Wipro sees margin pressure over next few quarters as attrition spikes

Indian IT services provider Wipro said on Friday it expects pressure on margins to continue over the next two to three quarters due to higher employee-related costs as attrition spikes and travel opens up.

We are seeing slightly lower margins than the range we have seen in the past. There are some salary increases planned and certainly we have to watch travel carefully," said Wipro`s Chief Financial Officer Jatin Dalal in an interview.

Wipro reported a near 4% year-on-year gain in consolidated net profit for the quarter ending March 31, while revenue rose 28.4%.

The company`s IT services operating margin for the quarter was at 17% for the March quarter compared with 21% a year earlier.

The company forecast June quarter revenue from the IT services business to be in the range of $2.75 billion to $2.80 billion, a sequential growth of 1% to 3%.

We don`t see a slowdown in client spending and our order numbers are quite strong. There is nothing on the horizon that worries us," Dalal said.

Rising investments in areas from cloud computing to cyber security by various businesses during the pandemic have propped up demand for the $195 billion Indian IT industry.

However, the demand has also led to severe attrition among employees and margins have suffered due to higher employee costs like wage hikes.

Wipro said it will double its fresher hiring in FY 22-23 from about 19,000 last year.

Peers Infosys, Tata Consultancy Services, HCL Technologies have made net additions of over 190,0000 people in FY 2021-22, over 50% higher than the last fiscal year.

Wipro also said discussions were ongoing with clients for improvement in pricing, a trend flagged by Infosys a few days back, given higher inflation.

The environment is quite positive for seeking price increases and that discussion is already happening, Dalal said.