Wipro’s Strategy will pay off by Mar 2018: Neemuchwala

Abidali Neemuchwala, the chief executive of Wipro Ltd expects the currently pursued strategy to pay off and to help India’s third-largest software services company of the country end the next fiscal year with industry-matching growth.

Bengaluru-based Wipro does not give any annual forecast (it provides quarterly guidance) and for this very reason, it has clarified that this should not be interpreted as a target.

However, Wipro, which over the last few years has shown signs of struggles to keep pace with its peers, believes that measures taken since the month of February this year to generate more business for the firm from the existing clients, investments in building capabilities in new technologies, like cloud computing platforms and Internet of things, and an aggressive mergers and acquisitions (M&A) strategy should help it get to industry-matching growth.

The Company under Neemuchwala, who joined the company in April last year as chief operating officer and was elevated to his current role as the CEO in February 2016, posted a 0.8 per cent decline in dollar revenue growth in the second quarter, mirroring the growth pangs faced by country’s US$ 150 billion outsourcing sector. Wipro’s large rivals such as, Tata Consultancy Services Ltd (TCS) and Infosys Ltd, run the risk of slower growth this year than the 7.1 per cent and 9.1 per cent growth recorded last year.

To be sure, some of the early signs of the measures taken have started reflecting quite well, with the company improving its ability to generate more business from existing clients, and arresting declining profitability.

Wipro has managed to improve its average revenue per client to about US$ 6.6 million at the end of September from US$ 6 million at the start of the financial year in the month April.

The firm managed to hold on to a 17.8 per cent operating margin, same as during the April-June period, despite giving salary raises to close to 174,000 employees during the July to September period. The company’s margins had narrowed sharply after it reported 19.7 per cent profitability in the March quarter.

Significantly, Neemuchwala also said Wipro’s aggressive M&A strategy will boost its chances of becoming a US$ 15 billion firm by 2020. Wipro, which ended with US$ 7.35 billion in yearly revenue at the end of March 2016, declined to disclose what percentage of revenue will come from buyouts.

Meanwhile Wipro share price is trading at Rs 480.50, down by 3.75 per cent. Get the most important support and resistance levels of the share at Wipro share price forecast.