Why Wipro Share Price is Falling

The Indian IT sector, once a shining star of the economy, has faced a series of challenges in recent years.

The Covid-19 pandemic, the fall in US banking system, and other factors impacted the IT industry.

However, during the last year, industry was finally showing signs of recovery.

Just as optimism began to return, headwinds emerged, dragging the sector back into troubled waters. The pain is being felt by one of India's top IT companies: Wipro.

2024 was a good start for the IT giant. The company touched its 52-week high price on 19 February 2024, but soon after that it went southwards.

As of today, Wipro share price is down 4.6% in 2024. This raises the questions about what changed for the company.

Read on to find out.

#1 Change in Management

A change in management can bring a wave of uncertainty to a company.

Investors value stability and a clear vision for the future, and a new leader, throws those things into question. This uncertainty can lead investors to sell their shares, driving the price down.

Even if the new leader is qualified, there's a period of adjustment as they implement their vision. Investors might worry about the company's ability to execute effectively during this transition, leading to a dip in share price.

A sudden management change, can also generate negative press and public perception.

The same happened with Wipro. Wipro share price took a hit as Thierry Delaporte, (CEO and managing director) departed from the company in April 2024.

Srinivas Pallia who previously led Wipro's Americas 1 region, took over as the new CEO and managing director.

#2 Muted Quarterly Results

FY24 was a challenging year for the IT industry. The IT company reported a 6.8% year-over-year (YoY) decline in consolidated net profit for the quarter ending March 2024. Global uncertainties led to a weak demand and lower revenues.

Its net profit dropped from Rs 30.9 billion (bn) in the same period last year to Rs 28.8 bn in Q4 FY24. Revenue from operations also saw a 4.2% YoY decrease, falling from Rs 231.9 bn to Rs 222.1 bn.

Wipro's performance varied across different industry segments. The steepest revenue declines were observed in banking, financial services, and insurance (BFSI) at 8.9%, communications at 20%, and manufacturing at 11.5%.

Conversely, the healthcare sector was the only area to experience positive growth, with a modest increase of 1.3%.

On a yearly outlook, for FY24 the company's net profit stood at Rs 111.1 bn, down 2.3% from Rs 113.7 bn reported in FY23.

The company's total revenues also slipped marginally in FY24 to 897.6 bn, from 904.9 bn reported in FY23.

Wipro Financial Performance Summary

Particulars	Q4 (Rs in bn)	YoY decrease (%)	FY24	YoY decrease (%)
Net profit	28.8	6.8	111.1	2.3
Revenues	222.1	4.2	897.6	0.8

Source: Company Financials

What Next?

Wipro faces a tough road ahead as the IT sector battles headwinds.

This explains the new CEO's cautious outlook for the next quarter, with Wipro guiding for flat to slightly declining revenue growth (0.5% or -1.5% on a constant currency basis).

Lately, weak demand from key US and European markets, fueled by rising interest rates, has plagued the Indian IT sector.

Recent earnings and conservative growth forecasts from major players haven't brightened the mood.

IT companies are wary of a continued slowdown in discretionary spending, waiting for signs of recovery.

High interest rates, potential recession, and weak consumer sentiment in developed economies pose major challenges. Additionally, the rise of advanced AI is significantly reshaping the industry.

Large IT firms' disappointing revenue forecasts raise concerns, although deal wins remain strong.

However, converting those wins into actual revenue remains critical. While falling subcontracting costs and improved utilization boosted margins, wage increases and higher travel expenses offset some of these gains.

The worst may not be over for the IT sector. Stubborn inflation, delayed rate cuts, and a slowing US economy (evident in the recent weak GDP figures) add further pressure.

There's still a silver lining amid this turbulence. IT companies can use this time to re-evaluate business models, invest in emerging technologies, and diversify revenue streams.

Wipro's new CEO, with a five-year growth plan, exemplifies a proactive approach to navigate these challenges.

The future remains uncertain, but stay tuned for further developments.

Happy Investing!

How Wipro Share Price has Performed Recently

In the past five days, Wipro share price fell 1.7%.

In 2024, so far its share price fell 4.6% and it went up 13.8% in the last year.

The stock touched its 52-week high of Rs 546.1 on 19 February 2024 and a 52-week low of Rs 375 on 26 October 2023.

About Wipro

Wipro is one of the leading global IT, consulting and business process services companies.

Wipro was incorporated in 1945 as Western India Vegetables Product Limited. It was a consumer care product manufacturer till 1980 after which it diversified into the IT services business.

With effect from 1 April 2012, the company demerged its other divisions (consumer care and lighting, medical equipment, and infrastructure engineering) into a separate company called Wipro Enterprises.

Wipro's operations can be broadly classified into IT Services, IT Products, and India State Run Enterprise.

For more details about the company, you can have a look at Wipro Company fact sheet and Wipro quarterly results on our website.

For a sector overview, you can read our IT sector report.

You can also compare Wipro with its peers on our website:

Wipro vs TCS

Wipro vs Infosys

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