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Wipro Ltd. is a leading technology services and consulting company focused on building innovative solutions that address clients’ most complex digital transformation needs. Its holistic portfolio of capabilities in consulting, design, engineering, and operations help clients realize their boldest ambitions and build future-ready, sustainable businesses. With over 250,000 employees and business partners it has presence across 6 continents and 66 countries and delivers on the promise of helping their customers, colleagues, and communities thrive in an ever-changing world.

Simplified organization structure: For the betterment of the company as well as clients, Wipro has simplified its structure in FY21 and adopted a two axis business model a) 4 Strategic Market Units (SMUs) and b) 2 Global Business Lines (GBLs). 4 Strategic Markets were divided among Americas 1, Americas 2, Europe and APMEA while the global business line includes IDEAS and ICORE services. Further, effective from April 1, 2023 the company has planned to expand its global business lines to 4 different segments from 2 segments earlier with its motive to get close to clients, accelerate speed to market and capitalize on opportunities in the market

Strengthening partnership via M&A and Ventures: Wipro has been invested organically as well as inorganically with hyperscalers and industry leading platform players such as Amazon Web Services, Microsoft, Google, Salesforce, SAP and ServiceNow to drive leading-edge solutions. Apart from that, in the last few quarters, they have completed six acquisitions, one such is of Capco in Banking and Financial Services (one of the largest acquisitions) and many others. This helps differentiate Wipro from other players along with supporting it to expand in key markets, creating new synergies and developing solutions for clients.

Attrition level near to its lowest level: Wipro’s attrition rate had increased from 12.1% in FY21 to 23.8% in FY22 due to strong demand and high payment to employees. However, post FY22 as demand stabilized as well as their pay scale we are now seeing declining attrition levels which is positive for the companies across the IT sector. At present Wipro’s attrition stands at 19.2% in FY23 and ahead it is expected to further inch lower.

Cautious guidance by the management: Management remains cautious for the near term on the back of a challenging macro environment and delay in clients spending. Further, amongst sectors there would be some cut in spending from Banking, Insurance and Technology as some slowdown is witnessed. For Q1FY24, management has guided weak growth between -3% to -1% due to uncertainty and for margins management expects it to be in the range of last few quarters i.e.14-16%. It further mentioned that their current focus is to bring back the growth and then focus on margin expansion.

Outlook & Valuation: We expect its revenue/EBIT to grow at 8.5% and 11.5% CAGR over FY23-25E and EBIT margins to be in range of 15.5-16% for FY24E & FY25E. Although the long term growth prospect of IT remains positive, there are challenges and uncertainty hovering in the near term. Also, the company’s management's cautious view for 1HFY24, holds us back and thus we have initiated coverage on Wipro with a Hold rating and have arrived at a target price of Rs 432.

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