Wipro Q2: IT services margins seen falling 1% on wage hike

Wipro Q2: IT services margins seen falling 1% on wage hike

IT major Wipro is expected to report over 1.5 per cent quarter-on-quarter rise in dollar revenue sales for the July-September. The Azim Premji promoted firm, which reports it’s fiscal second quarter results on Friday, had forecast September-quarter IT services revenue of $1520 - $1550 million. Analysts expect Wipro to report $1540 million in dollar sales. Also see: Wipro's journey from a vegetable oil maker to an IT major

Shares in Wipro, India's third largest software services provider, closed 3 per cent higher at Rs 361.25 on the BSE, outperforming the broader BSE IT index, which closed 0.2 per cent higher. The gains came after Wipro demerged its soaps, toiletries, electrical and medical diagnostic product divisions into another company.

Consolidated sales are seen rising 1.5 per cent Rs 10,811 crore in the September quarter against Rs 10,653 crore in the June quarter. However, net profit may slip 1.5 per cent to Rs 1,554 crore against Rs 1,580 crore last quarter.

IT services revenues are estimated to rise 1 per cent quarter-on-quarter at Rs 8,399 crore against Rs 8,314 crore. Operating margins for IT services are expected to decline by 100 basis points to 20 per cent on account of wage hike, effective June 1. Wipro had announced an onsite wage hike of 2-3 per cent and offshore wage hike of 8 per cent.

Wipro, which gives IT services sales outlook on a quarterly basis, is expected to forecast $1573.9 million - $1589.3 million in the December quarter, implying a growth of 2-3 per cent over the September quarter.

Wipro is expected to report a volume growth of 2.1 per cent, which would be softer than its larger peers - TCS and Infosys.

Forex gains are likely to double to Rs 35 crore in the September quarter against Rs 17 crore in the June quarter.

Shares in the company may see some correction in case of a disappointment. Wipro shares have already gained over 7 per cent over the last four sessions. Earlier this week, global investment bank Credit Suisse had upgraded the stock to "outperform" citing recent underperformance and attractive valuations. Credit Suisse had also raised the target price to Rs 415 from Rs 385 currently.