Top Indian Companies: Wipro Limited

Wipro Limited, formerly known as the Western Indian Vegetable Product Limited is an Indian multinational conglomerate headquartered in Bangalore, Karnataka, India.

Its diverse businesses include FMCG, lighting, information technology, and consulting. It is a Nifty 50 company with a weightage of 1.28% on the index.

History of Wipro

The company was incorporated on 29 December 1945 in Amalner, India, by Mohamed Premji as Western India Vegetable Products Limited, later abbreviated to Wipro. It was initially set up as a manufacturer of vegetable and refined oils in Amalner, Maharashtra, British India, under the trade names of Kisan, Sunflower, and Camel.

In 1966, after Mohamed Premji's death, his son Azim Premji took over Wipro as its chairman at the age of 21.

During the 1970s and 1975 the company shifted its focus to new opportunities in the IT and computing industry, which was at a nascent stage in India at the time. On 7 June 1977, the name of the company changed from Western India Vegetable Products Limited, to Wipro Products Limited. In 1982, the name was changed again, from Wipro Products Limited to Wipro Limited. Wipro continued to expand in the consumer products domain with the launch of Ralak, a tulsi-based family soap and Wipro Jasmine, a toilet soap.

Western India Products Limited

Wipro Limited is a provider of IT services, including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled services, and R&D services.

Wipro GE Medical Systems

Wipro GE Medical Systems Limited is Wipro's joint venture with GE Healthcare South Asia. It is engaged in the research and development of healthcare products.

Shareholding Pattern

Holder's Name No of Shares % Share Holding

No of Shares 5481283211 100%

Promoters 4001950248 73.01%

Foreign Institutions 511821883 9.34%

Banks Mutual Funds 145477170 2.65%

Others 467417970 8.53%

General Public 332141849 6.06%

Financial Institutions 6722023 0.12%

GDR 15752068 0.29%

FY2023 Q4 and Full Year Result

The IT major on Thursday posted a 0.4 per cent decline in its consolidated net profit to Rs 3,074.5 crore for the March 2023 quarter and guided for a 1-3 per cent sequential decline in revenue from IT services business in the June quarter amid a weak macro environment.

The Wipro board also announced a share buyback of up to Rs 12,000 crore through the tender offer route, entailing 26.96 crore equity shares at a buyback price of Rs 445 apiece.

The buyback price is at an 18 per cent premium to Thursday's closing price of Rs 374.35 a share on BSE.

Wipro's Q4 FY2023 show was muted, as the company reported a net profit of Rs 3,074.5 crore, a decline of 0.4 per cent year-on-year. The revenue rose 11.7 per cent year-on-year to Rs 23,190.3 crore.

Wipro CEO and Managing Director Thierry Delaporte talked about softness in the banking, financial services, CPG and retail sectors due to the current macro environment but asserted that there are no radical changes in deal cycles, no reduction in deal sizes or cancellations. The ramp-downs, he said, are restricted to discretionary spending.

"In fact, we are seeing more large deals in our pipeline, and we are on it," Delaporte said at the earnings briefing, as he exuded optimism about the company's ability to win deals.

The company highlighted that it closed FY23 with the "strongest ever bookings recorded in a year".

"We delivered two consecutive quarters of total bookings of over USD 4.1 billion. Our large deal order booking grew by 155 per cent year-over-year for the quarter," Delaporte said.

The Wipro top honcho said the share buyback is part of the company's philosophy to deliver consistent returns to shareholders.

In a filing, Wipro said its board "...has approved a proposal to buyback up to 26,96,62,921 equity shares, being 4.91 per cent of the total paid-up equity shares of the company, for an aggregate amount not exceeding Rs 120,00,00,00,000 at a price of Rs 445...per equity share".

Members of the promoter and promoter group of the company have indicated their intention to participate in the proposed Buyback, it added.

Wipro had major buyback programmes in the past. In April 2019, the company announced a Rs 10,500 crore buyback offer at an offer price of Rs 325 per share. In November 2020, it announced up to Rs 9,500 crore share buyback plan at a price of Rs 400 per share.

Bengaluru-headquartered Wipro - which competes in the IT services space with larger rivals like Tata Consultancy Services (TCS) and Infosys - posted a net profit of Rs 3,074.5 crore for the just-ended quarter, against Rs 3,087.3 crore in the year-ago period.

The revenue for March 2023 quarter stood at Rs 23,190.3 crore, 11.17 per cent higher year-on-year.

IT services segment revenue increased to USD 2,823.0 million, an increase of 0.7 per cent sequentially and 3.7 per cent year-on-year. Its operating margin for the quarter was at 16.3 per cent, flat quarter-on-quarter.

The earnings per share for the quarter was Rs 5.61 (USD 0.071), an increase of 0.7 per cent quarter-on-quarter and a decrease of 0.5 per cent year-on-year.

Voluntary attrition decreased 330 basis points from the previous quarter, landing at 14.1 per cent on a quarterly basis and at 19.2 per cent on a trailing twelve months basis. The company said that it will "continue to hire basis demand".

"We continue to hire...there is demand...obviously the attrition has reduced, so we need to take that into account, and also we have hired a lot of next-gen associates who we can now leverage in our organisation," Delaporte said, adding that all of these components are being factored in.

The total headcount of the company stood at 2,56,921 in the just-ended quarter, a decline of 1,823 when compared to 2,58,744 in the December quarter.

For the full FY23, the net profit of Rs 11,350 crore was 7.1 per cent lower than the preceding fiscal, while revenue of Rs 90,487.6 crore was 14.4 per cent higher.

"We expect revenue from our IT Services business including India State Run Enterprise (ISRE) segment to be in the range of USD 2,753 million to USD 2,811 million. This translates to sequential guidance of -3.0 per cent to -1.0 per cent in constant currency terms," Wipro said in a statement.

It is pertinent to mention that the results of top-tier companies TCS and Infosys announced earlier this month, tripped on global uncertainties and missed street estimates.

Infosys' latest report card was a disappointment on several fronts - the company missed revenue guidance for FY23 hit by unplanned project ramp-downs and decision-making delays by some clients.

With global macroeconomic uncertainties looming, it has given a subdued 4-7 per cent revenue growth forecast for FY24, with its top management cautioning that "the environment remains uncertain".

TCS numbers too fell short of street estimates. On April 12, the software major opened the earnings season for the March quarter with a 14.8 per cent growth in net income to Rs 11,392 crore against Rs 9,926 crore in the year-ago period.

TCS, the largest software company by revenue and market value, said its revenue rose 16.9 per cent to Rs 59,162 crore in the March 2023 quarter from Rs 50,591 crore a year ago.

4Q22 revenue guidance of 2-4% QoQ CC implies strong growth of ~27-28% for FY22. Prabhudas Lilladher believe that attrition may peak out in Q4 and stabilize thereafter. The Brokerage believe there is scope for margin expansion in FY23 with attrition related cost pressures subsiding, pyramid optimization benefits coming in and revenue growth leverage. Our Revenue estimates cut by 1.5% for FY23/24E led by miss in revenue in Q3FY22. EPS estimates increase marginally by ~0.5% for FY23/24 due to slight increase in margin estimates.

Prabhudas Lilladher arrive at DCF based TP of 737 (implied target multiple of 24.8x P/E on FY24 EPS) Wipro is currently trading at 26.8x/23.3x on FY22/23E earnings of INR25.8/29.7 respectively with Revenue/EPS CAGR of 11.6%/16.6% for FY22-24 respectively. Maintain Buy.

ESG and Sustainability

Assessment and Sustainability Reporting

Wipro’s holistic view of sustainability encompasses environmental (energy, greenhouse gas emissions, water, waste, pollution, land-use change) and social (health and safety, labor and human rights) considerations.

Sustainability assessment is the first logical step to help craft a sustainability strategy.

Minimizing carbon emissions is a critical step in reducing humanity’s overall ecological footprint.

Wipro believes technologies are not only part of decarbonizing a business, but also tools that can help companies move toward a goal of net-zero emissions.