Coronavirus outbreak to hit Wipro’s new deals: ICICI Securities

Wipro, India’s fourth largest tech services firm, is likely to see its new deals hit by Coronavirus or COVID-19 outbreak, said ICICI Securities in a preview report.

The tech services, however, does not see any challenges in existing contracts as of now due to virus outbreak that has resulted lock-down across multiple key markets of Indian tech services companies.

“No disruption to existing book of business for now; new business to bear the brunt of Covid-19 for now. Existing projects are going on without any disruption for now with new business opportunities being more vulnerable to the impacts of Covid-19,” wrote Kuldeep Koul and Hardik Sangani of ICICI Securities.

According to the report, Wipro growth is going to take a beating given higher exposure than peers to segments like Oil & Gas and regions such as Middle East.

The report, however, said there is potential in the business to deliver superior growth under the new chief executive officer which is expected to be announced in the next few months.

The Mumbai-based brokerage firm said Wipro is expected to report revenue growth in the guided range of 0-2% in fourth quarter (Jan-March) in constant currency terms.

Koul and Sangani expect the revenue guidance for the first quarter of the next fiscal (FY21) to potentially be in the range of -2% to 0% as the impacts of Covid-19 worsen.

In fact, the virus outbreak “throws a spanner in what was an improving revenue story”, said the analysts. “BFSI (organic) and Retail were expected to do better in FY21. Wipro’s revenue story was expected to improve across business segments barring Hi-tech and Healthcare though that view now needs to be recalibrated in the aftermath of Covid-19,” wrote Koul and Sangani.

According to the report, Wipro “should be opportunistic of the current bargain basement valuation and do a larger buyback than in the past two years”.

The brokerage firm has upgraded the status for Wipro stock from add to buy.

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