Ahead of its quarterly earnings on Wednesday, the majority of brokerage firms and analysts expect a strong performance by IT major Wipro in second quarter of the financial year 2021-22 (Q2FY22). 

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The brokerages see a rise in the revenue in the range of 27 to 30 per cent on a year-on-year (YoY) basis. The street analysts point out the revenue growth will mostly be driven by the large deals as well as the contribution from Capco and Ampion acquisitions. They also estimate the IT heavyweight may see pressure on margins in the quarter, while expecting better guidance for third quarter.  

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Wipro, India’s third largest Information and technology firm with respect to market cap, is scheduled to report its results for June-September quarter of FY22, along with its peer Infosys. 

The shares of the company, during the second quarter has managed to outperform the benchmarks, by surging around 16 per cent as compared to a 13 per cent rise in the Nifty50. On the contrary, the company underperformed as compared to IT Index, which soared 20 per cent during the same time.  

IDBI Capital in its Q2 preview states, “We forecast IT services revenue growth of Wipro at 7.1 per cent quarter-on-quarter (QoQ) in CC (Constant Currency) terms. And, factor cross currency impact of approximately 70 basis points (bps). Similarly, forecast EBIT margin to decline by around 82 bps QoQ factoring salary increase and dilution due to Capco.” 

The brokerage firm would keenly watch for Q3FY22 guidance, as they expect the company to give IT services growth guidance between 0-2 per cent; It will also monitor commentary on the large deal wins; on client mining; EBIT margin, and across verticals - especially BFSI, Consumer business unit. 

Similarly, Nirmal Bhang, a brokerage firm, estimate 6.1 per cent CC QoQ revenue growth in Q2FY22, including one extra month of Capco and one full quarter of Ampion, besides a 2.5-3 per cent organic growth. The brokerage expects Wipro to guide for 1.5-3.5 per cent QoQ growth in Q3FY22. 

Moreover, Nirmal Bhang also expects margins to remain under pressure largely due to extra two months of wage hikes, the incremental amortization expense for the Capco acquisition. And, will watch out for management commentary on how the integration of the Capco deal is progressing and 

While YES Securities pointed out, “Q3FY22 guidance and the commentary on overall strategy would be key thing to watch out for. Wage hike and impact from Capco acquisition to result in decline in EBITDA margin by 41 bps QoQ” 

Similarly, Elara Capital said in a note, “We expect tier-1 IT services to report an average QoQ constant currency (CC) organic revenue growth of 4.2 per cent in Q1FY22E, with (70bps) QoQ average impact from cross currency and inorganic support for Wipro.”