Wipro

The numbers for Q1Fy14 which came in after market closing were disappointing. Though a slight decline in performance was expected, this came in much more than expected. Net profit was at Rs.1623 crore, down 6% sequentially, but YoY, it was up 11%. Revenue rose slower, up 1.3% (QoQ) and 5% (YoY) at Rs.9735 crore.  IT services revenue in dollar term was flat qoQ but YoY, it rose 5%. EBIT for the quarter was at Rs.1785 crore and the EBITDA margin was at 20%.  The good news is that the company has given a much optimistic guidance for Q2 as against its guidance in previous quarter which was muted.  The company has guided, for Q2, a revenue at $1.62 - $1.65 billion.  This guidance is made assuming GBP?US$ at 1.54, Euro/US$ at 1.31, AUD/US$ at 0.97 and INR/US$ at 57.24.

The major impact on the performance was the hike in wages. Of the total operating expense of Rs.7963, employee compensation comprised 61%, more than 58% in sequential quarter. The company has stated that cross currency swaps also hurt and during the quarter, impact was around US$ 16 million, which works out to 1% of the revenue earned.  In terms of geographical distribution, USA leads, with 46% of the revenue coming from this region. QoQ, revenue from USA rose 3%, Europe was down 1%, India was down sharply by 49% and Rest of the World (RoW) was down 19%. It added 28 new clients in the first quarter of FY14 and added 1469 new employees, taking the total tally to 1.47 lakh employees.  The company seems more optimistic about Q2 and that will help keep the stock price buoyant in the days to come.