Business and financial services boost Wipro's first quarter profits
Indian IT services giant Wipro has exceeded most expectations by posting growth in the first financial quarter of 2018, no thanks to its work in the US healthcare sector, which is facing significant barriers much like its business in India. Growth was driven by its financial services segment.
Wipro has reported growth of 2% for the financial quarter ending June 30th, taking its net profit for the period up to nearly $308 million. The growth is impressive in light of the challenges being face by the firm, and exceeds the profit forecasted by most experts, which averaged at around $283 million.
Having reached a size of 40 facilities in 23 states, the firm’s US operations are now proving more lucrative than its India business, accounting for more than half of its sales. The US business is thriving, but its dominance of sales is also partly due to Wipro’s ongoing struggles in the Indian market.
On the one hand, the firm is having to contend with the dip in relevance of IT infrastructure maintenance, which traditionally made up the lion’s share of its services. On the other hand, its expansion into more specialised services is blocked by significant competition in the Indian market from players such as Infosys and TCS (now the largest IT services firm in India).
Nevertheless, the firm recorded substantial growth in revenues, which it attributes to its banking, financial services and insurance (BFSI) arm, riding the wave of growth that the market is experiencing in India. Last year, the BFSI segment accounted for nearly 26% of Wipro’s revenues.
In this quarter, BFSI made up 30% of the firm’s revenues, although the effect counteracted by a dip in its revenues from the healthcare sector in the US. Wipro has been active in the US healthcare segment, the most recent example of which is its development of a new AI-based product for the health insurance sector, in partnership with Opera Solutions.
However, since the Trump administration’s targeted efforts to systematically dismantle Obamacare, stakeholders in various segments of the health insurance industry have become tentative in their expenditure, leading to a dip in healthcare revenues for professional services firms such as Wipro.
Abidali Z. Neemuchwala, CEO at Wipro explained, “While we see continuing challenges in our India business and the ACA (Affordable Care Act)-related decline in healthcare, we do see stronger momentum in the rest of our business led by BFSI and the Americas.”
One aspect of its operations that the firm hopes to improve on is its roster of big-money clients. Currently, only eight of Wipro’s clients worldwide are on annual contracts in excess of $100 million. “I wish we were doing better on that.We are pushing up from the base and you hopefully will see an acceleration from here on,” said Jatin Dalal, Chief Financial Officer at Wipro.
