Wipro under CEO Abidali Neemuchwala struggles for growth; targets $15 billion in revenues by 2020

BENGALURU: In the first full quarter with chief executive Abidali Neemuchwala in charge, Wipro continued with its familiar struggle for growth momentum, and projected that the first three months of 2016-17 will not be much better.

The Bengaluru-based company, owned mostly by chairman Azim Premji and his family, met revenue projections for the fourth quarter and set the bar low with guidance of 1-3% topline growth for the IT services business during April-June 2016.

The company said it would buy back up to 40 million shares at Rs 625 apiece, spending up to Rs 2,500 crore. The board also recommended a final dividend of Rs 1 per share, taking the total dividend to Rs 6.

Wipro stock closed 2.34% higher at Rs 602.35 on the National Stock Exchange before results were announced. An hour into trade, Wipro’s shares were trading at $12.93, down 0.35%, on New York Stock Exchange. “It (the turnaround) does take time. While I have some intermediate timelines in mind, publicly we can’t talk about how long it takes,” Neemuchwala told ET.
“It’s not something that happens tomorrow, but it can’t take forever,” an echo of language employed by vice chairman TK Kurien, who was CEO for five years until February.

Neemuchwala has set a revenue goal of $15-billion by 2020. Wipro ended the financial year with the topline of its IT services business growing by 3.7% to $7.35 billion.

Revenue at the IT products business shrank by 13% to $449 million. Revenue growth in the final quarter came in at 2.4%, helped along by acquisitions and operating margin dipped by 10 basis points to 20.1%.

The company added a net 118 customers during January-March 2016. Wipro declined to provide details on how much of topline growth, or customer additions, were because of the four acquisitions worth $763 million it made in 2015-16.

CFO Jatin Dalal said that the company does “not look at organic and inorganic revenues separately as part of the company’s broader philosophy.” Wipro’s margins took a hit during the year due to cross-currency fluctuations and acquisitions.

On Monday Tata Consultancy Services surprised with better-than-expected topline growth and commentary, and Infosys under CEO Vishal Sikka kicked off earnings season last Friday by saying it expects to do better than the industry average this year. Wipro has continued to lag its peers, and analysts said that they will watch Neemuchwala for actions that will signal a turnaround at a company which has been under-performing for the whole of this decade.

“Wipro continues to be impacted by the lack of scaleup in large accounts, apart from the continuing challenges in the energy/telecom segments. Consistent revenue growth in future will make us more positive on the stock,” said Dipen Shah, head of Private Client Group Research, Kotak Securities. Neemuchwala, sources said, has told his top lieutenants to shoot for at least 12-14% revenue growth in fiscal 2017, a task that will be harder if it delivers a weak first quarter.

In constant currency terms, revenue growth for the year 7.6% was well below Nasscom’s export growth estimate of 12.3%. Infosys’ sales grew 9.1% in 2015-16 and TCS’ by 7.1%.

Wipro was rescued during the quarter by strong growth in healthcare and life sciences, while finance, telecom and energy were a drag. The company reported positive growth in regions other than Asia-Pacific and “other emerging markets.” IT services had headcount of 172,912 employees at end of March.