Global meltdown crisis and rising talent acquisition cost, Indian technology major Wipro saw a 21% dip in its June quarter net profit as higher employee-related costs pushed up the firm's overall expenses.
Consolidated net profit at Rs 2,563.6 crore in April-June (the first quarter of 2022-23 fiscal) was 20.6%, lower than Rs 3,242.6 crore net profit in the same period a year back. Seen sequentially, the profit fell 16.9%.
Its expenses, which includes employee cost, jumped almost 23% to Rs 18,647.5 crore, with attrition at 23.3%. Of the expenses, employee benefit cost was Rs 12,613.4 crore, up almost 23% from last year. Retaining employees is leading to cost pressure on IT companies, denting their margins.
Wipro's revenue for the quarter rose 17.9% year-on-year to Rs 21,528.6 crore. “Despite the uncertainties of the macro-economic environment, if I look at our pipeline, our order bookings, and the discussions we are having with our customers, there has been no slowdown or pull back of spends for us,” CEO and Managing Director Thierry Delaporte said.
The operating margin in the IT services segment decreased by 200 basis points to 15 per cent quarter-on-quarter. Wipro CFO Jatin Dalal said the operating margins have bottomed out.
On the outlook for Q2, the firm said, “We expect revenue from our IT Services business to be in the range of $2,817 million to $2,872 million. This translates to a sequential growth of 3 per cent to 5 per cent.” The company asserted that demand for its IT services and the deal pipeline is robust.
With its Q2 guidance, the company exuded confidence it will “very comfortably” grow in double-digits for fiscal 2023. “I am very optimistic about the rest of the year,” Delaporte said during the Q1 earnings call.
The demand for IT services is robust, and the overall pipeline is at an all-time high, Delaporte pointed out. High-growth services like cloud, digital, engineering services and cybersecurity have seen ‘strong interest' from clients, the company said, adding bookings in cloud are up 35% year-on-year, while engineering services bookings have doubled.
The company's bookings in Total Contract Value terms grew at about 30 per cent year-on-year and in annual contract value terms, it grew nearly 18 per cent. Wipro said it is investing heavily in talent to support its ambitious growth plans for the year. The company onboarded over 10,000 freshers in Q1.
All markets for Wipro grew double-digit, with Americas and Europe – the top two markets, growing at 18% and 16% year-on-year in constant currency terms. Attrition cooled off, although just a tad, to 23.3 per cent in Q1 FY23 (on a trailing twelve-month basis) from 23.8 per cent recorded in Q4 FY22.
Wipro expects attrition levels to further moderate ahead. It had 2,58,574 employees as of June 30, 2022. Apart from the rise in employee benefit expenses, Wipro's finance costs too went up during Q1.