For Wipro, Obamacare repeal may lead to muted Q1 revenues

MARGINAL RISE IN Q4 PROFIT; FIRM ANNOUNCES BONUS SHARES

DESPITE ENCOURAGING results for its global information technology services business in the fourth quarter of the last fiscal, Wipro on Tuesday projected muted IT revenues for the company over the next quarter on the back of a hit to its business due to the move to repeal Obamacare in the US. The company, however, sees no impact on its business from US President Donald Trump’s recent executive order to review H-1B visa norms for tech workers.

In results announced on Tuesday, Wipro reported a gross revenue of Rs 13,990 crore ($2.2 billion) for the March quarter, a 2.6 per cent on-year growth. The firm’s net income for the quarter stood at Rs 2,260 crore ($349 million), an increase of 1 per cent from the year-ago period.

Its revenue from the IT services segment for the March quarter grew 4.7 per cent year-onyear in rupee terms to Rs 13,400 crore. For 2016-17, the company recorded an 8.4 per cent YOY increase at Rs 52,840 crore ($8.1 billion). The profit for the segment was nearly flat at Rs 2,530 crore ($390 million).

The company projected a flat performance in the opening quarter of the current fiscal with revenues estimated to be within the range of $1,915 million to $1,955 million. Company officials said the soft projection is due to the loss of the Obamacare business by a Wipro-owned US firm Health Plan Services, which had been contracted to provide enrolment and payment processing, following a move to repeal the health insurance scheme by the Trump administration.

“While traditionally Q1 is soft for Wipro, Q1 in FY18 has its own set of challenges due to uncertaintly in US healthcare industry and structural disruption in retail. We anticipate growth momentum to return in Q2 and expect it to be at industry growth rates by end of year,” Wipro CEO Abidali Neemuchwala said. “Uncertainty will remain in the healthcare business for the part related to Obamacare work,” he added.

Neemuchwala expressed confidence that Wipro would be in a position to bag a new contract whenever clarity emerges on the future of Obamacare.

“We have strong domain expertise. When clarity emerges on what happens after Obamacare or Affordable Care Act repeal we will be well positioned in the market and our investment will play up through the rest of the year. The player will start investing again to gain customers and that makes us quite optimistic,” Neemuchwala said. Meanwhile, Wipro said it will offer bonus shares to its shareholders and will also consider buyback of equity shares around July this year. The company will offer one bonus share for every one share held by shareholders (including to ADS holders) and expects the bonus shares to be awarded within two months, i.e, June 24, 2017.