On October 24, Indian IT Software service provider Wipro is likely to report constant currency revenue growth around the average to near the higher end of its guidance range for the quarter ended September 2018.

According to the analysts,” Our expectation for the quarter stands at the mid-point of the guided range, at 1.3 % QoQ CC. Cross-currency headwinds of 120bp are likely to result in 0.1 % QoQ growth in USD revenue”.

Wipro’s revenue growth guidance for Q2FY19 has been affected by continued restructuring in India/Middle East, uncertainty in HPS and pressure in utilities.

adjusted for the absence of data centre revenues, it expects a 1.5% organic growth in CC terms in IT services business. According to the report, “150bps CC  will lead to a flat growth in USD terms on a like to like basis in Q2FY19. One month revenue from the Alight deal should add another $12.5 million to revenues.”

Kotak and Phillip Capital expect CC revenue growth of 2% and 2.1 %, which is near the higher end of guidance.

“Since the Alight deal was not part of 0.3-2.3%  adjusted revenue growth guidance for the September 2018 quarter, revenues will be affected by $23 million due to the divestment of hosted data centre business. Also, growth will be led by the financial services vertical”.

At Operating Level Performances

According to the analysts, EBITDA margin in the range of 50-180 basis points for the quarter on a sequential basis. Rupee depreciation benefit may partially offset by wage hike.

The rupee declined nearly 6% against the US dollar during the July-September quarter.

Phillip Capital expects EBIT margin to expand 180bps QoQ due to rupee depreciation, partially offset by wage hike. It has also expected margin in IT Services to expand by 170bp to 17.3% led by INR depreciation (100bp), an absence of one-time restructuring expenses (40bp) and improvement in operational efficiencies (30bp). Some experts expect that 70bps QoQ margin improvement and ICICI Securities at 50 bps.

Q3 Guidance:

The guidance for the October-December quarter is expected to be robust. Also, strong guidance for Q3FY19 with constant currency revenue rising 2-4%  over Q2 while another expert suggests that the guidance below 3-5% QoQ growth would be disappointing. Wipro is likely to guide to 1-3 % revenue growth for December 2018 quarter, aided by 1% incremental contribution from Alight Solutions deal/acquisition.

Key things to focus for today results:

Guidance for Q3FY19, Outlook on spending by key clients and geographies, the way forward after a series of disappointments, State of demand from weak utilities, healthcare and communications vertical, measures taken to defend its share in core areas of competence i.e. IMS, ERD and BPO, drivers of margin, the impact of $75 million write off national grid (which is an exceptional impact) on profit, outlook on profitability once the revenue decline stabilizes.

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