With a 6.58 per cent stake, foreign portfolio investor (FPI) holding in Wipro was the least among Nifty constituents in percentage terms, as of September 30. FPI faith in the IT firm has been declining quarter by quarter, thanks to concerns over earnings and a volatile orderbook.
FPIs held 6.95 per cent stake in the Bengaluru-based firm in the June quarter; 8.11 per cent in the March quarter; 9.34 per cent in the December quarter of 2021; 9.39 per cent in the year-ago quarter and 9.83 per cent in the June quarter of 2021.
While FPIs have turned cautious on information technology sector broadly, NSDL’s fortnightly data suggests they still held domestic IT stocks worth Rs 4,91,465 crore, as of October 15. This was 10.72 per cent of their Rs 45,83,941 crore exposure to domestic equities.
Data showed Wipro shares have fallen 40 per cent in the last one year, the worst in the Nifty pack. This is against a 1 per cent rise in the Nifty during the same period. Nirmal Bang Institutional Equities said the significant de-rating seen in Wipro over the last 9-12 months is reflective of the concerns on earnings estimates.
In a note, it said the IT firm’s pre-tax return on invested capital (RoIC) has deteriorated from a recent peak of 36 per cent seen in FY21 to 24 per cent in FY23, justifying the derating.
Wipro has the lowest RoIC and return on equity (RoE) among peers including Infosys and TCS, which justifies a lower target multiple, said ICICI Securities. This brokerage sees more headwinds for Wipro than peers heading into macro slowdown. It sees a volatile orderbook for Wipro and the lowest EPS CAGR in the IT pack at 5.3 per cent over FY22-FY24, along with weak margin profile.
Nuvama Institutional Equities said Wipro has realigned its client-facing profiles and is focusing on mining strategic accounts as a growth strategy. While the client mining efforts would give revenues a leg-up, Nuvama said, Wipro needs to win new large clients to catch up on growth with peers.
Wipro’s September quarter profit declined 9.27 per cent to Rs 2,659 crore from Rs 2,930.70 crore YoY. This was against a 7.05 per cent in profit at Rs 3,489 crore for HCL Technologies. Larger peers TCS and Infosys reported 8-11 per cent profit growth for the quarter.
On revenue front too, Wipro came in at fourth. Infosys led the pack, with HCL coming in second and TCS third. Wipro’s Q2 margin at 15.1 per cent was also lowest among the top IT firms.
Emkay Global said while the management remains fairly confident on double-digit revenue growth in FY23, it shied away from giving any timeline on the margin returning to the medium-term target range of 17-17.5 per cent. That remains an irritant, the brokerage said.
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