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Wipro may see decline in profitability due to bankruptcy of Aircel

April 11, 2018

Wipro’s revenue and profitability are set to get impacted for a second consecutive quarter due to some clients filing for bankruptcy. According to the company, its profitability will be impacted by 0.65- 0.75 per cent, primarily due to one of its telecom clients which is undergoing insolvency proceedings. The client in question is assumed to be Aircel.

In the quarter ended December 2017, Wipro disclosed a similar issue with one of its energy customers, which had filed for bankruptcy. The company had then posted an 8.4 per cent annual decline in net profit due to higher costs and certain customer-specific uncertainties in the near future.

According to industry analysts, Wipro could face a slightly bigger erosion in profitability than they have accounted for, with estimated impact of on the EBIT margin by 0.8-0.9 per cent.

Wipro’s IT services EBIT margin has been gradually narrowing over the years, which has declined from around 23-24 per cent in 2013-14 to the current 17 per cent.

However, Wipro has been making efforts to improve its cash flow. Recently, the company divested its hosted data centre services business. Analysts believe that the sale will impact growth next year. Last year, its revenues from the IT services business grew 8.4 per cent over 2016-17.

 

 
 

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