New CEO sets ambitious target of 12% growth for Wipro

Wipro has significant dependence on the oil & gas business, a vertical that is suffering on account of the steep decline in oil prices that has substantially reduced IT spending by these companies.

BENGALURU: Wipro's new CEO Abidali Neemuchwala has set an ambitious target of growing at 12%-14% in 2016-17. That's almost double the growth rate in constant currency in the current year.

Sources in the company said Neemuchwala is goading his top executives to get to that figure. In February, he had set a goal of doubling Wipro's revenue to $15 billion, with an operating margin of 23%, by 2020, a compounded annual growth rate of over 15% over the next five years.

Wipro's IT services revenue is expected to touch $7.4 billion this year. Recently, its cross-town peer Infosys set a target of 16% revenue growth, with an operating margin of 27%, for 2016-17.

However, analysts are divided on Wipro's revival story. The company has significant dependence on the oil & gas business, a vertical that is suffering on account of the steep decline in oil prices that has substantially reduced IT spending by these companies. Oil & gas constituted 6% of Wipro's revenues in the December quarter, down from 8%-10% a few quarters ago.

But something that will definitely move the needle for Wipro are its recent acquisitions that has combined revenue of $370 million. It made four acquisitions this fiscal. Florida-based BPaaS provider for US health insurance market HealthPlan (for $460 million), Viteos Group, a BPaaS provider for alternative investment management (for $130 million), German IT consulting firm Cellent (73 million euros) and Denmark-based design firm Designit (for $95 million).

Peter Bendor-Samuel, CEO of US-based Everest Research, said it is important to distinguish between internal targets which are by design aspirational, and guidance which is given to investors. "Internal targets challenge the firm and are used to set the upper limits on compensation ranges and are always well in excess of formal guidance to the street. Having said that, I would expect Wipro to improve its execution under its new CEO Abid.Abid has been putting in place a more growth focused structure with strong incentives and I would expect growth to increase from last year's performance," he said.

He said it will likely take more than one year to get Wipro back to the higher industry leading organic growth rates, but it could have a nice pickup in growth if the acquisitions are added into the calculations.

Source: TechGig.com