Wipro Q3 Preview: Here are 5 major metrics that Dalal Street will watch out for

Software major Wipro Ltd, which will release its figures on Friday, is likely to report double-digit revenue growth year on year (YoY) for the quarter ended December, but the bottomline is likely to dip marginally.

Consolidated revenue is likely to rise 15% YoY and 3.5% sequentially to Rs 23,332 crore, according to the average of eight analysts’ estimates. While the net profit is likely to fall 3% on year to Rs 2,890 crore, it is seen rising 9% sequentially.

Wipro’s peers Tata Consultancy Services and Infosys reported strong numbers for the third quarter, with the latter also raising its revenue growth guidance for the current financial year.

It will be interesting to see how Wipro expects the March quarter to pan out. The software major usually gives quarterly guidance.

Following are the 5 major factors that Dalal Street investors will look at from the earnings and the management.

Outlook
Both Infosys and TCS have pointed out that there are signs of a slowdown visible in Europe. The growth in North America is much better than that in Europe. Whether Wipro is also seeing a similar trend and witnessing some delays in decision making will be closely monitored.

Kotak Equities anticipates muted revenue growth guidance from the company due to potential delay in budgets and weak consulting.

Among the different verticals that IT companies cater to, growth in banking and financial services will be tracked, as it is a major revenue contributor.

Several banks in the US have pointed to a slowdown in the business, and Infosys too, said that segments such as the mortgage business and investment banking are seeing some slowdown.

Furloughs
The December quarter is seasonally weak due to higher furloughs and year-end holidays. Analysts expect furloughs to be high for Wipro, so that will also be closely tracked to gauge the impact on the revenue.

“We would not be surprised if furloughs are higher than pre-Covid levels,” Kotak Institutional Equities said.

Margin
Nomura Financial Advisory and Securities expects operating margin, calculated as earnings before interest, tax (EBIT) to improve 60 bps sequentially, but said the pace of recovery will be slow given the 2-month impact of salary hike in the third quarter.

Kotak Equities expect a 40 bps sequential improvement in EBIT despite a hit from wage revision and furloughs. Aiding margins will also be the rupee depreciation and tight cost management, it said.

Attrition
Attrition trends for most companies dipped in the September quarter and was expected to come down further in the December quarter. Both TCS and Infosys saw attrition coming down, and for Wipro too, it is estimated to come down. In the September quarter, attrition rate dipped 30 bps sequentially to 23%.

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