Actual vs. expectations
Revenues were above our estimates while EBIT margins were 100bps below our estimates.
Likely stock reaction
Key positives - 8 large deals (TCV >USD30mn) closed during Q1 with combined TCV of USD715mn, broad based sequential growth performance.
· Wipro reported revenues of USD 2.4bn, up 12.2%/25.7% QoQ/YoY (CC 12%/21.3% QoQ/YoY), above our expectations of USD2.35bn. Organic revenue for Q1 was ~4.9% QoQ CC. (TCS Q1FY22 revenues was US$ 6.15bn, 2.4% CC QoQ; Infosys Q1FY22 revenues was US$3.78bn, 4.8% CC QoQ)
· IT services EBITM declined 320bps sequentially on account of integration of low margin Capco business and several senior leadership hires during the quarter to 17.8%; 100bps below our estimates. (TCS Adj. EBITM fell 130bps QoQ to 25.5%; Infosys Adj EBITM declined 80bps QoQ to 23.7%)
· Adj. Profits at Rs32.3bn (8.7% QoQ, 35.2% YoY), ~10.5% ahead of our expectations due to higher other income (includes Rs2,150mn on account of fulfilment of business targets pertaining to sale of hosted data centre business) and lower taxes.
· Q2FY22 revenue growth guidance: Company guided Q2FY22 sequential growth to be in the range of 5% - 7%.
Growth by Verticals (all in constant currency terms)
· Financial Services: 31.3%YoY ( V/s 0.6% YoY in Mar'21 quarter)
· Manufacturing: 5%YoY ( V/s -2.8% YoY in Mar'21 quarter)
· Healthcare: 8.9%YoY( V/s -1.6% YoY in Mar'21 quarter)
· Communications: 19%YoY ( V/s -11.4% YoY in Mar'21 quarter)
· Energy: 16.4% YoY ( V/s 0.1% YoY in Mar'21 quarter)
· Consumer Business Unit: 33.5% YoY ( V/s 2.9% YoY in Mar'21 quarter)
· Technology: 12.3% YoY ( V/s 7.1% YoY in Mar'21 quarter)
Growth by Strategic market units (all in constant currency terms)
· Americas 1: 18% YoY ( V/s 1.2 YoY in Mar'21 quarter)
· Americas 2: 24% YoY ( V/s 1.6% YoY in Mar'21 quarter)
· Europe: 32.5% YoY ( V/s 2% YoY in Mar'21 quarter)
· APMEA : 0.8% YoY ( V/s -6.3% YoY in Mar'21 quarter)
Total Headcount: 209,890, up 12,178 QoQ
LTM Attrition: 15.5%, V/s 12.1% in Mar'21 quarter and 11% in Dec'20 quarter.