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Result Highlights

* It reported consolidated revenue of Rs 162.5bn in Q4FY21, (above consensus estimate), a growth of 3.7% QoQ in INR terms. For IT services segment, the revenue was $2,152mn (up 3.9% QoQ, up 3% in cc terms, within the guidance range).

* Consolidated EBIT margin declined by 73 bps QoQ, on expected lines, due to impact of wage hike effective from 1st Jan.

* Reported robust deal booking as Large deal wins came in at $1.4bn compared $1.2bn for Q3FY21 (that included one large deal win from Metro), led by traction in cloud and digital technologies. Benefits from the new sales initiative of the management is visible in large deal win momentum.

* Employee attrition came in at 12.1% vs 11% in Q3FY21; with employees utilization (excluding trainees)  flat at ~86%.

* During the quarter, it completed share buyback of 237.5 mn shares for aggregate amount of Rs 95bn, in line with its policy to return surplus cash.

* Guidance: For Q1FY22, it has guided for revenue growth of 2‐4% in cc terms for IT Services segment and this does not include sales from Capco acquisition.

* Overall, it was strong result for the quarter on most parameters, with robust deal win momentum; and strong revenue growth guidance for Q1FY22.

Our view:

Overall, it has been able to maintain strong performance, led by tailwinds in demand environment. The change in management has led to sharper focus on markets to boost growth. The strong demand outlook led by traction in digital and cloud technologies is visible in strong deal wins which is expected to lead to low double digit or high single digit organic growth for Wipro for FY22.  It is expected to manage stable margin in near term led by positive operating leverage, through there are some headwinds like salary hike for FY22 and higher travel cost in the latter half of FY22. The stock trades at 16.5x on FY23 earnings. Initiate coverage with ADD rating on the stock.

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