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    Wipro says clients cutting back spends; revenues, margins to be hit

    Wipro says clients cutting back spends; revenues, margins to be hit

    Wipro says clients cutting back spends; revenues, margins to be hit
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    By Mugdha Variyar   IST (Published)

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    Wipro’s management said the business impact from the global pandemic was felt in the last two weeks of the final quarter.

    Wipro, for the first time since the company was listed on NYSE in 2000, has decided to not give out a revenue guidance for the next quarter due to the unprecedented disruption caused by the COVID-19 crisis, thus kicking off a trend largely expected in the Indian IT sector.
    Wipro’s management said the business impact from the global pandemic was felt in the last two weeks of the final quarter, but that was enough to impact revenues for Q4 by $14-$16 million (0.7-0.8% of revenues).
    “We expect revenues to decline in the coming quarters and expect a tremendous pressure on margins. There will be trade offs on hiring, discretionary spends, subcontractor costs among other things,” said Abidali Neemuchwala, CEO, Wipro.
    The company is expected to be hit by the scale of the impact on certain key business verticals its clients work in.  “Retail, auto and manufacturing will experience a more immediate and deeper impact,” said Neemuchwala.
    “Oil prices are also affecting the energy sector. There will also be an indirect impact on sectors such as BFSI and insurance,” he added.
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    IT clients are starting to cut on budgets and discretionary spends and are looking to restructure programs.
    “Customers are seeing their own businesses impacted, and are executing strategy to conserve cash. Discretionary spends are being paused,” Neemuchwala added.
    “Digital progam for quarterly renewals may not see Statement of Work (SOw) being signed. Consulting engagements are seeing deferment. Customers are now asking for pricing discounts,” he said.
    The Wipro head said that the one positive impact from the global crisis is that customers are looking to deploy more automation to cut costs and are looking at newer business models.
    “Wipro is well positioned to help customers through Wipro Holmes, our cloud studio etc. Despite the disruption, our customer satisfaction is at an all time high,” Neemuchwala said.
    “Customers are looking at stabilisation of operations, and many are also asking for offerings for new business models,” said COO Bhanu Murthy.
    Wipro is also seeing a bigger impact form the lockdown due to its higher BPO exposure.  “The BPO part of the business takes longer to move to a work from home model. We have 85 percent customer approval and 75 percent enablement of employees for work-from-home in this space," Neemuchwala added.
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