Wipro Q3 margin to see some headwinds due to salary increases, says CEO

Wipro is likely to face some headwinds in its third quarter margins due to two incremental months of salary hikes, Thierry Delaporte, CEO and Managing Director of Bengaluru-based IT services company Wipro Limited said on Wednesday. However, he said, the firm is expected to hold its margins.

Wipro reported a sequential operating margin growth of 16 basis points for its IT services business at 15.1 per cent. Margin stood at 17.8 per cent in the year-ago quarter. The IT major has guided for $2,811 million-$2,853 million in IT services business revenues. This translates to a sequential growth of 0.5 percent to 2 per cent. 

“We achieved margins of 15.1 per cent in Q2 after absorbing the impact of salary increases and promotions. Our margin improvement was led by better price realisations and strong operational improvements in automation-led productivity,” said Chief Financial Officer Jatin Dalal. 

As per media reports, an internal mail sent by Saurabh Govil, Chief Human Resource Officer of Wipro, last month said the company will be awarding annual increments to eligible employees for the financial year ending 2022 in their September salary. The homegrown IT company is expected to cover 96 per cent of its employees. The company also had earlier announced that it is moving to a quarterly promotion cycle. 

Delaporte said the company’s clients are seeing a level of caution in the market. 

“Since the last time we spoke in July, macro-economic conditions have changed. We are speaking to our clients every day, (we hear) a change in the level of optimism as businesses across the world are dealing with inflationary pressures, geo-political turmoil, energy crisis and rising interest rates. Almost every major economy is experiencing today economic disruption. It is a fact,” he said. 

However, on the outlook for next quarter, he said the company is guided for revenue growth of 0.5-2 per cent which will translate into growth of 10-12 percent year-on-year. For the full year, he said the company is confident about double digit growth. 

“We don’t know exactly what will be the outcome for calendar year 2023. It is too early to tell. For now, all I can say that in our pipeline, we possibly see more deals that are focused on productivity, cost rationalisation so and vendor consolidation and so on. We possibly see that more than what we would have seen a year ago,” Delaporte said. 

Also read: Wipro Q2 results: Net profit drops 9% to Rs 2,659 crore

Also read: Wipro to give 85% employees 100% variable pay in Q2