India's Wipro flags weak Q1 IT sales growth as clients cut spending

Illustration shows Wipro Ltd logo

By Navamya Ganesh Acharya

BENGALURU (Reuters) - India's Wipro Ltd said on Thursday its IT services revenue growth in the current quarter could be as low as 0.6% as clients cut down on discretionary spending, highlighting the near-term struggle that the country's IT companies face.

Wipros' bigger peers Infosys Ltd and HCLTech Ltd have indicated their revenue growth would range from 4% to 8% for the year as U.S. and European clients postpone and even cancel deals due to the weak economic environment globally.

However, Wipro, the only one among its peers that gives a nearer-term forecast, flagged an even weaker start to the year. It expects IT services revenue to increase between 0.6% and 2.8% in the April-June quarter, compared with the year-ago period.

That growth is also less than the 3.7% increase in IT services revenue, which accounts for about 98% of total revenue, Wipro reported for the fourth quarter.

The Bengaluru-based company's pace of growth in IT services revenue has declined for six straight quarters, with the current quarter's estimated growth the smallest in at least nine quarters.

The subdued forecast comes even as Wipro reported a 29% jump in deal wins, to $4.1 billion, on constant currency basis.

"While there is a good activity happening (in terms of deals) ... there's also a slowdown in the discretionary spends and that is visible in particular in some industries like banking, financial services and technology," CEO Thierry Delaporte said in a media conference.

Wipro's revenue rose 11.2% to 231.9 billion rupees ($2.84 billion) in the quarter ending March.

But its net profit dipped 0.4% to 30.75 billion rupees, weighed by a 12.4% jump in costs. Its operating margin fell to 16.3% from 17% year ago.

Wipro also approved a share buyback of upto 120 billion rupees and said that its promoters intend to participate in the buyback.

Earlier in the day, its smaller rival Tech Mahindra reported a 26% drop in fourth-quarter profit. ($1 = 81.7900 Indian rupees)

(Reporting by Nallur Sethuraman in Bengaluru; Editing by Nivedita Bhattacharjee and Savio D'Souza)