16 April 2020 Results Review 4QFY20

Wipro
Uncertainty persists REDUCE
We maintain REDUCE rating on Wipro based on lower than expected revenue CMP (as on 15 Apr 2020) Rs 187
and margin performance. Covid-19 related global slowdown will lead to cut in Target Price Rs 185
discretionary spending, pricing discounts and postponement of large deals
NIFTY 8,925
wins. Headwinds in BFSI (Medium term), stress in Manufacturing (Auto) and
ENU (Energy) will offset the improving outlook in Healthcare and
KEY
Communication. The company has not provided for 1QFY21E guidance, citing OLD NEW
CHANGES
uncertainty. We cut our EPS estimates by 0.9/1.5% for FY21/22E. Our TP of Rs
Rating Reduce Reduce
185 is based on 11x FY22 EPS.
Price Target Rs 190 Rs 185
 Revenue in 4Q stood at USD 2,074mn, +0.4/2.6% QoQ/YoY CC (vs. est. of
USD 2,086mn). Growth in 4Q was supported by uptick in ENU (12.8% of FY21E FY22E
EPS change %
rev), Healthcare (13.5% of rev) and Technology (12.8% of rev), while -0.9 -1.5
Consumer vertical (16.8% of rev) declined due to Covid impact. BFSI (30.4%
of rev) growth decelerated to -1.3% YoY (vs 15.9% YoY CC in 4QFY19), KEY STOCK DATA
impacted by slowdown in large European banks, Capital market sub-
Bloomberg code WPRO IN
segment and Covid-19 impact.
No. of Shares (mn) 5,713
 Growth slowed down in NorthAm (+3.1% YoY CC) while Europe growth
was soft (+1.9% YoY CC). Wipro has not given guidance for 1Q due to global MCap (Rs bn) / ($ mn) 1,066/13,938

uncertainty. The impact of Covid-19 in the quarter was ~USD 14-16mn (3 6m avg traded value (Rs mn) 889
weeks), which is 0.7-0.8% of revenue. USD rev growth adjusting for Covid 52 Week high / low Rs 302/159
comes to +1.2% CC, which is at the midpoint of the guidance (0-2% CC).
 IT services margin contracted 76bps QoQ to 17.6% (est. 18.1%). Margin was STOCK PERFORMANCE (%)
impacted due to lower growth and higher salary payout, offset by higher
3M 6M 12M
utilisation, lower SG&A and currency benefit. APAT came at Rs 24.56bn, -
Absolute (%) (24.9) (23.4) (35.2)
5.3% QoQ impacted by higher ETR of 20.9% (vs. 20.0% in 3Q).
Relative (%) 2.7 (2.9) (13.5)
 Cash conversion was impacted in the quarter due to increase in working
capital related to Covid-19. OCF to PAT conversion was at 60.5% in 4Q vs.
~100% last quarter. Net cash stands at USD 3.3bn (~22% of Mcap). SHAREHOLDING PATTERN (%)

Dec-19 Mar-20
 Valuation and view: Wipro’s growth will continue to lag within the Tier-1
IT pack based on soft outlook for ~51% of rev comprising BFSI, Retail, Promoters 74.04 74.04
Travel, Manufacturing & Energy. This will be offset by relatively better FIs & Local MFs 7.00 7.01
outlook in Consumer (e-commerce & new age Media), Healthcare
FPIs 8.42 8.45
(Hospitals) and Communication. New opportunity will emerge with
increased cloud adoption, Automation and workplace modernisation. Public & Others 10.54 10.50
Clients are looking for higher efficiencies (RTB) and vendor consolidation Pledged Shares - -
(benefit for incumbents). While growth concerns remain (Covid led
Source : BSE
disruption), there is limited scope for margin expansion. We expect USD rev
growth of -4.4/+4.7% and IT services EBIT% at 17.0/17.3% for FY21/22E. The
stock is down ~25% in 3M and valuations are at ~11.9x FY21E (vs. 12.8x Tier-
1 IT median). Amit Chandra
Financial Summary amit.chandra@hdfcsec.com
4Q 4Q YoY 3Q QoQ +91-22-6171-7345
YE Mar (Rs bn) FY18 FY19 FY20 FY21E FY22E
FY20 FY19 (%) FY20 (%)
Net Revenue 157.11 150.06 4.7 154.71 1.6 544.87 585.85 610.23 596.13 632.08 Apurva Prasad
EBIT 25.00 25.46 (1.8) 26.51 (5.7) 82.81 92.62 101.42 93.94 101.47 apurva.prasad@hdfcsec.com
APAT 23.26 23.63 (1.6) 24.56 (5.3) 82.57 90.86 97.22 89.24 96.73 +91-22-6171-7327
Diluted EPS (Rs) 4.1 4.1 (1.6) 4.3 (5.3) 14.5 15.9 17.0 15.6 17.0
P/E (x) 12.9 11.7 10.9 11.9 11.0
EV / EBITDA (x) 8.7 7.0 6.7 6.5 5.4 Vinesh Vala
RoE (%) 16.5 17.3 17.3 14.9 14.2 vinesh.vala@hdfcsec.com
Source: Company, HDFC sec Inst Research +91-22-6171-7332

HDFC securities Institutional Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
Wipro: Results Review 4QFY20

Quarterly consolidated Financial Snapshot

IT Services/Products/ISRE
Particulars (Rs bn) 4QFY20 4QFY19 YoY (%) 3QFY20 QoQ (%)
revenue was up
IT Services Rev (USD mn) 2,074 2,076 (0.1) 2,095 (1.0)
1.3/8.4/26.7% QoQ in INR
Total Revenues 157.11 150.06 4.7 154.71 1.6
terms
Operating Expenses 126.31 119.01 6.1 122.90 2.8
EBITDA 30.80 31.05 (0.8) 31.80 (3.2)
Depreciation 5.80 5.60 3.6 5.30 9.5
IT services revenue were
impacted by USD 14-16mn EBIT 25.00 25.46 (1.8) 26.51 (5.7)
(0.7-0.8% of revenue) in Other Income 5.32 8.76 (39.3) 5.40 (1.6)
4QFY20 due to COVID-19 Interest costs 1.65 2.53 (34.7) 1.84 (10.4)
Forex gain/(loss) 0.99 0.32 214.2 0.73 36.6
PBT 29.66 32.00 (7.3) 30.79 (3.7)
IT Services EBIT margin Minority Interest 0.19 0.10 83.7 0.07 169.0
contracted 76bps QoQ to Tax 6.21 7.06 (12.2) 6.16 0.7
17.6% (est. 18.1%) due to RPAT 23.26 24.83 (6.3) 24.56 (5.3)
revenue drop partially E/o (adj for tax) 0.00 1.20 NM 0.00 NM
offset by lower SG&A &
APAT 23.26 23.63 (1.6) 24.56 (5.3)
currency tailwind
Source: Company, HDFC sec Inst Research

Margin Analysis
Adjusted PAT stood at Rs Particulars (% of Revenue) 4QFY20 4QFY19 YoY (bps) 3QFY20 QoQ (bps)
23.26bn (-5.3% QoQ) vs.
Operating Expenses 80.4 79.3 109 79.4 95
est. of Rs 23.92bn impacted
EBITDA Margin (%) 19.6 20.7 (109) 20.6 (95)
by lower margin and
EBIT Margin (%) 15.9 17.0 (105) 17.1 (122)
higher tax rate
IT Services EBIT Margin (%) 17.6 19.2 -165 18.4 -76

Total forex hedging at USD Tax Rate (%) 20.9 22.1 (115) 20.0 91

2.7bn for the next four APAT Margin (%) 14.8 16.5 (174) 15.9 (107)
quarters Source: Company, HDFC sec Inst Research

USD Revenue Growth (% QoQ CC) USD Revenue Growth (% YoY CC)
(%, QoQ) (%, YoY)
12
3.1

3.5
2.8
2.7

3.0
9.5
2.4

8.4

2.5
2.0

8.1

7.8
1.8
1.7

7.2

2.0 8
7.0
6.9
1.4

6.3

6.2
1.1

1.1

1.5
5.9
1.0
0.9

0.9

5.2

5.1
0.6

1.0
0.4
0.3
0.3
0.2

3.8
0.1

0.5
3.4

3.3

4
3.0
2.8

2.6
2.5

0.0
2.4

-0.5
-1.0
1QFY20 -0.7

-1.5 0
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19

2QFY20
3QFY20
4QFY20

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Page | 2
 0
5
10
15
20
14
16
18
20

0
10
20
30
40
50
(5)

(20)
(10)
1QFY16 10.3 1QFY16 7.5 1QFY16
2QFY16 8.7 2QFY16 10.8 2QFY16 (%) 21.0

(%, YoY CC)

(%, YoY CC)

3QFY16 7.2 3QFY16 7.8 3QFY16 20.7

17.8
4QFY16 20.1 4QFY16 3.6 4QFY16 20.2
1QFY17 46.6 1QFY17 5.5 1QFY17 20.1
2QFY17 2.8

17.8
2QFY17 46.9 2QFY17
3QFY17 39.0 3QFY17 4.3 3QFY17
18.3

4QFY17 20.4 4QFY17 7.8 4QFY17

16.8
1QFY18 -0.6 1QFY18 8.1 1QFY18
18.3

2QFY18-10.5 2QFY18 10.8 2QFY18

17.3
IT Services EBIT Margin Trend

3QFY18 -8.5 3QFY18 14.5 3QFY18

Wipro: Results Review 4QFY20

16.0

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research
Source: Company, HDFC sec Inst Research
4QFY18 -6.3 4QFY18 14.5 4QFY18
17.2

1QFY19 -7.7 1QFY19 14.4 1QFY19

18.6

2QFY19 -4.4 2QFY19 16.0 2QFY19

19.8

15.9

BFSI: Trending downwards (% YoY CC)

Healthcare: Positive outlook (% YoY CC)

3QFY19 -4.1 3QFY19 17.5 3QFY19
4QFY19 -2.3 4QFY19 15.9 4QFY19
18.5

1QFY20 11.2
19.2

1QFY20 0.4 1QFY20

2QFY20 3.0 2QFY20 5.9 2QFY20
18.1

3QFY20 4.2 3QFY20 1.0 3QFY20

18.4

4QFY20 3.6 4QFY20 -1.3 4QFY20

17.6

40
42
44
46

0
2
4
6
8

0
2
4
6
8
10
12
14
16
18

10
12

(8)
(6)
(4)
(2)
1QFY16 5.0 1QFY16 14.7 1QFY16 44.9
2QFY16 -2.9 2QFY16 16.4 2QFY16 44.4
(USD '000)

(%, YoY CC)

(%, YoY CC)

3QFY16 -5.3 3QFY16 16.7 3QFY16 43.4
4QFY16 -1.8 4QFY16 15.2 4QFY16 43.8
1QFY17 -2.8 1QFY17 6.9 1QFY17 44.5
2QFY17 -1.8 2QFY17 3.7 2QFY17 44.0
3QFY17 -0.3 3QFY17 0.5 3QFY17 43.1
4QFY17 0.7 4QFY17 1.4 4QFY17 43.4
1QFY18 7.0 1QFY18 2.9 1QFY18 43.2
2QFY18 5.2 2QFY18 4.5 2QFY18 45.0
3QFY18 -2.7 3QFY18 5.6 3QFY18 45.4
Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

Source: Company, HDFC sec Inst Research

4QFY18 -3.1 4QFY18 2.2 4QFY18 46.3
Consumer: Holding up (% YoY CC)

1QFY19 -4.3 1QFY19 4.8 1QFY19 45.3

2QFY19 0.0 2QFY19 7.7 2QFY19 44.4
3QFY19 9.8 3QFY19 10.0 3QFY19 43.9
Revenue Productivity (Rev/emp USD ‘000)

4QFY19 9.4 4QFY19 14.8 4QFY19 44.5

1QFY20 7.8 1QFY20 7.7 1QFY20 43.5
2QFY20 6.3 2QFY20 6.1 2QFY20 42.5
3QFY20 2.6 3QFY20 12.1 3QFY20 42.0
ENU: Utilities doing well, Energy muted (% YoY CC)

Page | 3
4QFY20 4.9 4QFY20 6.4 4QFY20 41.4
Wipro: Results Review 4QFY20

Vertical Revenue Break-up (IT Services ex ISRE)

BFSI has slowed down for Verticals 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY19 FY20
(USD mn) FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20
Wipro due to challenges in
BFSI 593 613 643 654 2,509 644 641 647 630 2,559
US capital market, EU
QoQ % 2.3% 3.4% 4.8% 1.7% -1.5% -0.5% 0.9% -2.6%
Banks and COVID-19
disruption YoY % 15.2% 12.7% 15.1% 12.8% 14.3% 8.7% 4.6% 0.7% -3.6% 2.0%
% of Rev 29.8% 30.5% 31.4% 31.5% 30.9% 31.6% 31.3% 30.9% 30.4% 31.0%
Consumer 304 315 319 336 1,275 318 328 354 348 1,346
Consumer growth was QoQ % 0.5% 3.7% 1.2% 5.3% -5.4% 3.1% 8.0% -1.6%
muted due to lower deals in YoY % 4.9% 6.1% 7.2% 11.0% 7.7% 4.5% 3.9% 10.9% 3.6% 5.6%
e-commerce sub vertical % of Rev 15.3% 15.7% 15.6% 16.2% 15.7% 15.6% 16.0% 16.9% 16.8% 16.3%
Healthcare 270 261 268 274 1,072 269 266 274 280 1,090
QoQ % -5.7% -3.4% 2.6% 2.2% -1.8% -1.0% 3.0% 2.0%
Healthcare & Medical
YoY % -7.4% -5.3% -5.0% -4.4% -5.7% -0.5% 2.0% 2.4% 2.2% 1.7%
devices is seeing strong
% of Rev 13.6% 13.0% 13.1% 13.2% 13.2% 13.2% 13.0% 13.1% 13.5% 13.2%
demand related to Hospital
management and ventilators ENU 253 257 266 266 1,039 261 264 270 265 1,065

requirements QoQ % -1.5% 1.8% 3.4% -0.1% -1.8% 1.3% 2.2% -1.8%
YoY % -3.2% -3.3% 6.2% 3.6% 0.5% 3.3% 2.8% 1.6% -0.1% 2.5%
% of Rev 12.7% 12.8% 13.0% 12.8% 12.8% 12.8% 12.9% 12.9% 12.8% 12.9%
ENU slowed down due to Technology 288 279 266 262 1,096 265 266 258 265 1,057
lower oil prices impacting QoQ % -2.2% -3.1% -4.8% -1.7% 1.4% 0.5% -3.3% 3.0%
Oil & Gas sub vertical YoY % 8.1% -0.8% -5.7% -11.3% -2.9% -8.1% -4.6% -3.2% 1.5% -3.6%
% of Rev 14.5% 13.9% 13.0% 12.6% 13.5% 13.0% 13.0% 12.3% 12.8% 12.8%
Manufacturing 167 167 166 166 666 161 166 172 170 669
Manufacturing de grew for
QoQ % -7.0% -0.2% -0.6% 0.2% -3.0% 3.0% 3.5% -1.0%
the quarter, impacted by
YoY % -5.0% -4.9% -4.5% -7.6% -5.2% -3.6% -0.5% 3.6% 2.4% 0.4%
Auto segment
% of Rev 8.4% 8.3% 8.1% 8.0% 8.2% 7.9% 8.1% 8.2% 8.2% 8.1%
Communications 113 117 119 118 463 120 117 119 114 471
Airlines & Airports, Oil & QoQ % -4.8% 2.8% 1.8% -0.3% 1.7% -2.9% 2.2% -4.5%
Gas, Retail, Travel & YoY % -15.0% -10.3% -7.4% -0.7% -9.8% 6.1% 0.2% 0.6% -3.6% 1.7%
Hospitality, Auto sectors are % of Rev 5.7% 5.8% 5.8% 5.7% 5.7% 5.9% 5.7% 5.7% 5.5% 5.7%
high impact verticals due to Total Revenue (IT
1,989 2,010 2,047 2,076 8,120 2,039 2,049 2,095 2,074 8,256
COVID 19 Services)
QoQ % -1.5% 1.0% 1.8% 1.4% -1.8% 0.5% 2.2% -1.0%
YoY % 2.9% 2.0% 3.7% 2.8% 2.9% 2.5% 2.0% 2.4% -0.1% 1.7%
Source: Company, HDFC sec Inst Research

Page | 4
Wipro: Results Review 4QFY20

BPO de-grew 5.5% QoQ Service Line Break-Up (IT Services ex ISRE)
and 2.1 QoQ as WFH is Services Mix 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY19 FY20
difficult to acheive (USD mn) FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20
Modern
Application 929 930 933 936 3,727 909 918 926 927 3,674
Services
QoQ % 1.1% 0.2% 0.3% 0.3% -2.9% 0.9% 0.9% 0.1%
Cloud Infra and Analytics YoY % 4.2% 2.5% 3.5% 1.9% 3.1% -2.1% -1.3% -0.8% -1.0% -1.4%
both de-grew 1% in the % of Rev 46.7% 46.3% 45.6% 45.1% 45.9% 44.6% 44.8% 44.2% 44.7% 44.5%
quarter Cloud and
523 514 512 523 2,071 524 527 540 535 2,130
Infrastructure
QoQ % -6.1% -1.6% -0.5% 2.2% 0.2% 0.5% 2.6% -1.0%
YoY % -0.5% -4.0% -5.0% -6.1% -3.9% 0.2% 2.4% 5.6% 2.3% 2.9%
Opportunities are % of Rev 26.3% 25.6% 25.0% 25.2% 25.5% 25.7% 25.7% 25.8% 25.8% 25.8%

emerging in Virtual Digital

Operations and 247 259 301 309 1,112 300 301 321 303 1,222
collaboration tools, cyber Platforms
security, Process QoQ % -1.5% 5.1% 16.1% 2.8% -3.1% 0.5% 6.4% -5.5%
automation & increased YoY % 3.7% 6.1% 18.2% 23.5% 12.7% 21.5% 16.2% 6.5% -2.1% 9.8%
cloud adoption (medium % of Rev 12.4% 12.9% 14.7% 14.9% 13.7% 14.7% 14.7% 15.3% 14.6% 14.8%
to long-term) Industrial &
Engineering 147 149 145 149 593 155 154 157 160 627
Services
QoQ % -1.5% 1.0% -2.3% 2.8% 3.7% -0.8% 2.2% 1.6%
YoY % 7.2% 6.3% 5.2% 0.0% 4.3% 5.3% 3.3% 8.1% 6.9% 5.9%
% of Rev 7.4% 7.4% 7.1% 7.2% 7.3% 7.6% 7.5% 7.5% 7.7% 7.6%
Data, Analytics
Digital (41.2% of rev) 143 157 156 158 617 151 150 151 149 603
and AI
growth is slowing down QoQ % -0.1% 9.5% -0.8% 1.4% -4.4% -0.9% 0.8% -1.0%
(18.3% YoY vs. 34.5% in YoY % 1.5% 10.5% 11.0% 10.0% 8.6% 5.4% -4.6% -3.0% -5.3% -2.3%
4QFY19) % of Rev 7.2% 7.8% 7.6% 7.6% 7.6% 7.4% 7.3% 7.2% 7.2% 7.3%
Total Revenue
1,989 2,010 2,047 2,076 8,120 2,039 2,049 2,095 2,074 8,256
(IT Services)
QoQ % -1.5% 1.0% 1.8% 1.4% -1.8% 0.5% 2.2% -1.0%
YoY % 2.9% 2.0% 3.7% 2.8% 2.9% 2.5% 2.0% 2.4% -0.1% 1.7%
Source: Company, HDFC sec Inst Research
Legacy continues to be
under stress (-3.3% QoQ
& Business Mix
-9.9% YoY). Fall in legacy Segments (USD 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY19 FY20
is higher than peers. mn) FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20
Digital 557 631 679 722 2,590 763 811 834 854 3,262
QoQ % 3.7% 13.3% 7.7% 6.3% 5.6% 6.4% 2.8% 2.5%
YoY % 26.3% 32.9% 37.7% 34.5% 33.1% 36.9% 28.6% 22.7% 18.3% 26.0%
% of Rev 28.0% 31.4% 33.2% 34.8% 31.9% 37.4% 39.6% 39.8% 41.2% 39.5%
Legacy (Non
Cash conversion was poor 1,432 1,379 1,367 1,353 5,531 1,276 1,238 1,261 1,219 4,994
Digital)
due to increase in working QoQ % -3.4% -3.7% -0.8% -1.0% -5.7% -3.0% 1.9% -3.3%
capital related to Covid- YoY % -4.1% -7.8% -7.6% -8.7% -7.0% -10.9% -10.2% -7.8% -9.9% -9.7%
19. OCF to PAT % of Rev 72.0% 68.6% 66.8% 65.2% 68.1% 62.6% 60.4% 60.2% 58.8% 60.5%
conversion was at 60.5% Source: HDFC sec Inst Research
vs. ~100% last quarter

Page | 5
Wipro: Results Review 4QFY20

Geographic Revenue Break-up (IT Services ex ISRE)

Geography
America’s de-grew after two 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Mix (USD FY19
second consecutive quarter mn)
FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20 FY20
of growth due to COVID 19 US 1,114 1,127 1,169 1,208 4,612 1,197 1,221 1,240 1,226 4,879
impact QoQ % 2.5% 1.2% 3.7% 3.4% -0.9% 2.0% 1.6% -1.2%
YoY % 3.6% 4.4% 9.5% 11.2% 7.0% 7.5% 8.3% 6.1% 1.5% 5.8%
% of Rev 56.0% 56.1% 57.1% 58.2% 56.8% 58.7% 59.6% 59.2% 59.1% 59.1%
Europe reported muted Europe 519 516 522 511 2,071 502 481 496 500 1,981
growth but YoY growth is QoQ % -6.5% -0.5% 1.0% -2.2% -1.8% -4.0% 3.1% 0.7%
still under pressure YoY % 8.7% 2.4% -0.2% -8.0% 0.5% -3.4% -6.8% -4.9% -2.1% -4.3%
% of Rev 26.1% 25.7% 25.5% 24.6% 25.5% 24.6% 23.5% 23.7% 24.1% 24.0%
RoW 356 366 356 357 1,437 340 346 358 348 1,395
QoQ % -5.7% 2.7% -2.6% 0.3% -4.6% 1.7% 3.5% -2.7%
YoY % -6.5% -5.3% -7.0% -5.5% -5.7% -4.4% -5.3% 0.6% -2.4% -2.9%
% of Rev 17.9% 18.2% 17.4% 17.2% 17.7% 16.7% 16.9% 17.1% 16.8% 16.9%
Onsite revenue was under Total
pressure, offshoring helped Revenue (IT 1,989 2,010 2,047 2,076 8,120 2,039 2,049 2,095 2,074 8,256
Services)
margins
QoQ % -1.5% 1.0% 1.8% 1.4% -1.8% 0.5% 2.2% -1.0%
YoY % 2.9% 2.0% 3.7% 2.8% 2.9% 2.5% 2.0% 2.4% -0.1% 1.7%
Source: Company, HDFC sec Inst Research

Onsite-offshore Split (IT Services ex ISRE)

Onsite Offshore
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Revenue FY19 FY20
FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20
(USD mn)
Onsite 1,052 1,061 1,068 1,069 4,247 1,066 1,092 1,114 1,074 4,368
QoQ % -1.1% 0.8% 0.7% 0.1% -0.2% 2.4% 2.0% -3.6%
YoY % 1.5% 1.3% 1.2% 0.5% 1.1% 1.4% 2.9% 4.3% 0.5% 2.8%
% of Rev 52.9% 52.8% 52.2% 51.5% 52.3% 52.3% 53.3% 53.2% 51.8% 52.9%
Offshore 937 948 978 1,007 3,873 973 957 980 1,000 3,889
QoQ % -1.9% 1.3% 3.1% 2.9% -3.4% -1.6% 2.5% 2.0%
YoY % 4.4% 2.9% 6.6% 5.4% 4.8% 3.8% 0.9% 0.2% -0.7% 0.4%
% of Rev 47.1% 47.2% 47.8% 48.5% 47.7% 47.7% 46.7% 46.8% 48.2% 47.1%
Total Revenue
1,989 2,010 2,047 2,076 8,120 2,039 2,049 2,095 2,074 8,256
(IT Services)
QoQ % -1.5% 1.0% 1.8% 1.4% -1.8% 0.5% 2.2% -1.0%
YoY % 2.9% 2.0% 3.7% 2.8% 2.9% 2.5% 2.0% 2.4% -0.1% 1.7%
Source: Company, HDFC sec Inst Research

Page | 6
Wipro: Results Review 4QFY20

Client Performance (IT Services ex ISRE)

Top customer is under Clients Revenue 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
FY19 FY20
pressure since last three Metric (USD mn) FY19 FY19 FY19 FY19 FY20 FY20 FY20 FY20
Top customer 74 74 76 77 300 75 66 63 62 264
quarters
QoQ % 1.2% 1.0% 1.8% 1.4% -1.8% -13.1% -4.1% -1.0%
YoY % 31.2% 18.0% 19.9% 5.6% 18.9% 2.5% -11.8% -17.0% -19.0% -12.1%
% of Rev 3.7% 3.7% 3.7% 3.7% 3.7% 3.7% 3.2% 3.0% 3.0% 3.2%
Top 2-5 163 171 190 208 731 206 197 195 191 793
Wipro’s Top-5 client’s
QoQ % -6.1% 4.7% 11.4% 9.1% -0.8% -4.5% -1.0% -2.1%
performance have been
YoY % 11.0% 8.4% 16.2% 19.5% 12.9% 26.3% 15.2% 2.4% -8.1% 8.5%
muted for the past four
% of Rev 8.2% 8.5% 9.3% 10.0% 9.0% 10.1% 9.6% 9.3% 9.2% 9.6%
qtrs impacted by BFSI
Top 5 237 245 266 284 1,031 281 262 258 253 1,057
QoQ % -3.9% 3.6% 8.5% 6.9% -1.1% -6.8% -1.8% -1.8%
YoY % 16.6% 11.1% 17.3% 15.4% 14.6% 18.9% 7.0% -3.2% -11.0% 2.5%
% of Rev 11.9% 12.2% 13.0% 13.7% 12.7% 13.8% 12.8% 12.3% 12.2% 12.8%
Gross utilisation
Top 6-10 135 139 137 139 552 141 143 145 147 570
improved 320bps on
QoQ % 1.5% 2.5% -1.1% 1.4% 1.2% 2.0% 0.8% 1.9%
account of lower net
YoY % -4.2% -2.2% 3.7% 4.4% 1.4% 4.0% 3.4% 5.4% 5.9% 3.2%
additions % of Rev 6.8% 6.9% 6.7% 6.7% 6.8% 6.9% 7.0% 6.9% 7.1% 6.9%
Top 10 372 384 403 423 1,583 422 406 402 400 1,626
QoQ % -2.0% 3.2% 5.0% 5.0% -0.3% -3.9% -0.9% -0.5%
Net reduction of 4,432 YoY % 8.1% 5.9% 12.3% 11.5% 9.6% 13.5% 5.7% -0.2% -5.5% 2.7%
employees witnessed % of Rev 18.7% 19.1% 19.7% 20.4% 19.5% 20.7% 19.8% 19.2% 19.3% 19.7%
during the quarter Non top 10 1,617 1,626 1,643 1,652 6,537 1,617 1,643 1,693 1,673 6,630
QoQ % -1.4% 0.5% 1.1% 0.5% -2.1% 1.6% 3.0% -1.1%
YoY % 1.7% 1.1% 1.8% 0.8% 1.3% 0.0% 1.1% 3.0% 1.3% 1.4%
Attrition moderated to % of Rev 81.3% 80.9% 80.3% 79.6% 80.5% 79.3% 80.2% 80.8% 80.7% 80.3%
14.7% (-100bps QoQ),
attrition is at multi qtr
low Headcount, Attrition and Utilisation Data
3Q 4Q 1Q 2Q 3Q 4Q
(Nos.) FY19 FY20
FY19 FY19 FY20 FY20 FY20 FY20
Total
1,72,379 1,71,425 1,71,425 1,74,850 1,81,453 1,87,318 1,82,886 1,82,886
headcount
Net additions 928 -954 11,502 3,425 6,603 5,865 -4,432 11,461
Voluntary
TTM attrition 17.9% 17.6% 17.6% 17.6% 17.0% 15.7% 14.7% 14.7%
(%)
Gross
73.4% 75.4% 74.4% 73.9% 71.4% 70.2% 73.4% 72.2%
Utilisation (%)
Utilisation ex-
83.2% 85.4% 84.8% 85.0% 82.1% 79.6% 82.6% 82.3%
trainees (%)
Source: Company, HDFC sec Inst Research

Page | 7
Wipro: Results Review 4QFY20

Key Assumptions
Particulars FY17 FY18 FY19 FY20 FY21E FY22E
IT Services Growth (USD) % 4.9 2.5 2.9 1.7 (4.4) 4.7
USD/INR rate 68.0 66.4 70.3 71.6 73.0 74.0
Products Growth (INR) % (4.6) (28.3) (39.4) (10.6) 0.3 2.0
IT Services EBIT Margin* % 18.2 16.8 18.4 18.2 17.0 17.3
Consolidated EBIT margin (%) 15.6 15.2 17.1 16.6 15.8 16.1
Source: Company, HDFC Sec Inst Research

Change in Estimates
FY21 FY22
(Rs bn) Earlier New % Change Earlier New % Change
IT revenue (USD bn) 7.94 7.90 (0.6) 8.32 8.27 (0.6)
Net revenue (Rs bn) 598.97 596.13 (0.5) 635.16 632.08 (0.5)
Cons. EBIT (Rs bn) 95.44 93.94 (1.6) 103.88 101.47 (2.3)
EBIT margin (%) 15.9 15.8 -18 16.4 16.1 -30
EPS (Rs) 15.8 15.6 (0.9) 17.2 17.0 (1.5)
Source: HDFC sec Inst Research

Peer Set Comparison

MCap CMP TP EPS (Rs) P/E (x) RoE (%)
Company RECO
(Rs bn) (Rs) (Rs) FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E FY19 FY20E FY21E FY22E
TCS 6,510 1,735 1,770 REDUCE 83.9 86.4 83.5 93.1 20.7 20.1 20.8 18.6 36.1 35.6 33.9 37.6
Infosys 2,717 640 670 BUY 37.1 37.8 37.2 41.5 17.2 16.9 17.2 15.4 24.3 25.2 24.7 25.9
HCL Tech 1,305 481 525 BUY 37.3 39.5 37.5 43.9 12.9 12.2 12.8 11.0 26.0 23.5 19.1 19.4
Wipro 1,064 187 185 REDUCE 15.8 17.0 15.6 17.0 11.8 10.9 11.9 11.0 17.3 17.3 14.9 14.2
TechM 518 537 660 BUY 48.9 48.3 45.0 50.9 11.0 11.1 11.9 10.5 22.0 20.6 17.7 17.8
Tier-1 IT Median 12.9 12.2 12.8 11.0 24.3 23.5 19.1 19.4

LTI 255 1,465 1,650 ADD 87.1 86.2 93.1 109.9 16.8 17.0 15.7 13.3 34.6 28.2 26.3 27.0
Mphasis 125 670 800 ADD 57.6 60.4 59.6 66.9 11.6 11.1 11.2 10.0 20.0 20.5 18.6 19.3
L&T Tech 127 1,218 1,215 ADD 67.8 77.2 72.9 86.7 18.0 15.8 16.7 14.1 32.0 29.8 24.4 25.2
Mindtree 127 770 815 ADD 44.1 40.2 43.4 54.2 17.5 19.1 17.7 14.2 24.9 19.0 20.6 23.0
Hexaware * 87 292 295 ADD 19.6 21.5 20.0 22.6 14.9 13.6 14.6 12.9 26.5 24.6 20.1 20.5
Persistent 39 506 535 REDUCE 47.8 45.7 36.2 44.5 10.6 11.1 14.0 11.4 15.7 14.0 11.3 12.9
Tata Elxsi^ 46 734 NA NR 46.6 41.2 40.2 45.1 15.8 17.8 18.2 16.3 34.5 25.2 21.4 20.9
Cyient 25 225 280 ADD 43.6 34.7 27.8 31.1 5.2 6.5 8.1 7.2 19.5 14.7 11.0 11.5
Zensar 22 95 95 ADD 14.2 10.3 9.2 11.8 6.7 9.2 10.3 8.0 17.6 11.5 9.4 11.2
Sonata 18 174 250 BUY 23.7 27.3 22.4 27.5 7.3 6.4 7.8 6.3 35.1 34.6 25.6 28.6
Intellect^ 10 76 NA NR 7.7 (1.7) 1.7 4.9 10.0 NM 44.5 15.6 11.1 (2.2) 2.2 6.1
Majesco 8 275 360 BUY 18.3 18.0 20.5 24.8 15.0 15.3 13.4 11.1 8.4 7.3 7.8 8.8
Mastek 6 210 333 BUY 39.9 39.8 39.6 43.2 5.3 5.3 5.3 4.9 15.9 15.0 13.3 12.8
Tier-2 IT AVG 11.9 12.3 15.2 11.2 22.8 18.6 16.3 17.5
Tier-2 IT Median 11.6 12.3 14.0 11.4 20.0 19.0 18.6 19.3
Source: HDFC sec Inst Research, Bloomberg, *Dec YE, ^ Not Rated

Page | 8
 Wipro: Results Review 4QFY20

Financials
Consolidated Income Statement
YE March (Rs bn) FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
IT Services Net Revenues (US $bn) 7.08 7.35 7.70 7.90 8.12 8.26 7.90 8.27
Growth (%) 7.0 3.7 4.9 2.5 2.9 1.7 (4.4) 4.7
Net Revenues 469.55 512.44 550.40 544.87 585.85 610.23 596.13 632.08
Growth (%) 8.1 9.1 7.4 (1.0) 7.5 4.2 (2.3) 6.0
Operating Expenses 364.94 404.40 441.28 440.94 473.75 487.95 480.33 507.19
EBITDA 104.61 108.04 109.13 103.93 112.09 122.28 115.80 124.89
Depreciation 12.82 14.97 23.11 21.12 19.47 20.86 21.86 23.41
EBIT 91.79 93.07 86.02 82.81 92.62 101.42 93.94 101.47
EBIT (%) 19.5 18.2 15.6 15.2 15.8 16.6 15.8 16.1
EBIT Growth (%) 6.7 1.4 (7.6) (3.7) 11.9 9.5 (7.4) 8.0
Other Income 19.86 23.44 21.66 23.86 26.96 25.25 23.68 26.15
Interest 3.60 5.58 5.18 5.68 7.38 7.33 7.12 7.44
Forex gains/(losses) 3.64 3.87 3.78 1.49 3.22 3.17 1.53 1.24
PBT 111.68 114.80 106.27 102.47 115.42 122.51 112.04 121.43
Tax (incl deferred) 24.62 25.32 25.21 22.39 25.24 24.80 22.41 24.29
Minority Interest and associate profit -0.53 -0.49 -0.25 -0.00 -0.14 -0.50 -0.39 -0.41
RPAT 86.53 88.99 84.90 80.08 90.03 97.22 89.24 96.73
EO (Loss) / Profit (Net Of Tax) 0.00 0.00 4.08 -2.49 -0.82 0.00 0.00 0.00
APAT 86.53 88.99 80.81 82.57 90.86 97.22 89.24 96.73
APAT Growth (%) 11.0 2.8 (9.2) 2.2 10.0 7.0 (8.2) 8.4
EPS 15.2 15.6 14.2 14.5 15.9 17.0 15.6 17.0
EPS Growth (%) 11.0 2.8 (9.2) 2.2 10.0 7.0 (8.2) 8.4
Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet

YE March (Rs bn) FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
SOURCES OF FUNDS
Share Capital - Equity 4.94 4.94 4.86 9.05 12.07 11.43 11.43 11.43
Reserves 403.05 460.23 515.44 473.89 556.05 546.03 627.25 715.28
Total Shareholders' Funds 407.98 465.17 520.30 482.94 568.12 557.46 638.67 726.71
Minority Interest 1.65 2.21 2.39 2.41 2.64 1.88 2.26 2.67
Total Debt 78.91 125.22 142.41 138.26 99.47 97.39 97.39 97.39
Net Deferred Taxes 0.30 0.82 3.52 (3.85) (2.19) (3.18) (3.48) (3.80)
Long Term Provisions & Others 10.43 15.59 15.05 19.67 16.28 20.88 20.88 20.88
TOTAL SOURCES OF FUNDS 499.27 609.02 683.68 639.43 684.32 674.43 755.73 843.86
APPLICATION OF FUNDS
Net Block 56.67 74.58 76.77 67.39 61.59 93.88 95.87 97.74
CWIP 5.47 6.21 8.95 15.17 22.77 20.35 20.35 20.35
Goodwill & Other Intangible Assets 68.08 101.99 125.80 117.58 116.98 131.01 131.01 131.01
LT Loans & Advances, Others 30.38 32.75 40.01 74.64 54.56 45.96 48.26 50.68
Total Non Current Assets 160.60 215.53 251.52 274.78 255.90 291.21 295.49 299.77
Cash & Equivalents 212.85 303.29 344.74 294.02 379.25 334.13 401.06 485.17
Debtors 91.53 100.98 94.85 100.99 100.49 104.47 107.79 112.56
Inventories 4.85 5.39 3.92 3.37 3.95 1.87 2.09 2.21
Other Current Assets 127.26 94.53 95.40 80.58 87.98 79.38 82.27 85.33
Total Current Assets (ex Cash) 223.64 200.89 194.16 184.94 192.42 185.72 192.14 200.11
Creditors 58.75 68.19 65.49 68.13 88.30 78.13 77.97 82.69
Other Current Liabilities & Provns 39.08 42.51 41.26 46.18 54.95 58.50 55.00 58.50
Total Current Liabilities 97.82 110.70 106.74 114.30 143.25 136.63 132.97 141.19
Net Current Assets 125.82 90.19 87.42 70.63 49.17 49.09 59.18 58.92
TOTAL APPLICATION OF FUNDS 499.27 609.02 683.68 639.43 684.32 674.43 755.73 843.86
Source: Company, HDFC sec Inst Research

Page | 9
Wipro: Results Review 4QFY20

Consolidated Cash Flow

YE March (Rs bn) FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
Reported PBT 111.68 114.80 106.27 102.47 115.42 122.51 112.04 121.43
Non-operating & EO items (14.00) (18.10) (19.76) (10.32) (20.63) (12.46) (23.68) (26.15)
Interest expenses 3.60 5.58 5.18 5.68 7.38 7.33 7.12 7.44
Depreciation 12.82 14.97 23.11 21.12 19.47 20.86 21.86 23.41
Working Capital Change (7.98) (5.99) 4.54 (0.94) 27.17 (23.86) (12.69) (2.46)
Tax paid (24.27) (26.94) (25.48) (28.11) (25.15) (6.38) (22.41) (24.29)
OPERATING CASH FLOW ( a ) 81.86 84.32 93.87 89.91 123.65 108.00 82.23 99.38
Capex (22.60) (52.55) (53.25) (27.35) (20.84) (24.77) (23.85) (25.28)
Free cash flow (FCF) 59.26 31.77 40.62 62.56 102.81 83.23 58.39 74.09
Investments (25.94) 0.27 (0.23) 0.00 0.00 0.00 0.00 0.00
Non-operating income 12.43 18.43 17.38 14.96 20.52 24.20 23.68 26.15
INVESTING CASH FLOW ( b ) (36.12) (33.85) (36.10) (12.40) (0.32) (0.57) (0.16) 0.87
Debt Issuance 21.88 35.25 12.98 (11.15) (39.14) (32.82) 0.00 0.00
Interest expenses (3.60) (5.58) (5.18) (5.68) (4.80) (4.60) (7.12) (7.44)
FCFE 77.54 61.44 48.42 45.74 58.87 45.81 51.27 66.65
Share capital Issuance/Buyback 0.01 0.00 (25.00) (110.29) 0.00 (105.30) 0.00 0.00
Dividend (29.49) (35.49) (8.73) (5.42) (5.43) (8.28) (8.03) (8.70)
FINANCING CASH FLOW ( c ) (11.20) (5.82) (25.94) (132.53) (49.37) (151.00) (15.14) (16.14)
NET CASH FLOW (a+b+c) 34.54 44.65 31.84 (55.02) 73.96 (43.57) 66.92 84.11
Non-operating and EO items 3.55 45.79 9.61 4.30 11.26 (1.55) 0.00 0.00
Closing Cash & Equivalents 212.85 303.29 344.74 294.02 379.25 334.13 401.06 485.17
Source: Company, HDFC sec Inst Research

Key Ratios
FY15 FY16 FY17 FY18 FY19 FY20 FY21E FY22E
PROFITABILITY (%)
EBITDA Margin 22.3 21.1 19.8 19.1 19.1 20.0 19.4 19.8
APAT Margin 18.4 17.4 14.7 15.2 15.5 15.9 15.0 15.3
RoE 23.0 20.4 16.4 16.5 17.3 17.3 14.9 14.2
RoIC or Core RoCE 25.0 23.7 19.6 18.7 23.7 23.8 21.2 22.6
RoCE 16.2 14.1 11.2 11.2 12.1 12.5 11.1 10.9
EFFICIENCY
Tax Rate (%) 22.4 22.0 22.1 22.8 21.8 21.9 20.2 20.0
Fixed Asset Turnover (x) 3.6 3.2 3.2 3.6 3.8 3.1 2.7 2.6
Debtors (days) 71 72 63 68 63 62 66 65
Other Current Assets (days) 99 67 63 54 55 47 50 49
Payables (days) 46 49 43 46 55 47 48 48
Other Current Liability (days) 30 30 27 31 34 35 34 34
Cash Conversion Cycle (days) 94 60 55 45 28 28 35 33
Net Debt/EBITDA (x) (1.3) (1.6) (1.9) (1.5) (2.5) (1.9) (2.6) (3.1)
Net Debt/Equity (x) (0.3) (0.4) (0.4) (0.3) (0.5) (0.4) (0.5) (0.5)
Interest Coverage (x) 25.5 16.7 16.6 14.6 12.6 13.8 13.2 13.6
PER SHARE DATA
EPS (Rs/sh) 15.2 15.6 14.2 14.5 15.9 17.0 15.6 17.0
CEPS (Rs/sh) 17.4 18.2 18.9 17.7 19.2 20.7 19.5 21.1
DPS (Rs/sh) 5.2 6.2 1.5 1.0 1.0 1.2 1.4 1.5
BV (Rs/sh) 71.5 81.6 91.2 84.7 99.6 97.7 112.0 127.4
VALUATION
P/E 12.3 12.0 13.2 12.9 11.7 10.9 11.9 11.0
P/BV 2.6 2.3 2.0 2.2 1.9 1.9 1.7 1.5
EV/EBITDA 8.9 8.2 7.9 8.7 7.0 6.7 6.5 5.4
OCF/EV (%) 8.8 9.5 10.9 9.9 15.8 13.1 10.8 14.7
FCF/EV (%) 6.4 3.6 4.7 6.9 13.1 10.1 7.7 11.0
FCFE/mkt cap (%) 7.3 5.8 4.6 4.3 5.5 4.3 4.8 6.3
Dividend Yield (%) 2.4 2.8 0.7 0.4 0.4 0.5 0.6 0.7
Source: Company, HDFC sec Inst Research

Page | 10
Wipro: Results Review 4QFY20

RECOMMENDATION HISTORY
Date CMP Reco Target
Wipro TP 1-Apr-19 255 NEU 241
9-Apr-19 264 NEU 245
290
17-Apr-19 281 SELL 250
5-Jul-19 272 SELL 255
270
18-Jul-19 260 SELL 220
27-Aug-19 249 SELL 220
250
22-Sep-19 246 SELL 220
4-Oct-19 236 NEU 222
230
16-Oct-19 244 NEU 230
210 7-Jan-20 252 NEU 235
15-Jan-20 257 NEU 235
190 2-Mar-20 221 REDUCE 240
18-Mar-20 173 REDUCE 205
170 6-Apr-20 180 REDUCE 190
16-Apr-20 187 REDUCE 185
150 From 2nd March 2020, we have moved to new rating system
Dec-19
Jun-19

Oct-19
Aug-19

Nov-19
Apr-19

Feb-20

Apr-20
Jul-19

Sep-19

Jan-20
May-19

Mar-20

Rating Criteria
BUY: >+15% return potential
ADD: +5% to +15% return potential
REDUCE: -10% to +5% return potential
SELL: > 10% Downside return potential

Page | 11
Wipro: Results Review 4QFY20

Disclosure:
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Any holding in stock –YES
HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

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