Wipro Plans Big Bets on Digital Services to Double Revenue

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Wipro Plans Big Bets on Digital Services to Double Revenue
Highlights
  • Abidali Neemuchwala revealed the revival plan at a post-earnings press conference.
  • The plan comes as Wipro grapples with shrinking margins and falling profits.
  • Wipro has lagged rivals Infosys and TCS in switching to high-margin digital services.
The new boss of Indian IT services firm Wipro Ltd is betting on digital and automation services to stem a decline in market share and double revenue over the next four years.

Abidali Neemuchwala, who took over the reins at India's third-largest software services exporter in February, told a post-earnings press conference that the company plans to boost revenue to $15 billion (roughly Rs. 99,434 crores) by fiscal 2020, from $7.7 billion (roughly Rs. 51,049 crores) in the 2015-16 financial year.

The revival plan, first outlined in an internal company memo in February, comes as Wipro grapples with shrinking margins and falling profits.

The Bengaluru-based company has lagged larger domestic rivals Infosys and Tata Consultancy Services (TCS) in switching to high-margin digital services as tight competition has pressured fees for routine IT services.

Neemuchwala said initiatives to improve digital sales would include merging the company's consulting business with its digital services business and setting up new training schemes for employees.

Wipro reported a 1.6 percent drop in net profit for its fiscal fourth quarter, from a year ago, to Rs. 22.35 billion ($338 million) on Wednesday, missing analysts' estimates of Rs. 23.43 billion.

Both TCS and Infosys produced forecast-beating fourth-quarter earnings this month.

Neemuchwala said Wipro's margins would rise to 23 percent by 2020 as more of its revenue comes from digital contracts that include services such as big data, artificial intelligence and automation.

In the fourth quarter, its margins contracted by 10 basis points to 20.1 percent - the fourth successive quarterly contraction.

For the current quarter, Wipro said it expected revenue at its IT services business to be between $1.90 billion (roughly Rs. 12, 597 crores) and $1.94 billion (roughly Rs. 12,863 crores).

The company separately approved a 25 billion rupee share buyback.

© Thomson Reuters 2016

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