Wipro's revenue declines, industry outlook bleak

Wipro Ltd saw its quarterly dollar revenue decline 2.1% in the June quarter, after Tata Consultancy Services (TCS) Ltd and HCL Technologies Ltd reported tepid numbers earlier, raising concerns about the sluggish growth of India's $245 billion IT services industry in the current fiscal year.

- Varun Sood

Worryingly, Wipro has forecast that its revenue could contract again in the September quarter. The country's fourth-largest IT services firm estimates revenue could fall by 2% or improve by 1% in constant currency terms. Constant currency does not take into account exchange rate fluctuations.

Wipro's revenue in the first quarter totalled $2.78 billion, a 2.1% sequential decline and only 0.81% better than the year-ago period. In constant currency terms, sequential growth fell by 2.8%. A Bloomberg survey of 20 analysts estimated profit to come in at $360.9 million on net sales of $2.78 billion.

Unlike TCS and HCL Technologies, Wipro's problems appear to be broad-based: Revenue declined in all four markets and in four of the seven business segments the firm classifies.

But the pain was most pronounced from its largest customer base, banks, which accounted for a third of the firm's revenue and reported a 3.5% sequential decline.

Two additional sore areas are declining profitability and a falling workforce. Wipro's operating margin was 16%, narrowing 30 basis points from the preceding March quarter. One basis point is one-hundredth of a percentage point.