues are expected to drop 5% year over year to Rs 22,117 crore from Rs 23,289 crore. With $2,647 million in sales, dollars are down 6.7% year over year (down 0.4% in constant currency terms and 0.3% in QoQ).

“Due to a reduction in discretionary expenditure, Wipro is anticipated to post a sequential fall in revenue in CC terms of 0.4%, in line with the Q4 targeted range of minus 1.5% to 0.5%. Because of the effect of the pay increase, the EBIT margin is predicted to drop 60 basis points on a quarterly basis.

According to stockbroker Nirmal Bang, Wipro has been generating revenue over $3 billion on a total contract value (TCV) basis for the last five quarters, with deal wins in the December 2023 quarter valued at a substantial $3.8 billion. It anticipates that TCV won’t drop below $3 billion.

This also follows Wipro’s attempts to pursue bigger agreements by cutting a few minor, loss-making clients. Converting TCV to revenue is Wipro’s bigger problem, and it seems to be more severe than that of its competitors, the report said.

Nirmal Bang projects Q4 revenue to increase 3.9% to Rs 22,286 crore and Q4 profit to decrease 4.3% YoY to Rs 2,942 crore.

The largest IT company, Infosys, reported a 30% increase in net profit year over year to Rs 7,969 crore for the fourth quarter that concluded in March 2024 on Thursday. However, compared to Rs 37,441 crore in the previous year, its sales from January to March 2024 increased by only 1.3% YoY to Rs 37,923 crore.

The net profit of Infosys was Rs 6,128 crore during the same quarter of the previous year.

In the meantime, TCS, the biggest IT services business in India, said on April 12 that its March quarter net profit increased by 9.1% to Rs 12,434 crore, kicking off the Q4FY24 results season. During the 2023–24 fiscal year, the net profit of the corporation increased by 9% to Rs 45,908 crore.