While this raises hopes that the company may continue to improve the top line trend and report a growth for the current fiscal year (FY27), there is little to expect from its June quarter performance. It has guided for either a flat revenue or a 2% drop on a sequential basis for the first quarter of FY27. The subdued forecast owes to slower offtake from a client and delayed ramp up in a large project it bagged recently. On a positive note, the company does not expect these events to have a spill over effect on the performance in the subsequent quarters.
The specific client issues also affected the company’s March quarter profitability along with the impact of salary increase during the quarter. The operating margin (EBIT margin) shrank by 30 basis points sequentially to 17.3% after showing 90 basis point expansion in the previous quarter. The margin trend in the subsequent quarters will depend upon the speed of project ramp ups and the rupee-dollar movement. The rupee sequentially depreciated by nearly 5% on average in the March quarter thereby supporting profitability.
In a press conference after declaring the result, Wipro’s management stated that it has been cautiously approaching campus recruitments, which have gradually declined over the past four years given the changing business scenario. While it did not give any guidance on campus hiring for FY27, it is expected to remain subdued given that the employee attrition rate skidded to 13.8% in the March quarter, the lowest since March 2021 quarter, when it had hit a low of 12.1%.
The stock has gained nearly 10% over the past month amid weaker rupee, which improves realisations. This has reduced its six-month drop to around 13%. It currently trades at a trailing price-earnings (P/E) of nearly 17, which is at a significant discount to the five-year average multiple of 22. Though this looks attractive, investors need to wait to see a meaningful uptick in the financials in the coming quarters before making fresh purchases.
