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India's Wipro, one of the largest IT services companies in the country, reported sluggish sales growth in Q1 as customers reduced expenditure. The company's revenue growth was lower than expected, indicating a challenging business environment.

India’s Wipro reports sluggish IT sales growth in Q1 as customers reduce expenditure

The current quarter’s revenue growth for India’s Wipro Ltd.’s IT services might be as low as 0.6% as clients reduce discretionary spending, underscoring the short-term challenge that the nation’s IT companies confront.

Larger competitors of Wipros, Infosys Ltd (INFY.NS) and HCLTech Ltd, have said their revenue growth for the year will range from 4% to 8% as U.S. and European clients delay and even cancel orders owing to the global economic downturn.

Wipro, the only company among its competitors to provide a projection for the immediate future, warned of an even weaker start to the year. It anticipates that revenue from IT services will rise between 0.6% and 2.8% in the April-June quarter compared to the same time last year.

Additionally, the growth is less than the 3.7% increase in IT services revenue, which Wipro announced for the fourth quarter and makes up around 98% of overall revenue.

The Bengaluru-based company’s rate of IT services revenue growth has been slowing for six consecutive quarters, with the expected growth for the current quarter being the smallest in at least nine quarters.

Even though Wipro announced a 29% increase in transaction wins, to $4.1 billion, on a constant currency basis, the estimate is muted.

CEO Thierry Delaporte stated at a press conference that “while there is a good activity happening (in terms of deals),… there is also a slowdown in the discretionary spends and that is visible in particular in some industries like banking, financial services, and technology.”

In the three months ended in March, Wipro’s revenue increased 11.2% to 231.9 billion rupees ($2.84 billion).

The company’s net profit, however, fell by 0.4% to 30.75 billion rupees as a result of costs rising by 12.4%. Its operating margin decreased from 17% a year ago to 16.3% now.

Additionally, Wipro approved a share repurchase program of up to 120 billion rupees and declared that its promoters would take part in the program.

Its smaller rival Tech Mahindra had earlier in the day announced a 26% decline in fourth-quarter profit. 81.79 Indian rupees to the dollar.

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