Forbes India 15th Anniversary Special

Q4 results: Wipro reports muted earnings for quarter ended March 31

Billionaire Azim Premji led-IT services company readies for a Rs 2500 create share buyback

Debojyoti Ghosh
Published: Apr 20, 2016 03:32:18 PM IST
Updated: Apr 20, 2016 07:34:48 PM IST
Q4 results: Wipro reports muted earnings for quarter ended March 31
Image: Punit Paranjpe / Reuters

India’s third-largest software-services exporter Wipro, said on Wednesday that the company’s board has approved a share buyback plan of four crore equity shares for a consideration of Rs 2,500 crore. This represents 1.62 percent of the total paid up equity share capital of the company. “The board has determined that the record date for the proposed buyback is May 6, 2016,” Wipro said in a statement to the stock exchanges.

Wipro, owned by billionaire Azim Premji, has set the share buyback price at Rs 625 a piece, a four percent premium over its closing share price of Rs 601.35, on Wednesday. The company’s shares were up 2.07 percent on the Bombay Stock Exchange over the previous day’s close, even as the Sensex ended the day marginally up by 0.11 percent.

The Bengaluru-based IT company said that “members of the promoter and promoter Group have indicated their intention” to participate in the proposed buyback programme. Premji and his family, through personal and other investment entities, own 73.34 percent stake in the company.

“The move to buyback equity shares is part of the company’s policy to provide regular, stable and consistent return to investors while striving to enhance long-term value for all stakeholders,” said Jatin Dalal, chief financial officer, Wipro in a press release. The IT major also announced a final dividend of Rs 1 per equity share.

Meanwhile, for the quarter ended March 31, Wipro posted a 2.4 percent sequential rise in dollar revenue, inline with the company’s guidance of growing between 2 and 4 percent quarter-on-quarter in Q4. However, the IT major’s profit slipped by 1.6 percent sequentially during the March quarter.

Wipro’s IT services revenue stood at $1,882 million in Q4. The company had projected that its IT services revenue for the quarter under review would rise to between $1,875 million and $1,912 million. (Other than quarterly dollar revenue forecast, Wipro doesn't provide any other projections.)

Consolidated net profit for the March quarter (Q4) stood at Rs 2,235 crore from Rs 2,272 crore a year-earlier, a decline of 1.6 percent. Sequentially net profit was nearly flat for the IT major. In Q3 Wipro posted a profit of Rs 2,234 crore.

“We have maintained our margins in the quarter, with benefits from utilization and operational efficiencies largely off-setting the margin impact from our inorganic investments. We continue to generate robust cash flows during the year,” said Dalal.

Traditionally, January to March is a seasonally soft quarter for the Indian IT industry. It is a lean period for software services companies as client budgets are finalised during the period for the next fiscal and revenues do not accrue for the full quarter. 

For the full year, Wipro recorded a 3.7 percent increase in dollar revenue from IT services. It posted a revenue of $7.35 billion for the year ended March 31. Brokerage houses were expecting Wipro to report a dollar revenue growth of about 4 percent for FY16.

Over the last three fiscals, the Azim Premji-led company has been working on a slew of turnaround measures to get itself back to industry leading growth. Wipro has been underperforming compared to its larger rivals TCS and Infosys as well as the industry as a whole.

In the last two years, the Indian IT industry has been growing between 12 and 14 percent, with mid-tier IT firms like Tech Mahindra reporting growth figures of 18.3 percent. Wipro, however, has reported revenue growth figures of between 6.4 and 7 percent in the last two fiscals. 

From February this year, Abidali Z Neemuchwala took over as the chief executive officer of the company and TK Kurien, who has been at the helm of affairs for five years was elevated to the position of executive vice-chairman.

Wipro had a net addition of 2000 employees during the March quarter, taking its total employee strength to 1,72,912 people as of March, 2016. During the quarter, the company added 119 new customers including clients of Cellent and HealthPlan Services.

Wipro acquired Germany-based Cellent AG, an IT consulting firm in January and US-based HealthPlan Services in February this year.